3.1.8.3 - Public goods and common resources
Learn how rivalry and excludability distinguish public and private goods, why free riding can prevent provision, and why open access to a rival natural resource can cause overuse rather than a missing supply.
Two properties of consumption
A good's economic classification depends on whether another user's consumption reduces availability and whether non-payers can be excluded.
Rivalry means one person's use reduces what is available to others. Eating an apple prevents someone else eating that apple. Non-rivalry means an additional person can benefit without reducing others' consumption: another resident receiving an area-wide warning need not diminish the warning for existing residents.
Excludability means it is feasible to prevent access, for example by requiring payment or controlling entry. Non-excludability means excluding non-payers is impractical or prohibitively costly under the relevant conditions. It is not the same as a provider choosing to charge nothing. A free museum with controlled entry can still exclude people.
| Consumption properties | Classification | Illustrative example |
|---|---|---|
| Rival and excludable | Private good | An apple sold to one buyer. |
| Non-rival and non-excludable | Pure public good | An area-wide flood-warning signal whose benefits cannot be confined to subscribers. |
| Non-rival but excludable | Club-type/quasi-public provision | An encrypted broadcast accessible to subscribers. |
| Rival but difficult to exclude | Common resource | Fish in an unmanaged open-access sea. |
A pure public good has both non-rivalry and non-excludability. These properties concern the good, not who finances it: a government-provided sandwich remains rival and excludable, while a privately financed warning may be public in its consumption properties. “Public” does not mean popular, socially useful or supplied by the state.
Examples need conditions. A warning's benefits can be shared, but a personal emergency response using one rescue team's time is rival. A road can be largely non-rival when quiet and rival when congested. Specify the output and capacity before assigning a classification.
Why non-payers can prevent provision
Non-excludability can separate the social benefit of provision from the revenue a seller can collect.
An illustrative neighbourhood wants a warning siren. Once it sounds, people who did not contribute also benefit. Each household may prefer others to pay while it enjoys the warning: free riding. This is not a claim that the warning has no value; it is an incentive to avoid revealing or paying for that value when access does not depend on payment.
If too many households withhold contributions, the supplier may lack enough revenue to cover provision even though their combined benefits exceed the resource cost. There can then be under-provision or a missing market. Non-rivalry means excluding additional beneficiaries, where possible, would often deny a useful benefit without saving the cost of providing the existing signal. Producing the signal still uses resources; “one more user costs little” does not mean producing the good is free.
Collective finance, such as taxation, can separate payment from an individual's choice to contribute and fund provision. Voluntary organisations or assurance agreements can sometimes coordinate contributions too. Their success depends on participation, trust and enforcement, so public-good characteristics create a problem rather than proving private provision is always impossible or government provision always efficient.
Capacity and technology change classification
A good can have public-good features only within a capacity limit or under a particular technology.
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