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Seth_Goldin comments on Individual vs. Group Epistemic Rationality - Less Wrong
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I'm sorry; how is scientific knowledge a public good? Yes, it is nonrivalrous in consumption, but certainly not nonexcludable. Legitimate, peer-reviewed journals charge for subscriptions, individual issues, or even for individual articles online.
The issue is not "who gets to read a specific peer reviewed paper" but much more "who benefits from the world state that comes about after the paper existed to be read by anyone".
The obvious benefits are mostly the practical fallout of the research - the technologies, companies, products, medical treatments, social practices, jobs, weapons, strategies, and art forms that occur only by virtue of the research having been done that provided the relevant insights to people who could leverage those insights into various sorts of world improvement. Knowledge dissemination happens via many mechanisms and scientific journals are only an early step in the process.
If the only benefits of science were to individual people who read the papers, then no government on earth should or would subsidize the process. If positive benefits stop being derived from knowledge work, and this fact reaches the public consciousness, democratic subsidy of science will eventually cease.
How do you reach that conclusion? Governments subsidize all sorts of activities which benefit particular sub-groups more than the general population. It is hard to identify any government activity which doesn't implicitly favour certain groups over other groups.
In reality the benefits of government funded science tend to accrue to more than just the individual people who read the papers but funding decisions are clearly not based on any kind of utilitarian calculus.
There is a difference between science, a.k.a. basic research, and technology, a.k.a. applied science. A popular justification for funding basic research is that it suffers the positive external effects you mention, but this is inappropriately conflating science and technology. Technology doesn't suffer from external effects. The patent system and the profit motive allow for technological goods and services to be excludable.
A "public good" is not a Boolean kind of thing. There are degrees of excludability and rivalrousness. Some goods become more or less excludable over time and so may or may not be a public good at any given point. Some scientific knowledge is a public good and some of it isn't, but probably will be in the near future.
Yes, degrees of rivalrousness and excludability exist on a continuum, but that's irrelevant here. Scientific knowledge isn't nonexcludable.
Let's be precise with our language. Scientific knowledge is produced in respected, formal, peer-reviewed journals. Such journals charge for access to that knowledge. We shouldn't be sloppy with how we define scientific knowledge; there is a lot of knowledge about science, that's not the same thing as scientific knowledge, which is produced by a specific, formal, institutional process.
I reckon it is public good anyway, insofar as public libraries are public. In fact, you can most probably access many of those journals for free at your nearest public library, even if not necessarily by direct web access, but by requesting a copy from the librarian.
EDIT: Of course if you want convenience, you have to pay. (Perhaps) luckily enough people and institutions are willing to.
Right, so a "public" library is a good example of a good that is provided publicly, but has little economic justification as such. A "public" good is technically specific in economics, and refers to something more narrow than what is used in everyday language.
A book is excludable, even if somewhat nonrivalrous. It's rivalrous in the sense that it can't be checked out to multiple people at once, but nonrivalrous in the sense that a book in a library can be consumed by many more people than a book kept on a shelf in someone's private home, over an extended period of time.
A library could operate without positive external effects with a subscription model.