Merit good

A merit good can be defined as a good that is desirable yet underconsumed, and it creates positive externalities which makes it desirable.A merit good in economics is a commodity which is judged that an individual or society should have on the basis of a norm other than respecting consumer preferences. One rationale for this is paternalism, that the government or other donor provides such a good on the basis of "merit," because it can better provide for individual welfare than allowing consumer sovereignty  (Musgrave, 1987). Alternatively, there may be more acceptance for income redistribution in the form of goods, rather than, say, purchasing power (Musgrave and Musgrave, 1973, p. 81). Examples include food stamps, health care, and subsidized housing.
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A good (or service) which some "outside analyst" considers to be intrinsically desirable, uplifting or socially valuable for other people to consume, independently of the actual desires or preferences of the consumer himself. In the case of such goods, it is sometimes held that free consumer choice is inappropriate, and therefore that if many consumers left to themselves are unwilling to purchase "appropriate" quantities of such goods, they should be encouraged or even compelled to consume them anyway. Such arguments are often employed in an effort to justify government intervention in the market place to provide such alleged merit goods to the citizenry, either through direct government provision of the good at no cost to the consumer or through payment of tax-financed government subsidies that enable private providers to sell the good far below its true costs of production. Typical examples of alleged merit goods might include various forms of "higher culture" often ignored by "lowbrows" (grand opera and ballet performances, museums, uplifting documentaries or talking heads shows on PBS TV stations), the services of the clergy of The One True Religion, schoolroom instruction for children, etc.
[See also: demerit good , subsidy ]