The market does not deal very well with resources that are not individually owned&emdash;such as the atmosphere, waterways and some areas of land. These are called public or social goods by economists. Public goods all have the following characteristics to some degree, and this is what prevents them from being bought and sold on the market:

• 'Consumption by one person does not reduce the quantity available to others' (HRSCEC 1987, p. 11). For example, if a bushwalker goes to a scenic lookout her action does not reduce the amount of view available for others to see.
• Benefits automatically accrue to everyone - 'enjoyment cannot be made conditional upon the payment of a price or upon ownership' (p. 11). For example, if the ozone layer is not depleted, everyone benefits. Conversely, no-one can be prevented from benefiting, even if they do not pay to prevent its depletion.
• 'Individuals cannot avoid using the good' (p. 11). For example, the air is something that no-one can avoid breathing.

Public goods include some types of information, scientific knowledge, roads, lighthouses and national defence. In reality, there is a continuum from pure public goods to private goods, with many goods and services having some but not all the characteristics of a 'pure' public good. For example, a water supply can be charged for, and is sometimes privately controlled and sold. The world's supply of fertile soil, forests and even beaches can be seen as a common heritage, but parts can be owned by individuals.

At the public-goods end of the spectrum are environmental goods, such as clean air, the ozone layer and aesthetic landscapes. These goods are not bought and sold, and so are said to have a zero price in the market place. Economists argue that this has led to them being overused and there has been no incentive to protect them.

One of the reasons that public goods are not usually bought and sold is that it is difficult to exclude non-payers from using or taking advantage of them. This means it is hard to make a profit from providing them, and there is little incentive for private firms to supply or maintain them. However, public goods often cost money to supply or maintain, and their provision and protection has traditionally been a government responsibility.

Because most people seem unwilling to pay for public goods through their taxes, they have generally been underfunded. In 1958, economist John Kenneth Galbraith noted the imbalance in American society between private and public goods, and illustrated it as follows:

The family which takes its mauve and cerise, air-conditioned, power-steered, and power-braked car out for a tour passes through cities that are badly paved, made hideous by litter, blighted buildings, billboards, and posts for wires that should long since have been put underground. They pass on into a countryside that has been rendered largely invisible by commercial art. (The goods which the latter advertise have an absolute priority in our value system. Such aesthetic considerations as a view of the countryside accordingly come second. On such matters we are consistent.) They picnic on exquisitely packaged food from a portable icebox by a polluted stream and go on to spend the night at a park which is a menace to public health and morals. Just before dozing off on an air-mattress, beneath a nylon tent, amid the stench of decaying refuse, they may reflect vaguely on the curious unevenness of their blessings. (Galbraith 1969, pp. 208&endash;9)

Some economists would like to see this function of managing public goods taken over by the private sector by artificially making markets for public goods. They believe this would ensure that public goods are allocated in a more 'efficient' manner. By efficient, economists mean that the economic returns outweigh the costs. Efficient allocation, however, does not mean that allocation is just or fairly distributed. Nor does it imply that allocation will be ecologically sustainable.

In any case, whether or not the government supplies and protects environmental goods, economists agree that this could be done more effectively if people and firms were charged real prices for using the environment. This would ensure that environmental considerations were incorporated into market decisions. Environmental economists see the solution to environmental problems in terms of ensuring that the environment is properly priced to reflect the relative scarcity of natural resources and assets.

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