Social goods, defined


This blog needs a definition of “social goods.” That’s a bit difficult, though. Even economists don’t have a clear and agreed-upon definition. So by way of definition, let’s discuss the characteristics and problems of social goods, and how those characteristics pose problems for traditional marketing activities such as design, distribution, pricing and promotion.

Roughly, social goods are products and services that could be provided through private enterprise, but are instead provided by government or non-profits. Reasons for relying on government or non-profits might include social policy, or lack of an effective market mechanism, or economies of scale. For instance, public transportation can be provided by private enterprise, but it’s usually offered through government action because of economies of scale offer by taxation to build, maintain and subsidize the system.

Social goods share several characteristics that separate them from private goods:

  • Universal distribution: members of the society can’t be easily or reasonably prohibited from accessing social goods.
  • Universal consumption: one person consuming a social good doesn’t appreciably reduce someone else’s consumption.
  • Pooled financing: the social good is paid for predominantly by the pooled funds or labor of the entire group.
  • Separation of buyer and user: the user of a social good may not be the one who paid for it, and vice versa.

I’ll continue with my public transportation example to show how these characteristics apply. The city bus is intended for everyone, provided of course they pay the fare; no one is reasonably excluded. My riding the bus doesn’t diminish your ability to ride. The bus system is paid for predominantly by the pooled funds and labor of the community. I use the bus to get around, but the transit agency is the actual buyer of the bus.

Social goods are also prone to several common problems.

  • Underproduction: the society may not produce enough of the social good to meet demand
  • Overuse: the social good may be overused due to underproduction separation of buyer and user
  • Degradation: the social good may become degraded through overuse, poor maintenance, accident or natural disaster
  • Free ridership: individuals who bear neither direct or indirect costs for the social good may nonetheless use it

The public transportation example continues to be a useful illustration. My city may not provide enough bus service for the community, due to lack of funds, public resistance or other reasons. The buses that are in service may be overused through crowding and through run them beyond their designed parameters. Over time, the buses themselves and the entire related system can become run down. People who pay no taxes and no fare may be riding the bus.

For marketers, social goods pose several challenges beyond most commercial products and services, including

  • Design: How can you design with, not for, your audience, when your audience is potentially everyone?
  • Distribution: How do you effectively distribute social goods, when reaching such a broad audience is expensive?
  • Pricing: How do you fairly price a social good when the user is not the buyer? Can you make people pay for a social good that they don’t directly use?
  • Promotion: Can social messages competitive effectively against commercial messages for society’s attention?

Many goods and services can be offered as social goods, but here are several of the common ones:

  • Clean water
  • Clean air
  • Wild lands
  • Fisheries
  • Sanitation
  • Public health
  • Food and drug safety
  • Energy
  • Education
  • Transportation
  • Finance and markets
  • Public spaces
  • Information
  • Public safety and justice

These goods and services, these social goods, are crucial to our lives individually and collectively. They are too important to not get right through savvy application of marketing disciplines about design, distribution, pricing and promotion.

If you find any of these lacking in your community, look for a solution from a marketing perspective, and then use that perspective to make your solution reality.

2 thoughts on “Social goods, defined

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s