Question: Should the provision of leisure services be considered as a private good? Using theory discussed in Block 3, outline the arguments as to whether it may be necessary for the government to intervene in the provision of leisure services and comment on any practical limits to government intervention.

Provision of Leisure Services as Private Goods

Table of Contents

Introduction…………………………………………………………………………………………………………………….. 2

Brief explanation on private goods……………………………………………………………………………………….. 2

Provision of leisure services as private goods………………………………………………………………………….. 4

Intervention of Government in the provision of leisure services………………………………………………… 5

Practical limits to intervention of Government………………………………………………………………………… 6

Conclusion……………………………………………………………………………………………………………………….. 6

References………………………………………………………………………………………………………………………. 7

Introduction

Leisure service can be defined as the part of the day in which there is no involvement of the workers in the income and earning activities of the goods. Usually it is off job time and during this time the people tend to relax and rest. It can be while watching TV, sports or sleeping. The main aim of the assignment is to assess whether the leisure services will be considered as a private good. The intervention of the Government in the provision of the leisure services and the limits to the intervention of the Government has been assessed. A brief explanation of leisure services as private goods has been provided. The private good as an economic resource are scarce and there is increase in rivalry for private good (Slavov, n.d.). The demand curve for a private good is a horizontal summation of the individual demand curves. The private goods follow the law of demand and the price of a private good increase with the rise in demand and when the supply is low (Public Goods and Private Goods, 2015). Bread can be an example of private good where the bread that has been taken by one person cannot be consumed by another (considered as a rival) and it becomes easier for the baker to trade a loaf. On the other hand public good can be defined as a good that on consumption by one individual does not potentially reduce the amount available for consumption by another individual(BESLEY and GHATAK, 2015).

Brief explanation on private goods

In the present essay it needs to be assessed that whether the leisure services can be considered as a public good or a quasi-public good. The public good can be defined as an environment with temperature that is important for healthy living. In case of public goods the enjoyment of the goods cannot be taken away unlike the private goods where there is exclusion of the individuals if there is no payment for the product. The central Government also provides the quasi public goods. Thus it can be said that the leisure services are not public goods but quasi public goods.Private goods can be considered to be opposite of public goods. The free rider problem is less visible in case of private goods as to be the owner of private good, it has to be purchased. It is not available for free (Labaree, 2015). The demand curve for private good is same as public good. With the rise in demand for private goods, the price of private good increases. The common examples of private goods are food, cell phones and airplanes. Economists have defined private goods as rivalrous and excludable (Blomquist and Christiansen, 1999). The leisure service can be defined as the segment of the business that focuses on entertainment, sports, tourism and recreation. The leisure services fall under the category of private goods as the consumption of a private good is possible only if it is purchased by the consumer (Koenig, Lausen and Wagener, 2015).

                       Excludable                                                     Non-excludable

Rivalrous

Non – Rivalrous

The demand curve shows that optimal quantity is given by M and the provision of the quasi-public good will occur at that quantity of membership as at a point where the marginal cost is equal to the marginal benefits.

Provision of leisure services as private goods

The Government plays a major role for the welfare of the public. They have the responsibility to maximize the benefits of the public. Thus the leisure services has to be provided by the Government and there is necessity for intervention from the Government. The public provision of private goods (education, day care, health care etc) is important quantitatively in all countries that are developed which accounts for around 15 to 20% of the GNP. The quantitative determination of the leisure services has to be included under private goods. Differential taxation policy for private goods is a major issue. It is optimal to tax the goods differently. It is optimal to tax the luxury show off goods such as jeweler, luxury cars higher than the insurance services. The work of Veblen on leisure studies refer to his conception of conspicuous consumption as a phenomenon of sociology. But the economic importance of leisure services is equal (Dragicevic and Meunier, n.d.). It is difficult to develop the economies of leisure or any other area where there public sector is involved. The economics of leisure is concerned with the adoption of the standard model so that the odd situations can be taken into account which has no conformity with the format of the standard market. In such cases there is involvement of the government take place (Blomquist, Christiansen and Micheletto, 2011). In case of provision for leisure services as private goods, the sports sector violates some of the major assumptions that are considered in mainstream economics. In a sports sector, the firms are open to access the market as the firms want to maximize their market share. However it is viewed by the government and the economist as undesirable and it is resisted by the antitrust laws and the monopolies commission. The composite product is common for the leisure sector. The sporting league can be considered as an example of a composite product. Tourism is also a composite product. Monopoly is one of the major characteristics of leisure. Monopoly occurs when there is only one supplier for a product. It is seen that the leisure organizers take the advantage of monopoly. Monopoly leads to excess of profit and as a result of which there is limitation to supply (Fang and Norman, 2013).

Intervention of Government in the provision of leisure services

 Governments provide public goods at all levels but they also devote considerable amount of time for the provision of private good and services like providing health care services , child care services , insurance services , education and housing services. The intervention of the Government on the leisure services can be explained in terms of tourism sector. The tourism sector requires a proper strategy from the Government as it is an industry that has growing economic importance. The tourism industry can result in sustainable development and it can be an instrument for regeneration. The tourism industry is a diverse industry and it requires support from the Government. The demand for the tourism sector is seasonal and it is variable. But according to several economists, Government should not intervene unless it has been justified under valid grounds. But in case of a market failure there is justification for Government intervention. In leisure services and tourism there is existence of natural monopolies. There is only one operates that is responsible for operating the tourist spots like Grand Canyon, Great Barrier Reef. In such sector it is apt that the Government must intervene to prevent the private operators from taking advantage of the monopoly. The Government intervention prevents the undue advantage by the operators to charge higher prices. Thus the intervention from the Government is seen as a measure to overcome the problem by taking certain measures like levying taxes for the payment of goods and services or it can be done by subsidizing the production to a considerable level (ec.europa.eu, 2015).

Practical limits to intervention of Government

The leisure services and goods are one of those minimal packages that are available for providing a satisfactory quality of life. The Government intervention in the leisure services makes its cheaper for all. The monopoly nature of the leisure services can be prevented from Government intervention. There are various ways in which the Government can intervene includes imposition of tax and prevention of extortion of prices. It is seen that there are some sporting activities that are promoted by the Government to maintain the physical fitness. There is also legal framework by the Government for the protection of the society and protection of the life. Government intervention is seen in case of gambling, alcohol consumption and various safety regulations in the entertainment place. Government provides subsidy in case of education sector. They also interfere to maintain the cultural heritage of the country. Government intervention is also seen in promotion of local film industry. However there are several cases in which the intervention from the Government has led to market failure. In some cases it is seen that the demand from the Government is endless which causes discomfort among the public (Veal, 2010) ; (Aronsson and Stenman, 2013).

Conclusion

In majority of the cases, the Government intervention is seen as facilitating rather than a providing a direct provision role. The facilitating role of the Government is seen to develop the nonprofit sector and the commercial sector. The trend in the policy making by the Government has been seen in the field of leisure, tourism and sports. The Global influence in the cultural services is seen at the cultural level. The government intervention in the leisure services is seen to be feasible in case of monopoly sectors. In these sectors the sellers charge in excess in order to earn huge profits. In such cases it is necessary for the Government to intervene. The Government intervention is seen in term of implementation of tax. However in some cases it is seen that Government intervention leads to market failure. The intervention of the Government in the leisure services is necessary to preserve the natural beauty of a tourist spot or the cultural value of a place.

References

Aronsson, T. and Stenman, O. (2013). Publicly Provided Private Goods and Optimal Taxation when Consumers Have Positional Preferences. [online] gupea.ub.gu.se. Available at: https://gupea.ub.gu.se/bitstream/2077/32519/1/gupea_2077_32519_1.pdf [Accessed 16 Feb. 2015].

BESLEY, T. and GHATAK, M. (2015). GOVERNMENT VERSUS PRIVATE OWNERSHIP OF PUBLIC GOODS. 1st ed. [ebook] pp.1343-1349. Available at: http://econ.lse.ac.uk/staff/mghatak/qje.pdf [Accessed 16 Feb. 2015].

Blomquist, S. and Christiansen, V. (1999). The political economy of publicly provided private goods.Journal of Public Economics, 73(1), pp.31-54.

Blomquist, S., Christiansen, V. and Micheletto, L. (2011). Public provision of private goods, self-selection and income tax avoidance. [online] ucfs.nek.uu.se. Available at: http://ucfs.nek.uu.se/digitalAssets/129/129546_wp20116.pdf [Accessed 16 Feb. 2015].

Dragicevic, A. and Meunier, G. (n.d.). Competitive Private Supply of Public Goods. SSRN Journal.

ec.europa.eu, (2015). Economic Assessment of the Barriers to the Internal Market for Services. [online] Available at: http://ec.europa.eu/internal_market/services/docs/services-dir/studies/2005-01-cph-study_en.pdf [Accessed 16 Feb. 2015].

Fang, H. and Norman, P. (2013). Toward an efficiency rationale for the public provision of private goods. Econ Theory, 56(2), pp.375-408.

Koenig, T., Lausen, T. and Wagener, A. (2015). The Public Provision of Private Goods with Status Concerns. [online] coll.mpg.de. Available at: https://www.coll.mpg.de/sites/www.coll.mpg.de/files/workshop/Public%20Provision.pdf [Accessed 16 Feb. 2015].

Labaree, D. (2015). Public Goods , Private Goods : The American Struggle over Educational Goals.American educational Research Journal, [online] 34, pp.38-81. Available at: https://web.stanford.edu/~dlabaree/publications/Public_Goods_Private_Goods.pdf.

Public Goods and Private Goods. (2015). 1st ed. [ebook] pp.1-10. Available at: http://www.econ.ucsb.edu/~tedb/Courses/UCSBpf/pflectures/chap2.pdf [Accessed 16 Feb. 2015].

Slavov, S. (n.d.). Public versus Private Provision of Public Goods. SSRN Journal.

Veal, A. (2010). Leisure, sport and tourism. Cambridge: CABI.