Private goods

The revealed preference method is an indirect approach that is used in order to monetize use values. This method observes the real choice between money and the environmental goods. Methods often include observations of consumers or producers behaviour or actions, such as the hedonic price method and the production function method. The hedonic price method determines values from actual market transactions. These transactions are used to see how the price of a market commodity varies when a related environmental good changes, such as the effects of noise or air pollution on house prices. The production function method is used to estimate the value of the environmental effects on production. This method is suitable when consumption or production of a private good is affected by the environmental good. An example is the valuation of ground-level ozone levels by valuing the impact on the production of wheat or timber, which has market prices. The problem with the revealed preference method is that it does not contain all the individuals values that affect the WTP. 

The paradox generated by these findings is further illustrated by a comparative study of Denmark and Britain, a country with the fastest growth of organic food consumption in Europe (Weir et al., 2005). Demand in both markets is shown to be sustained primarily by the private good attributes, that is health and safety, of organic foods. However, in both countries, much of the organic food is produced and handled in concentrated and industrialised sectors characteristic of the conventional food systems that consumers are... 

Chapter 3 argues that when chemical exposure is a private good, people can decide for themselves how to weigh the costs and benefits of erring in eifher direcfion. No public or private entity needs to decide the correct" trade-off. In fact, no correct" trade-off exists. Chapter 4 notes that matters become more complicated when we can collectively consume only one level of ambient exposure. 

Proponents of government regulation question the equity and efficiency of information markets. This chapter examines information markets in which chemical risks are private goods (Cross, Byrd, and Lave 1991). 

Finally, I consider whether command-and-control regulation by government agencies enhances the efficient use of information. Said differently, should we permit individuals to ignore government recommendations about private goods ... 

The ability of people to obtain information about private-good risks and take cost-effective precautions against them is illustrated by the public response to radon exposure. Once information about radon exposure risks became public and geologists asserted that the northeastern area of the United States was prone to radon release, companies were quickly started to measure residential radon levels and to install positive pressure systems to keep radon from seeping into basements. 

Because radon exposure varies widely from home to home, exposure information is a private rather than a public good, and a market developed to provide it. Basic information about the risks of radon exposure might be suboptimally provided by private markets, but the determination of exposure and the development of remediation plans are private goods that markets provide. 

Limited knowledge and high transaction costs prevent individuals from developing expertise about many remote risks. So entrepreneurs often fill the gaps. The ability to provide information about the risks of chemical exposure offers many profitable opportunities, as long as the exposure is a private good that varies among individuals. ... 

Many chemical exposures are private goods. Essential prerequisites for optimal exposure choices include the development and dissemination of informafion about the effects of exposure on human healfh. 

The main difference between public and private chemical exposures is that the level of public exposures must be equal for all those in the same airshed or watershed. That, of course, eliminates the primary method of reducing conflict associated with private goods individual differences in consumption. 

In the case of chemical exposures that are private goods, government (to the extent that it does anything at all) should limit its activities to the provision of information so individuals can decide for themselves which risks to bear. Command-and-control regulations inhibit the development of robust private information markets because people think that if a product is for sale, the government must have checked it out to ensure that its benefits were greater than its harms. 

Risks are private goods if individuals choose to purchase particular products, work at specific jobs, or live on certain parcels of land. 

Public goods have two qualities. Their consumption is difficult to restrict to just those who pay and is nonrivalrous (i.e., one person s use does not significantly detract from another person s). Private goods have opposite characteristics. 

Private goods, as economists use the term, are commodities whose consumption is rivalrous and can be restricted to those who pay. That is, two people cannot consume a private good simultaneously. This chapter examines situations in which individuals purchase a particular commodity, choose a particular job, or reside in a particular location. 

This example illustrates the "private-good" nature of many health risks. New studies about radon exposure risks do not alter the example s purpose (Leary 1994 Associated Press 1996 Warner, Mendez, and Courant 1996). 

Commodities are pubKc rather than private goods if their consumption is difficult to restrict to those who pay for them. In the case of chemical exposures, public risks are created through air and water pollution that individuals cannot alter. 

Class-action suits are also used when exposure is a private good but numerous individuals all suffer the same damages from exposure. Such class actions exploit economies of scale that arise from the nearly identical circumstances across cases. 

While emphasizing patient care, the general approach used by the CMA policy on Physicians and the Pharmaceutical Industry (CMA 2001) is not inconsistent with that used by the AMA and the ACP. One of the general principles of the CMA policy requires the primary objective of interactions between physicians and industry to be the advancement of health of Canadians rather than the private good of physicians or industry. Another is that relationships with industry are appropriate only insofar as they do not negatively affect the fiduciary nature of the patient-physician relationship. The principles also instruct physicians to resolve any conflict of interest between themselves and their patients resulting from interactions with industry in favor of their patients. They specifically warn physicians to avoid any self-interest in their prescribing and referral practices (CMA 2001). 

These similarities are offset by contrasts in their health insurance arrangements, access of patients to the political process, the authority wielded by physicians, and social insurance systems. For example, health care in the United States is generally seen as a private good associated with individual choice and the availability of menus for insurance, thereby rationing care by price. In Germany, by contrast, health care is seen primarily as a right or entitlement. It serves as an instrument of broader social justice, and rationing, if at all, is controlled by providers on a local and individual level. 

According to welfare theory, a competitive market will produce an optimal quantity of private goods. However, it will not produce adequate quantities of pure public goods, given their above-mentioned nature. Such market failure results in a loss of social welfare. 

Private good A good, such as an automobile, used and enjoyed exclusively by its owner. 

Drinking water security, a private good which is substitutable (to varying degrees) by water treatment techniques, at the level of the municipal supplier or via domestic filters, and bottled mineral water. 

Private Goods and Constr-lndustry ° Producing Mining action... 

Characteristic Total Private Goods Industry Producing Naturai Resources and Construc-Mining - tion Manufac- turing Total Service Providing Trade, Transportation and UtHitjes" Infor- mation Professional Education Leisure Financial and Business and Health and Other Activities Services Services Hospitality Services O z > 1 ... 

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