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HELM TALKS: Natural Capital Lecture 5

  1. 1. QUESTIONS What is a public good? Why won’t markets provide them? What are the key environmental public goods? How should they be paid for? How can public monies for public goods replace CAP subsidies?
  2. 2. WHAT IS A PUBLIC GOOD? • In economic theory, a public good is a non-excludable and non-rival • Non-excludable makes it difficult to charge • Non rival means the more who benefit the better • Not the same as the public interest
  3. 3. WHY WON’T MARKETS PROVIDE PUBLIC GOODS? • Very hard to get people to pay • Marginal cost for assets in zero • Fixed costs dominate • Creating clubs excludes people • Taxing excludes some beneficiaries
  4. 4. WHAT ARE THE KEY ENVIRONMENTAL PUBLIC GOODS? • Views, scenery and beauty Public footpaths Local parks National parks Ecosystems Biodiversity
  5. 5. HOW SHOULD PUBLIC GOODS BE PAID FOR? • The classic case for public expenditure • National, regional, local and the EU pre-BREXIT • Alternative is specific clubs, entrance fees to parks, charitable donations etc. National Trust BBC
  6. 6. PUBLIC GOODS AND THE CAP • The Treasury’s public monies for public goods • Food is not a public good • Food security might be but very hard to define and not the same as self-sufficiency • Animal welfare is a partial public good • Woods, trees, hedgerows, ponds, carbon, wild flowers, meadows, biodiversity are public goods
  7. 7. A BIDDING MODEL • Farmers and other bid • Public goods for subsidies with cost • River catchment system operators (CSOs) auction subsidies • Supply curve of costs and credible commitments allow system optimisation. CSO Farm public goods Wildlife trusts Floods Tourism Water Companies
  8. 8. SUMMARY • Public goods won’t be provided without subsidy • Public monies essential • Auctions offer good way of bringing bottom up environmental schemes forward • Massively better than paying for owning land.