Public goods, rivalry and free riding
| English | 中文 | Pinyin · 拼音 |
|---|---|---|
| non-rivalry/nɒn ˈraɪvəlri/ | 非竞争性 | fēi jìng zhēng xìng |
| non-excludability/nɒn eksˌkluːdəˈbɪlɪti/ | 非排他性 | fēi pái tā xìng |
A decision you can investigate
- A flood-warning signal can protect people who did not pay for it. A school meal is used by one person and can be withheld from non-payers.
- Funding by government does not determine whether a good is public in the economic sense.
Build the explanation
- Rivalry means one person’s use reduces the amount or service available to others. Excludability means non-payers can feasibly be prevented from using it. A pure public good is non-rival and non-excludable; a private good is rival and excludable. A subscription broadcast can be non-rival but excludable; an open-access fish stock can be rival but hard to exclude.
- Free riding occurs when someone benefits without contributing and hopes others pay. If beneficiaries can enjoy a public good regardless of their own payment, voluntary private financing may fall below the level that their combined benefits justify. The problem concerns incentives to contribute, not the absence of any benefit.
Work through the evidence
- Three fictional households value a shared warning service at 40, 35 and 25 currency units per month. Their combined willingness to pay for the SAME service is 40+35+25=100. Provision costs 80; stated aggregate benefit exceeds cost by 20. Yet if nobody can be excluded, each may withhold payment expecting others to cover it.
- Sharing cost equally would require 80/3≈26.67 each, more than the third household’s stated value of 25. A compulsory equal levy can finance the service but has a distributional consequence. A voluntary contribution of 40+35+5=80 covers cost only if these contributions actually occur; the values do not prove that they will.
How should an ordinary school meal be classified?
Consumption uses a scarce meal and access can be controlled.
Test the limits
- Non-rivalry 非竞争性 can fail under congestion, and technology can make exclusion feasible. A road may be non-rival below capacity and rival during congestion; a toll can change exclusion. Education and health treatment normally use scarce staff and places, so they are not pure public goods merely because government provides them.
- Public provision, collective agreements and bundled financing can overcome some contribution problems. Each has costs and constraints. Do not confuse common-resource overuse with public-good underprovision; rivalry is the key distinction.
What is combined stated benefit of the same warning service?
Add each household’s value for that shared service.
Every service provided by government is a pure public good.
Classify the service by rivalry and excludability, not by its funder.
Apply and explain your answer
- Why is a freely accessible fish stock different from a non-congested warning broadcast?
- Catching fish reduces what remains for others; receiving the warning does not reduce another person’s access to the same signal.
Why may the warning service lack voluntary funding despite benefit exceeding cost?
Non-excludability weakens incentives to pay.
Use the terms precisely
- non-rivalry: One user’s consumption does not reduce availability to another user.
- non-excludability 非排他性: Preventing non-payers from benefiting is infeasible or impractically costly.
Match the terms to their meanings.
Use each term for its stated economic relationship.
Three fictional households value a shared warning service at 40, 35 and 25 currency units per month. Their combined willingness to pay for the SAME service is 40+35+25=100. Provision costs 80; stated aggregate benefit exceeds cost by 20. Yet if nobody can be excluded, each may withhold payment expecting others to cover it. Sharing cost equally would require 80/3≈26.67 each, more than the third household’s stated value of 25. A compulsory equal levy can finance the service but has a distributional consequence. A voluntary contribution of 40+35+5=80 covers cost only if these contributions actually occur; the values do not prove that they will.
Non-rivalry can fail under congestion, and technology can make exclusion feasible. A road may be non-rival below capacity and rival during congestion; a toll can change exclusion. Education and health treatment normally use scarce staff and places, so they are not pure public goods merely because government provides them. Public provision, collective agreements and bundled financing can overcome some contribution problems. Each has costs and constraints. Do not confuse common-resource overuse with public-good underprovision; rivalry is the key distinction.
Rivalry means one person’s use reduces the amount or service available to others. Excludability means non-payers can feasibly be prevented from using it. A pure public good is non-rival and non-excludable; a private good is rival and excludable. A subscription broadcast can be non-rival but excludable; an open-access fish stock can be rival but hard to exclude.