Public and Private Goods
Introduced| English | Meaning |
|---|---|
| rivalry/ˈraɪvəlri/ | The property of a good whereby one person's consumption reduces the amount available to others. |
| excludability/eksˌkluːdəˈbɪlɪti/ | The ability to prevent people from using a good or service if they do not pay or meet access conditions. |
| private good/ˈpraɪvət ɡʊd/ | A good that is rival in consumption and excludable. |
| public good/ˈpʌblɪk ɡʊd/ | A good that is non-rival in consumption and non-excludable. |
| common resource/ˈkɒmən rɪˈzɔːs/ | A resource that is difficult to exclude people from using but is depleted or made less available when one person uses it. |
| club good/klʌb ɡʊd/ | A good from which users can be excluded but whose use is non-rival over the relevant range, often until congestion occurs. |
| free-rider problem/friː ˈraɪdə ˈprɒbləm/ | The difficulty of financing a shared benefit when people can enjoy it without contributing to its cost. |
| government/ˈɡʌvənmənt/ | The institutions responsible for making and implementing public decisions and laws within a jurisdiction. |
| tragedy of the commons/ˈtrædʒədi ɒvðə ˈkɒmənz/ | Overuse of a shared resource when individuals act in their own interests without accounting for the costs imposed on others. |
Two questions sort every good
- A sandwich, national defence, ocean fish, a streaming service — all "goods", yet wildly different.
- Two simple yes/no questions sort them all.
- The answers decide whether a market can supply the good well, or fails to.
- Get this grid, and market failure suddenly makes sense.
Rivalry and excludability
- Rivalry 竞争性: does one person's use use it up for others?
- Excludability 排他性: can non-payers be kept out?
- Crossing them gives four types: a private good 私人物品 (rival + excludable), a public good 公共物品 (neither), a common resource 公共资源 (rival, not excludable), and a club good 俱乐部物品 (excludable, not rival).
Which type of good?
Rivalry (does use it up?) and excludability (can non-payers be kept out?) sort goods into private, public, common resource, and club goods.
A good is "rival" when:
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Rivalry is about using it up; excludability is about keeping non-payers out.
A public good, like national defence, is:
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Everyone can use it at once (non-rival) and no one can be shut out (non-excludable).
Match each good to its type.
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Rivalry and excludability place each good in one of the four boxes.
The free-rider problem
- Because non-payers can't be excluded from a public good, everyone waits for someone else to pay.
- This is the free-rider problem 搭便车问题, and it makes the market underproduce public goods.
- It is why the government 政府 provides things like defence, funded by taxes.
When everyone waits for someone else to pay for a public good, it is the ______-rider problem.
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The free-rider problem leaves public goods underprovided, so the government steps in.
The tragedy of the commons
- A common resource is rival but open to all, so each user grabs as much as they can before others do.
- The result is the tragedy of the commons 公地悲剧: the resource is overused and depleted.
- Fixing it means adding excludability (fencing, licences) or setting a quota.
The tragedy of the commons happens because a common resource is rival but open to all.
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Each user grabs as much as they can, so the resource is overused and depleted.
A good way to prevent the tragedy of the commons is to:
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Limiting access (quota, fence, licence) stops the overuse that depletes the resource.
Two properties — rivalry and excludability — sort goods into private, public, common resource, and club goods. Public goods suffer the free-rider problem (underprovided, so government steps in); common resources suffer the tragedy of the commons (overused).
Write from 25 boats too many
- A lake can sustain 15 boats. 40 boats are fishing.
- Name the overuse and the type of resource.
A lake can sustain 15 fishing boats, but 40 boats are out. How many boats are excess, and what kind of resource is the fish stock?
40 minus 15 is 25.
How many boats are above the sustainable number?
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40 minus 15 is 25 extra boats. Other options — 40 (the boats currently fishing); 15 (the sustainable fleet).