Economists often classify goods based on two key dimensions: rivalry and excludability. These characteristics determine how goods are consumed and whether they can be efficiently allocated.
- Rivalry refers to whether one person’s use of a good diminishes another’s ability to use it.
- Excludability determines whether it’s possible to prevent someone from accessing a good.
Depending on which combination of these qualities we have, we face different mechanism design problems.
| Excludable | Non-Excludable | |
|---|---|---|
| Rival | Private Goods e.g., food, clothing |
Common Pool Resources e.g., fisheries, forests |
| Non-Rival | Club Goods e.g., subscription services, private parks |
Public Goods e.g., national defence, clean air |
Without these concepts in our vocabulary, the world is more confusing. Understanding these classifications helps us think about issues like overuse, under-provision, and free-riding. For instance:
- Public Goods often require government provision because they are non-excludable and non-rival, leading to potential free-rider problems, and molocian equilibria.
- Common Pool Resources need sustainable management to prevent depletion, as they are rival but non-excludable.
- Club Goods can be efficiently managed through membership or pricing strategies since they are excludable but non-rival.
- Private Goods are typically managed by markets due to their excludable and rival nature.
1 Incoming
Public Goods and Common Pools: Introduction to Energy and Earth Sciences Economics * Buterin, Hitzig, and Weyl (2019) considers an interesting mechanism for funding public goods via voting systems.
2 References
Afonso. 2014. “How Academia Resembles a Drug Gang.” SSRN Scholarly Paper.
Buterin, Hitzig, and Weyl. 2019. “A Flexible Design for Funding Public Goods.” Management Science.
Hanna. 1997. “The New Frontier of American Fisheries Governance.” Ecological Economics.
Hardin, Garrett. 1968. “The Tragedy of the Commons.” Science.
Hardin, Russell. 1971. “Collective Action as an Agreeable n-Prisoners’ Dilemma.” Behavioral Science.
Krikorian, and Kapczynski. 2010. Access to knowledge in the age of intellectual property.
Ostrom. 1992. “The Rudiments of a Theory of the Origins, Survival, and Performance of Common Property Institutions.” Making the Commons Work: Theory, Practice and Policy.
Ostrom, Burger, Field, et al. 1999. “Revisiting the Commons: Local Lessons, Global Challenges.” Science.
Potts, Hartley, Montgomery, et al. 2016. “A Journal Is a Club: A New Economic Model for Scholarly Publishing.” SSRN Scholarly Paper ID 2763975.
Sekeris. 2012. “The Tragedy of the Commons in a Violent World.” Working Paper 1213.