Public and Private Goods
Introduced| English |
|---|
| rivalry/ˈraɪvəlri/ |
| excludability/eksˌkluːdəˈbɪlɪti/ |
| private good/ˈpraɪvət ɡʊd/ |
| public good/ˈpʌblɪk ɡʊd/ |
| common resource/ˈkɒmən rɪˈzɔːs/ |
| club good/klʌb ɡʊd/ |
| free-rider problem/friː ˈraɪdə ˈprɒbləm/ |
| government/ˈɡʌvənmənt/ |
| tragedy of the commons/ˈtrædʒədi ɒvðə ˈkɒmənz/ |
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:
Rivalry is about using it up; excludability is about keeping non-payers out.
A public good, like national defence, is:
Everyone can use it at once (non-rival) and no one can be shut out (non-excludable).
Match each good to its type.
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.
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.
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:
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).