Wednesday, February 8, 2012

Weather Forecasts and Public Goods

Some things are naturally public goods, meant to be given away to all takers. For a public good, the cost of producing it once, for a single customer, is not much less than the cost of providing it to the world at large. Two of the best examples of public goods are weather forecasts and epidemiological data. This information costs tens of millions of dollars to put together, but the cost of distributing the results is much smaller, in the tens of thousands.

Public goods are typically produced by governments, volunteers, and charities. Some are incidental parts of business operations. Attempts to turn public goods into commercial products lead to enormous inefficiencies and business failures. That’s because the cost of packaging a commercial product may be much higher than that of giving the same product away without the commercial packaging. Imagining, for example, paying for weather forecasts the way you pay for telephone service. It could cost that much to create a billing, security, and legal apparatus around the weather, to collect money from paying customers while preventing the information from leaking out to everyone else.

The reason this is important right now is that there is a political movement this year to privatize virtually all of the functions of government. In a few cases, the need for privatization is obvious. The government ideally should not be operating a mortgage company or a credit card lender, a golf resort or a shopping mall. But in other cases, the results of privatization could be unpleasant. That is especially the case when ideologues attempt to privatize public goods, such as the weather.