Public vs. Private Goods

Summary

This video explores the relationship between humans and non-human things through the concepts of excludability and rivalry. Excludability refers to whether access to a good can be restricted, while rivalry examines whether one person's use of a good prevents others from using it. The video categorizes goods into private, club, common, and public goods based on these properties. It also discusses the challenges in managing common goods, the free rider problem, and how property rights shape the use of resources. Ultimately, understanding these concepts helps in navigating how society manages resources and services.

Takeaways

• 🌐 Excludability determines whether someone can access or use a good without paying for it, with non-excludable goods being freely accessible to all.
• 🍎 Rivalry, also called subtractability, measures whether one person's use of a good reduces availability for others.
• 🏞 Non-excludable examples include public views, public roads, national defense, and certain ocean resources.
• 💻 Excludable examples include items in stores, phone and internet services, and private or rented land.
• 🛠 Most tangible goods are rivalrous, like food or tools, whereas non-rivalrous goods can be used by multiple people simultaneously, like broadcast TV or public highways.
• 📊 Marginal cost helps define non-rivalrous goods—if adding one more user costs nothing, the good is non-rivalrous; some goods can become rival once usage reaches a limit.
• 🎟 Combining excludability and rivalry creates four categories: Private Goods (rival + excludable), Club/Collective Goods (non-rival + excludable), Common Goods (rival + non-excludable), and Public Goods (non-rival + non-excludable).
• 🏛 Public goods are typically provided by the government because companies struggle to charge for non-excludable and non-rival goods, leading to free-rider problems.
• 🐟 Goods can change categories depending on context—for instance, a fish in the water is a common good but becomes a private good once caught.
• 📜 Property rights define the rules for how goods are accessed, used, and transferred, covering both physical and non-physical items, including social or environmental resources.
• 💡 Understanding excludability and rivalry is crucial for managing resources efficiently and creating fair rules for access and usage.
• ⚖️ Pricing and resource management differ by type: private goods use market pricing, while public goods require collective or governmental support due to free-rider issues.

Q & A

What is excludability, and how does it relate to public goods?

Excludability refers to whether or not someone who didn't pay for a thing is allowed to use or access that thing. Public goods are typically non-excludable, meaning people can benefit from them even if they haven't paid, such as clean air or national defense.

Can you give an example of a non-excludable good?

An example of a non-excludable good would be a scenic view. People can enjoy it without paying for it, and it's difficult to exclude people from seeing it.

What does rivalry mean in economic terms?

Rivalry refers to the idea that one person's use of a good can reduce or prevent someone else from using it. This is also called subtractability, where using the good 'subtracts' from its availability to others.

Is broadcast television a rivalrous good?

No, broadcast television is considered non-rivalrous. Multiple people can watch the same broadcast at the same time without diminishing the experience for others.

What is the difference between private goods and public goods?

Private goods are rivalrous and excludable, meaning one person's use prevents others from using it, and access requires payment. Public goods are non-rivalrous and non-excludable, meaning everyone can use them without affecting others' use or needing to pay.

Why is clean air considered a public good?

Clean air is considered a public good because it is both non-rivalrous and non-excludable. Everyone can breathe the air without reducing its availability for others, and it is hard to charge people for its use.

What is a common pool resource?

A common pool resource is a good that is rivalrous but non-excludable. This means that while people can use the resource, it’s difficult to prevent others from using it, and its use by one person can reduce its availability for others. Examples include fisheries and forests.

How does excludability affect the pricing of goods?

Excludability affects whether a good can be sold or made available only to those who pay for it. If a good is excludable, you can charge people to use it, like with internet services. If it’s non-excludable, you can't prevent people from using it, even if they haven’t paid.

Why are property rights important in understanding goods and services?

Property rights define the rules governing the use, ownership, and access to goods. These rules help us understand how non-human things like resources or services are managed and who has the right to benefit from them.

How does the concept of rivalry apply to common goods like fisheries?

Common goods, such as fisheries, are rivalrous because if one person takes fish, those fish are no longer available for others. However, they are non-excludable because it's difficult to stop people from accessing or using the resource.