ABSTRACT
The standard example of negative externality is pollution, usually a side effect of production. A producer such as a manufacturer of clothing releases dyestuffs into a river. The problem is the presence of values which are translated into willingness to pay in the market. Environmental health services and public health education campaigns are examples of goods which are both non-rival and non-excludable and are therefore close to being pure public goods. Although the two characteristics of public goods are usually separated, it may be more useful to identify degrees of public goods characteristics. Non-excludability implies severe difficulties in organising a market in the good concerned. Many components of the health sector are natural monopolies – they exhibit features which tend to limit the number of suppliers in the market. Competitive markets require the entry of small contenders for a share of the market’s business, and opportunity for such small firms to become established.
