Where benefits cannot be withheld, individuals let others bear the cost and the good is underprovided.
The lighthouse is the textbook case, and a poor one — Coase showed British lighthouses were privately funded for centuries. The reliable examples are clean air and herd immunity.
In practice
- A shared kitchen where nobody buys the washing-up liquid runs out of washing-up liquid.
- An open-source library depended on by four thousand companies is maintained by two unpaid people.
- Further reading
- Wikipedia
- Subject
- Economics & Incentives
- Essay
- The theories behind every argument about money