club good: an intermediate case between a pure public good and a pure private good. With a club good exclusion is feasible, but the optimal size of the club is generally larger than one person. An example is a film shown in a theater, where it is possible for the good to be priced (exclusion can be practiced) and for a number of people to share the good without diminishing each other's consumption of it. The optimal size of a club is that which maximizes the group's joint utility.

economies of scale: when increased output lowers a product's average cost.

economies of scope: when producing two products together is cheaper than producing them separately.

externality: when an individual, firm, country, or other entity takes an action but does not bear all its costs (negative externalities) or receive all its benefits (positive externalities).

final public good: like private goods, public goods can be differentiated by the stages of their production process. Final public goods are those desired for consumption, such as clean air, efficient markets, and peace and security. Producing final public goods often requires inputs of many private goods, public goods, or both. Public goods that contribute to the production of a final public good are called intermediate public goods. For example, achieving clean air or a stable climate requires international agreements (such as the Kyoto Protocol) and national regimes (such as for sustainable energy or forest management). Sometimes a public good can be final from one perspective and intermediate from another. Consider knowledge. People desire some elements of knowledge for their own sake. Other elements (such as medical knowledge) may be used in the production of vaccines (which are private goods), with the goal of producing a final public good­say, disease control or,more generally, enhanced healthy living conditions.

free rider: someone who enjoys the benefits of a good without paying for it. Because it is difficult to keep people from using pure public goods, those who benefit from them have an incentive to avoid paying for them.

global public good: a public good with benefits that are strongly universal in terms of countries (covering more than one group of countries), people (accruing to several, preferably all, population groups), and generations (extending to both current and future generations, or at least meeting the needs of current generations without foreclosing development options for future generations).

intermediate public good: see final public good.

market failure: when a market fails to achieve economic efficiency.

moral hazard: the tendency for people who purchase or are provided with insurance to be less cautious because they have less reason to avoid what they are insured against.

nonexcludable: describes benefits that are available to all people once a good is provided. By contrast, a good's benefits are excludable if they can be withheld by the owner or provider. Firework displays, pollution control devices, and street lighting yield nonexcludable benefits because once they are provided, it is difficult if not impossible to exclude people from enjoying their benefits.

nonrival: when a good can be consumed by one person without detracting from the consumption opportunities available to others. Sunsets are nonrival (or indivisible) when views are unobstructed.

Pareto efficient: when no rearrangement of a resource allocation can make anyone better off without making someone else worse off.

prisoner's dilemma: when the independent pursuit of self-interest by two parties makes both worse off.

provision of public goods: typically consists of two separate but intertwined processes. The first is the political process, which involves making decisions about which public goods to produce, how much of them to produce, how to shape them, and at what net cost and benefit to whom. The second is the production process, which involves bringing together contributions from all concerned actor groups, sectors, and countries. Financing issues should be considered in both parts of the provision process because they may critically influence actors' incentives to cooperate.

public good: goods with nonrival consumption and nonexcludable benefits have a strong potential for publicness. For example, it generally costs little or nothing to give an additional person access to statistical data.Yet only some data are in the public domain­available for all people to use free of charge. Other data are private and must be purchased. Thus it is important to distinguish between a good's potential and de facto publicness. Only de facto public goods are actually available for all people to consume.

transaction costs: the extra costs (beyond the price of the purchase) of conducting a transaction, whether in terms of money, time, or inconvenience.

Definitions are adapted from Joseph E. Stiglitz's Economics, second edition (New York: W. W. Norton, 1997); from The MIT Dictionary of Modern Economics, fourth edition (Cambridge, Mass.: MIT Press, 1992); and from Richard Cornes and Todd Sandler's The Theory of Externalities, Public Goods and Club Goods, second edition (New York: Cambridge University Press, 1996). The definition of public good reflects the ideas presented in Kaul and Mendoza (in this volume).