public good paid for by Samuel.

Step 3. Samuel reasons the same way about Rachel.

Step 4. When both people reason in that way, the public good never gets built, and there is no movement to the

option where everyone cooperates—which is actually best for all parties.

The Role of Government in Paying for Public Goods

The key insight in paying for public goods is to find a way of assuring that everyone will make a contribution

and to prevent free riders. For example, if people come together through the political process and agree to pay

taxes and make group decisions about the quantity of public goods, they can defeat the free rider problem by

requiring, through the law, that everyone contributes.

However, government spending and taxes are not the only way to provide public goods. In some cases, markets

can produce public goods. For example, think about radio. It is nonexcludable, since once the radio signal is
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