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Public goods and private goods are relative concepts. Versus private goods or services, public goods has its own characteristics. First, the consumption of non-competitive. Consumer's noncompetitive refers to a person's consumption of public goods does not affect other people from the consumption of public goods utility obtained, ie a person consume the additional increased costs of public goods is close to zero. Second, non-exclusive benefits. Non-exclusive does not mean it is impossible to stop those who pay for the consumption of public goods, the supply of public goods without paying any fees with those who pay the cost of the same people come to enjoy the benefits of public goods, because technically impossible to exclude producers And those who do not pay people to enjoy the product, or the exclusion of the cost so high that he became uneconomical row. This "free rider" is the result of private unwilling to provide such public goods, thus the need for government intervention, such as the provision of public goods through taxation or through inter-state negotiations to solve the free-rider problem between countries. In fact, these two features is just a theoretical definition, in line with the above characteristics of public goods belonging to the narrow scope of public goods, that is, the so-called pure public goods. In reality, there is a lot more between "pure public goods" and "pure private goods" between the "quasi-public goods," such as infrastructure, some medical products. Broad public goods include both pure public goods, but also includes "quasi-public goods." "Quasi-public goods," the supply of basically two ways: one is completely private providers; Second, the joint provision of private and government; provided by the private sector "quasi-public goods" would have a certain degree of external effects.

外部效应亦称外部性。它是指市场活动中没有得到补偿的额外成本和额外收益，是市场失灵的主要原因之一。外部效应表现为作为经济主体的交易双方在经济活动中会产生一种有利或不利影响，并带来一定的利益或损害，这种利益或损害不是由经济主体自身而是由第三方或社会来获得或承担的，第三方因此而获得的收益或因此而付出的成本在交易双方的决策中都未予考虑。

External effects known as externalities. It refers to marketing activities have not been compensated for the additional costs and additional revenue, is one of the main market failure. External effects of economic performance as the main parties to the transaction in economic activity will produce a favorable or unfavorable impact and bring some benefit or harm, such benefit or harm not by itself but by economic agents to third parties or social obtained or assumed, therefore a third party gain or so while the cost of the transaction parties are not taken into account in decision-making. According to the impact of externalities can be divided into positive externalities, negative externalities. Negative externality refers to a third party outside the transaction brings not be reflected in the price the cost. An economic activity in the presence of negative externalities, the private cost is less than the social costs, then private activity levels are usually required to be higher than the optimal level of society (positive externalities contrast). Externalities cause efficiency losses, costs to the cost burden and the super-excessive use of public resources and other issues. Resolve the negative external effects is concerned, is the ex