Factors a Government Considers in Allocating Resources to Street Lighting and Public Parks

Answer

A government allocating scarce resources to street lighting and public parks must weigh the market failure each good corrects against the costs and constraints of provision. The two goods differ in kind of failure — which is exactly why agreement on street lighting is firmer than on parks. The thesis is that street lighting warrants near-certain provision, while the extent of park provision is genuinely contestable.

Street lighting — a pure public good. Street lighting is a public good: it is non-rivalrous (one person’s use does not reduce another’s) and non-excludable (non-payers cannot be shut out). Non-excludability invites free-riding, so no consumer will pay; profit-seeking private firms cannot recover costs and supply nothing — complete market failure, output of zero against a positive socially optimal level. Because the missing output is the whole market, the case for government provision is strong and largely uncontested.

Public parks — a merit good with positive externalities. Parks are a merit good: their consumption confers external benefits on third parties (a healthier, more cohesive population, higher surrounding property values), and consumers, lacking full information, undervalue the private benefit. Both forces mean the free market under-provides.

Parks: marginal social benefit MSB lies above marginal private benefit MPB by the marginal external benefit. The free market produces at Qm (MPB = MPC); the social optimum is Qs (MSB = MSC). The Qm–Qs gap is under-consumption, with the shaded triangle the deadweight welfare loss.

Unlike street lighting, parks are excludable and rivalrous to a degree (entry can be charged; they congest), so a private market would supply some parks — just too few relative to the social optimum at Qs. The failure is partial, not total, which is why the extent of public provision is debatable.

Costs and constraints. Against these benefits the government must set the explicit cost of provision and the opportunity cost of the budget — resources spent on parks are unavailable for healthcare or education. Provision is bounded by the government’s budget position, debt, and reserves. There is also the risk of government failure: imperfect information about citizens’ true valuation of parks can lead to over- or under-provision, and large showcase parks (Gardens by the Bay) may carry high maintenance costs that crowd out higher-value uses.

Judgement. The factors point to different conclusions for the two goods. For street lighting, the benefit — averting complete market failure of an essential public good — almost always exceeds the modest cost, so provision is warranted and economists agree. For parks, the market already supplies some, the external benefit is real but harder to quantify, and the marginal cost of grand projects is high; the decision therefore turns on a marginal cost–benefit comparison — provide up to the point where the marginal social benefit of an additional park equals its marginal social cost. That optimum varies with a country’s income, land scarcity and fiscal capacity, which is precisely why economists disagree on the extent of park provision even while agreeing on street lighting.