Definition of Public Goods Reconsidered

This paper begins with verifying, successively, the following propositions. First, the characteristics of non-rivalry and unexcludability exist in externality as well as in public goods. For this the Civil Code concept of “Unjust Enrichment” is utilized. Second, non-rivalry and unexcludability jointly incur noncompensation. Third, public good is more adequately defined while markets fail than while governments intervene, and its definition should mention the existence of third-party effect. Fourth, externality equals in concept with public good, till varying radii of third-party effect do them part. Consequently, based on the verifications, new definitions of externality and public good are constructed by employing such concepts as existence and radius of third-party effect, noncompensation, non-rivalry, and unexcludability.