Lindahl Equilibrium

The Lindahl equilibrium, proposed by Erik Lindahl, is that the amount that everyone should pay for public goods should equal the marginal benefit that they’re getting out of the good.

For instance, everyone’s paying the same amount to national defense, and everyone’s gaining the same marginal benefit from it, for the most part. But what about something like a park? The Lindahl equilibrium says that, if you never go to the park, you shouldn't pay a cent for it, and if you go to the park often, you should pay for that amount. Yet...this is why public goods are public goods: they are for the public. Switching to a pay-for-park system would more or less make it private.

As you can see from the park situation, the Lindahl equilibrium isn’t applicable in many real-life, public good scenarios. Still, it serves as a way to contrast the free rider problems that can come with public goods, where people are incentivized to consume more than they’re paying.