It implies further that the marginal equivalency conditions are not generated automatically. The paucity of public goods exists because one characteristic of a public good is non-excludability. This means that a consumer can consume a good or service and not pay for it, the firm cannot exclude any consumer from the act of consumption, and therefore no profit maximising firm will be willing to supply the good or service. This represents an example of a market failure and provides a legitimate rationale for government intervention. If the good or service is economically viable then the government will supply the product itself and finance it by collecting revenue from taxes.
Pollution is an example of an externality.
Externalities are costs and benefits which result from an act of production or consumption but which are not borne or received by the economic agent, the firm or consumer, making the decision to produce or consume. The problem for the market economy is that the existence of negative externalities means that the marginal equivalency conditions are not met because private marginal costs understate societal marginal costs. This market failure provides a legitimate reason for government intervention. The form that the intervention may take can be direct or indirect. The direct role involves the setting of regulations or standards requiring the polluter to reduce or eliminate completely the pollution.