There should, however, be much less debate about spending on what Econ 101 calls public goods — things that benefit everyone and can’t be provided by the private sector. Yes, we can differ over exactly how big a military we need or how dense and well-maintained the road network should be, but you wouldn’t expect controversy about spending enough to provide key public goods like basic education or safe drinking water.In a world where yuppie parents expend large sums to get their spawn into Ivy-prep day-care, and load cartons of Poland Spring or Nicolet into their motorcars, you will in fact have such controversy.
It's the failure of government, which manifests itself in Flint, and potentially anywhere else where the water authority has revenue problems, that drives people who can to opt out of the government schools and reduce their dependence on tap water. (As does Cafe Hayek's Don Boudreaux.)
But economics sometimes burdens the discussion with additional terminology, and sometimes, as Tim Worstall notes, the burden is worth bearing.
It probably is true that the absence of pandemic disease through the existence of a decent sanitation system is a public good. But drinking water is not, not by the economists’ definition.The simple economics still call for precision. Perhaps water delivery takes place under natural monopoly conditions, in which one network of pipes is less costly than competing networks. Yes, there are opportunities for users to bypass the network, which might involve digging your own well or setting out rain barrels. But we've inherited from the Romans the idea of the water works as a government enterprise, rather than a public utility. And independently of the natural monopoly, there's value in certifying the water as free of disease, which might be a government function, or, as is the case with the bottled water, the certification might be a convex combination of packaging regulations and brand name capital. "Often a good idea" is more restrictive than "warrants government provision."
The importance of getting this right is that there’s a very strong argument for government intervention into the provision of public goods. If something is a public good then it’s very difficult to make a profit from it. This means that private markets will undersupply it, or at least potentially will. So, intervention to get the amount we think would be societally useful is often a good idea. Please do note that I’m not banging an ideological drum here; this just is the simple economics of the matter.