Today, cable providers remain under rate control despite competition from other means of transmission of signals. It has been argued that, to protect consumers, if the government gives a firm a monopoly position in a market, it must then regulate prices in that market, limiting what the monopoly firm can charge. If I promise you a 7 percent rate of return on your expenses, you have little incentive to keep your expenses down. There are some goods that we want, but that firms won t provide for us, because they can t sell the goods in small units. For example, we all want national defense, but it is not something you can buy in store.
National defense is a good example of what economists call a public good.
National defense is because, if a submarine is located off the coast of California I can benefit at the same time you do. The second characteristic of public goods is that I can t be excluded if I don t pay. So parks are not public goods. But if I don t pay for the submarine off the coast and it is put in place anyway, I can t be excluded from benefiting from the protection. The submarine off the coast is a public good.