Unit 1: Public Goods & Market Failure

Street lighting is often a favourite example of a public good cited by students and teachers in lessons on public goods. It is provided collectively by local government, as it is unlikely to be profitable for private suppliers.

However, some local councils have decided to not use scarce grant or ratepayers’ funds to pay for street lighting, instead the lights will be turned off or dimmed. Given that there is no statutory requirement for the provision of street lights, the policy appears to highlight the economic problem of limited resources and unlimited wants as well as opportunity cost.

Street Lighting in Nottinghamshire Click here for article


Nottinghamshire County Council proposes to switch off the lights between midnight and 5.30 in the morning. External benefits might include lower energy use, protection of nocturnal wildlife and their habitats and the creation of a clearer view of the galaxies, but these are offset by possible increases in external costs (accidents or crime). Placing a monetary value on such external costs and benefits of the proposed policy will depend on the assumptions used by the Council’s economists.

The current proposals to reduce state spending may hint at a rethink of what constitutes merit goods and public goods, and whether a partial market failure can be tolerated.