Overview
This lecture covers the classification of goods based on rivalry and excludability, explaining four types of goods, and focusing on the concept of common goods and the "tragedy of the commons."
Rivalry and Excludability
- Goods are categorized by two traits: rivalry (does consumption by one reduce what's available for others?) and excludability (can people be prevented from using it?).
- A good is rivalrous if one person's consumption prevents others from consuming it (e.g., shoes, food).
- A good is non-rivalrous if many can use it without preventing others' use (e.g., cable TV, Netflix).
- A good is excludable if it's practical to prevent non-payers from using it (e.g., gym membership, French fries).
- A good is non-excludable if it's impossible or impractical to prevent use (e.g., public parks, radio, fish in the ocean).
Four Types of Goods
- Private Goods: Rivalrous and excludable (e.g., food, clothing, cars).
- Common Goods: Rivalrous but non-excludable (e.g., fish in the ocean, public parking spaces, groundwater).
- Club Goods: Non-rivalrous but excludable (e.g., cable TV, gym memberships, toll lanes).
- Public Goods: Non-rivalrous and non-excludable (e.g., national defense, lighthouses).
Common Goods and the Tragedy of the Commons
- Common goods are at risk of overuse because everyone tries to maximize their benefit before the resource runs out.
- Overuse of common goods leads to resource depletion, called the "tragedy of the commons."
- Examples: Overfishing, overdrawing groundwater, overgrazing pasture land.
- Regulation (e.g., fishing seasons, quotas) can convert common goods into excludable goods to prevent depletion.
Key Terms & Definitions
- Rivalrous — Consumption by one reduces availability for others.
- Non-Rivalrous — Consumption by one does not affect others' ability to consume.
- Excludable — Access can be restricted based on payment or membership.
- Non-Excludable — It's impractical or impossible to prevent access.
- Private Goods — Rivalrous and excludable.
- Common Goods — Rivalrous and non-excludable.
- Club Goods — Non-rivalrous and excludable.
- Public Goods — Non-rivalrous and non-excludable.
- Tragedy of the Commons — Overuse of a resource due to lack of exclusion, leading to depletion.
Action Items / Next Steps
- Listen to the podcast about public goods if you haven't already.
- Prepare for the next lecture section, which will focus in depth on public goods.