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A merit good refers to goods or services that are provided for the benefit of society. Often merit goods are provided or subsidized by the government because their provision would be inadequate if controlled by private enterprises or left to market forces. These are things like medical care, education, and museums which are provided to the public cheaply or at no cost because the government wants to encourage their use and consumption.
In economics, a merit good is different from other goods in that its benefit to the individual or society is not certain at the “point of consumption,” the time at which the benefit is conferred. With education for instance, society generally considers it something of value, both for the individual and society. It may take years before an education shows economic benefits to the student. However, it is assumed that personal enrichment comes with education. It is also believed that society will benefit from an educated individual with marketable skills.
Another distinguishing economic aspect of a merit good is that its benefits are usually greater than the marketplace can gauge and are specific to the individual who receives them. Museums and libraries are considered important for the knowledge and cultural education they can provide to the public, but many people may never visit one. The economic theory is that the social benefits are more important than the level of private consumption.
With a merit good such as free or low cost addiction services, there is a benefit to the individual in becoming substance free. There are also many potential gains for society. The recovering person’s family will benefit. If successful in treatment, the patient could likely become a more productive employee. Another individual may fail at treatment or succeed only after years of multiple attempts.
For the most part, merit goods are considered “equity” goods that should not be linked to the ability to pay for them. Their long-term benefits are considered greater than the short-term benefits of acquiring them. In economics, a merit good is different from a public good. A public good, such as clean air or police protection, cannot be denied to anyone. It is shared by everyone without losing any value.
Critics of the theory of merit goods say that it is merely an excuse for unwarranted government intrusion into what is “best” for people. Things such as the use of government health care or mandatory withholding of income for retirement are choices many individuals would not make on their own. Consumers should not have to subsidize activities a government considers “good for people,” like public museums, ballets, orchestras, or broadcasting stations.