A Suppose that the firms in the chemical industry are allowed, free of charge, to dump harmful products into rivers. As an additional consumer obtains the benefits of a pure public good such as national defense, the benefits to existing consumers decline. In the political arena, voters and lawmakers can be expected to act in their own self-interests.
Income is distributed equally in and by both sectors.
In both sectors, economic activity is undertaken only when it will result in social gain. In both sectors, economic exchange is completely voluntary. Someone must cover the cost associated with the provision of scarce goods in both sectors. Individuals who expend scarce resources to influence taxation, spending, and regulatory policies are actively engaged in tax evasion. A common complaint often heard during election years is that too few people take the time to educate themselves on the issues and vote.