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Differentiate between public goods and common resources.

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yaga49 | Valedictorian

Posted May 2, 2013 at 4:57 PM via web

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Differentiate between public goods and common resources.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted May 2, 2013 at 5:18 PM (Answer #1)

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Economists say that there are four kinds of goods.  These goods can be differentiated on two axes.  One axis has to do with whether the consumption of the good is rivalrous.  The other has to do with whether nonpayers can be excluded.  These two axes create a four-category matrix of goods.  Public goods are one of the categories while common resources are another.

Public goods are goods that have non-rivalrous consumption.  In addition, nonpayers cannot be excluded from using these goods.  A classic example of a public good is national defense.  If the US military protects me from foreign invasions, it does not really diminish their ability to prevent any other American from foreign invasion.  That means consumption is non-rivalrous.  If I failed to pay my bill for national defense, I could not be singled out and deprived of its use.  The government could not say to other countries “you can invade that guy’s home, but no one else’s.”  Therefore, nonpayers cannot be excluded.

By contrast, common resources have rivalrous consumption even though nonpayers cannot be excluded.  An example of such a resource would be a park in the middle of a town.  It would not really be feasible to make people pay to get into parks and playgrounds.  However, the use of the park is rivalrous.  It is not possible for everyone in the town to use the park at the same time.  If they all try to, some will be excluded because there simply will be no room for everyone. 

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