## What Are Global Public Goods?

## Source details

**Canonical URL:** [What Are Global Public Goods?](https://www.imf.org/-/media/files/publications/fandd/article/2021/december/b2b-global-public-goods-chin.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/fandd/article/2021/december/b2b-global-public-goods-chin.pdf.md)
- [Structured JSON version](/-/media/files/publications/fandd/article/2021/december/b2b-global-public-goods-chin.pdf.json)

---

### Definition and characteristics of public goods
- Public goods are nonexcludable and nonrival: available to all (“nonexcludable”) and can be enjoyed repeatedly without diminishing benefits to others (“nonrival”).
- Scope can be local, national, or global.
- Examples given: environment, culture, technology, public health (global public goods); public fireworks (local public good); national defense (national public good); metric system (global public good).
- Distinction from other goods:
  - Club goods: Toll roads, internet, movie theaters.
  - Common goods: Natural resources, judicial system.
  - Private goods: Food, medicine, books.
- Key implications:
  - Public goods cannot be sold in a store or accessed via a simple fee.
  - Creating public goods is more difficult than supplying private goods; providing global public goods poses a unique challenge.

### Reasons public goods are undersupplied
- Core incentive problems:
  - Free rider problem: Individuals cannot be charged for their use; once supplied, all people can use a public good whether or not they contributed.
  - Small individual benefit and spillovers: For most public goods, the benefit to each individual is small; positive or negative spillovers can distort individual incentives (example: vaccination yields individual health benefit and large positive spillover by preventing others from getting sick).
  - Intertemporal mismatch: For many public goods, costs are paid today while benefits accrue in the future; people tend to overvalue the present relative to the future (examples: education, natural environment / climate change).
- Consequence: Public goods will tend to be undersupplied if left to the private sector.

### Role of governments and institutions
- Coordination as solution: Ensures everyone contributes and balances costs and benefits.
- Governments as main coordinators for local and national public goods:
  - Strong institutions can enforce regulation and taxation to mobilize resources and eliminate the free rider problem.
  - Inclusive governments value welfare of all citizens—within borders and across generations—and can realize full societal benefit of public goods and balance present and future needs.
- Global challenge:
  - Global institutions often lack legal authority to enforce regulation and taxation or the institutional capacity to coordinate needs of all citizens and future generations.
  - Coordination is more difficult because global institutions deal with national governments rather than individual citizens; many national governments already struggle to provide public goods within their own countries.

### International agreements and limitations
- Paris Agreement example:
  - Successes: Takes into account countries’ different needs and responsibilities; commitment by developed economies to provide $100 billion in climate financing each year mobilized resources for emerging market and developing economies.
  - Limitations: Withdrawal of the United States in 2020 and chronic underprovision of climate financing highlight limited ability to enforce contributions and eliminate the free rider problem.

### Supply and demand dynamics for global public goods
- Historical formation: Many institutions providing public goods formed in response to demand (examples: public education in the United States; IMF established after the Great Depression and World War II to promote global financial stability).
- Rising demand: Increased interconnectedness—trade, capital flows, migration—makes global public goods more important than in 1945, when many global institutions were founded.
- Crises increasing demand:
  - COVID-19 increases demand for global public health.
  - Refugee crises increase demand for global peace.
  - Climate change increases demand for sustaining the global environment.
- Requirements for effective global provision:
  - A global framework that recognizes a shared obligation, clearly delineates each country’s responsibility, and enforces commitments.
  - Comprehensive governance structures to ensure decisions are legitimate and represent all present and future citizens of the world.
- Outlook: If current momentum can be harnessed and mobilized to build such a global framework, the provision of global public goods may become a reality.

*Moya Chin, Finance & Development, December 2021*

---


_Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/december/b2b-global-public-goods-chin.pdf_