- [Instructor] In this video,
we're going to do a bit
of a deep dive in classifying
different types of goods.
And before we even get
into the thick of things,
I'm gonna make some definitions.
So the first definition
is that of a rival good.
Now, a rival good, one
way to think about it is,
if one person uses it,
it impairs the possibility
of another person using it
or it impairs the ability
of another person using it.
So one person,
one person or party using it,
using it
impairs or oftentimes
prevents another party,
another person
from using it or getting the benefit,
using it.
And we're going to talk
a lot about some goods
that are rival goods
versus non-rival goods.
Now, another related idea
is that of excludability.
And as we'll see, sometimes
these things go together,
but sometimes they aren't.
So excludable,
excludable means that you could
stop someone from using it,
can stop someone,
someone from using it,
you can exclude them,
using it.
So what I'm gonna do is I'm
gonna set up a bit of a matrix
where, on one axis, I'm gonna think about
whether something is a rival good or not,
and then, on another axis,
I'm going to think about
whether it's excludable or not.
So let me just do a big
two-by-two matrix here.
So,
that it looks big enough for me.
Then I said I would do two by two.
That looks like about halfway.
I always underestimate.
Okay, that looks about halfway,
and now we'll do it here as well.
And so on this axis, I'm gonna think about
whether something is a rival good or not.
So rival good,
question mark.
This row is it is a rival good.
This row is it is not a rival good.
And then for the columns,
I'm going to think about
whether something is an excludable good,
so excludable.
Excludable, question mark.
Yes and no.
So let's start in this
first top-left cell.
So what are examples of things
that are both excludable
and rival goods?
Pause this video, and see
if you can think of any.
Well, actually many of the
things that we imagine buying
or using fall into this top-left category,
things like a,
so, let's say bananas.
Bananas are for sure excludable.
I could prevent someone
from taking my banana.
You have to pay in order
to have access to a banana.
And it for sure is a rival good.
If I have a banana, especially
if I eat that banana,
well, that's definitely
going to impair your ability
to eat that banana.
Another example is clothing.
It's definitely a rival good.
If I'm wearing this shirt,
it's going to be very difficult
for you to wear that shirt as well.
And like bananas, you can force someone
to pay money for that clothing.
They're not just going
to get as much clothing
as they want for free.
You could think of housing.
You can exclude someone from your house
or from an arbitrary house.
They have to pay for it or pay the rent.
And it's a rival good.
If one person or one
family is using a house,
it definitely impairs the ability
for another family to use the house.
And we could keep thinking of more
and more ideas in this top left.
In general, goods in this top
left are called private goods,
private,
private goods.
Now, let's imagine going to
things that are excludable
but maybe not as rivalrous.
And there's really a
large spectrum of things.
And as we'll see in the
future and you could imagine,
some things are kind of blurring the line
or depends at what
context you're using it.
But one example of
something that is excludable
but is not necessarily a rival good,
that one person using it doesn't prevent
the other person from using it in theory,
something like satellite television,
satellite,
satellite TV.
Why is that excludable?
Well, you can force someone to pay
to access satellite television.
Only if you have access
to some type of a device
or some code, you might be
able to watch the signal.
But the reason why it's
not a rival good is
you have the satellites in space,
here's my little satellite,
and it's beaming,
it's beaming the signal down to Earth.
And in theory, if I'm
receiving the signal here
and I'm watching satellite television,
it doesn't impair someone else ability
to get to watch that satellite signal.
But we have artificially made it scarce
by perhaps making people pay for that,
even though everyone else,
everyone could use it
without impairing the ability
for anyone else to use it.
And so that's why this category of goods
is often called artificially scarce good,
artificially scarce.
The scarcity is artificially happening
because you're making it excludable,
but it doesn't necessarily have to.
Another example could be
something like a private park.
If I go buy a bunch of land
and I landscape it nicely,
I might say that you have to spend $1,000
to get entry to that park.
Well, that is very, that's very exclusive,
and I'm clearly excluding
people from that park.
But in theory,
if I go and enjoy that park
and if it's large enough,
well, it doesn't necessarily
impair the ability
for someone else to
enjoy the park as well.
Now, if all of a sudden thousands
or millions of people
tried to enjoy the park,
then it might become a
little bit more rivalrous.
Now let's go on the other side,
things that are not so excludable.
Well, if we think about
things that are rival goods
but not excludable, the classic
example here is fish stocks,
fish stocks.
When we're talking about fish
stocks, we're talking about,
let's imagine some body of water here,
and there are fish in this body of water.
And let's say that everyone could,
you can't exclude people from it,
so anyone can go and stick
their fishing rod into this,
into this pond or into
this lake and get fish.
But the problem is, is
that if I get a fish,
that's going to make it hard
for someone else to get fish.
And you can imagine an extreme,
if enough people are grabbing the fish,
it is impairing the ability
for other folks to get fish.
And so this type of resource
or I should say this type of good
is known as a common resource,
common,
common resource.
And it's prone to what is known
as tragedy of the commons,
and we have a whole video
on tragedy of the commons.
But the tragedy of commons,
which happens for common
resources is when every
individual person acts in
their own best interest,
they might say, hey, I'm just gonna get
as much fish as I need
to support my family,
I could even make a business
out of it, I can sell it.
At the end of the day, you
might do something that's not
in the common interest,
and it's actually not even
in your own personal interest long term.
Because if enough people
fish in the short term
and get that benefit, you
might deplete all the fish,
and they're not able to reproduce.
And then at some point,
there are no fish left.
So in the medium to long run,
you have hurt everyone,
including yourself.
So that would be the
tragedy of the commons,
which is typical for a lot of things
that are common resources.
Another thing that you could view
as a common resource is timber
or wood that's on land
that anyone could access.
In a lot of cases, clean, clean water,
fresh water I should say,
not salt water, fresh water.
Now, on some level, if there's
a lot of folks doing it,
it's definitely going to be rivalrous.
But if there's only one or two people
and your source of fresh water is huge,
well, then it might feel
a little less rivalrous.
So once again, we can debate,
it might be under different circumstances.
Now, last but not least, let's
think about what are examples
of things that are neither
rivalrous nor excludable?
And that whole category
is referred to as public,
public goods.
Pause this video, and see
if you can think of any.
Well, one thing that is often
considered a public good is air.
Now, you could debate,
at some extreme level,
if the air is really used up or something,
you might start to feel
like it's rivalrous.
But for most cases, when
one person is breathing air,
it's not impairing the ability
for someone else to use the air.
And it's very hard to exclude
someone from breathing.
People just need to take a breath.
So it sits out here in public goods.
You can imagine something
like national defense,
national defense.
If you are benefiting
from national defense
because of aircraft
carriers and missile systems
and planes and the military
that the nation has,
does that exclude me, your neighbor,
from also benefiting from it?
No, and in fact, it would be
very difficult to exclude.
You would have to kick
me out of the country
for me to not benefit
from the national defense.
So in general, we would consider
it to be non-excludable.
And then is it a rival good?
Well, if you are feeling safe
because of national defense,
that doesn't impair my ability
to feel safe from national defense.
So it's also a non-rival good,
at least in most general circumstances.
So I would consider that
a public good as well.
Now, when we talk about public goods,
there's the notion of
the free rider problem,
free rider,
and that's because you can't
exclude folks from using it.
It's usually not in the
incentive of any entrepreneur
to try to make these public goods happen.
And so this is typically
the domain of government.
And in general, when thinking
about this whole column
of things that are
non-excludable, this is a domain
where the government
tries to get involved.
So we don't have the
tragedy of the commons
with fish stocks or timber or fresh water,
they might put some regulation in
or some permitting process.
