Goods for the Public

Here’s a story that meshes two of my favorite topics: robots and government interference with the free market.  The US government has apparently designated robocalls from marketers as a pressing social problem.  So, the Federal Trade Commission put out a prize for whoever could come up with the best system of stopping them – the prize was split three ways, with two methods based on intercepting the calls and the third based on building an ex post facto database of “bad” numbers based on consumer reports.

This is a great example of the government “interfering” with the free market in order to provide something that is not actually a public good but is still worthwhile.  Pubic goods are non-rivalrous and non-excludable; non-rivalrous in that use by one individual does not impede availability to others, and non-excludable in that individuals cannot be easily excluded.  The robocall-blocking technology clearly fails the traditional test of public goods because it is easily excludable – it would be pretty trivial to set this up as a subscription-based service.

Yet this seems like a clear case where government interference is obviously the economically ideal solution.  The competition between robocallers and robocall blockers is an economically net-negative activity; just a Red Queen’s race that sucks up resources (brainpower, cash, etc.) that could be used more productively.  Having the robocall-blocking technology put behind a paywall sucks cash out of the economy that could be used more productively for other purposes.  For the price of $50,000, the value of the prize, the government was able to prevent that – I would argue that is a pretty clear win for the government interfering with the free market.

It makes me wonder whether “public goods” aren’t better suited for the Economics 101 textbook than a real description of the world.  Roads are often cited as an example of a public good, but they fail the same excludability test.  Is this a particularly useful category when it cannot encompass public investments that clearly benefit the larger economy?

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