Types of economy goods
Excludable – people con be prevented from using the good
Rival in consumption – one person’s use of the good reduces another person’s ability to use it
Rival in consumption
Excludable
Yes
No
Yes
Private
Good
Natural
Monopoly
No
Common
Resources
Public
Goods
Private good – both excludable and rival in consumption (hamburger, congested toll road)
Public good – neither excludable nor rival in consumption (national defense, uncongested freeway)
Natural Monopoly – excludable nut not rival in consumption (Electricity, uncongested toll road)
Common Resources – not excludable but rival in consumption (fish in the ocean, congested freeway)
Public goods
Free Rider – a person who receives the benefit of a good but avoids paying for it
Someone from Oklahoma traveling the Kentucky parkways
or
Someone from Kentucky traveling the Oklahoma parkways
• National Defense
• Basic Research
• Fighting Poverty
No Price / Cost-benefit analysis – a study that compares the costs and benefits to society of
providing a public good (adding a stoplight with an intersection with improve traffic and reduce
the likelihood of death. Value of a human life is approximately $10 million.
Common Resources
Tragedy of the Commons – illustrates why common resources are used more than is desirable
from the standpoint of society as a whole. (Community sharing pasture and population grows)
• Clean Air and Water
• Congested Roads
• Fish and Other Wildlife
Why the Cow isn’t extinct – buffalo 60 million to approx 400 in 1900 (no one owned them, cows
are privately owned and have commercial value. Today, elephants are common resources
(protected by law) in some African countries and are private goods (allowed to be hunted) in
others. The privately owned elephants are fairing much better because of ownership and value.
Property Rights
Unclear property rights often leads to market failure and possible misuse of resources.
Government intervention may allow for improve efficiencies for sociality (protecting air quality or
providing for national defense.
Other Examples
• Voting for a new bridge between Louisville and Indiana (Paducah residence don’t care)
• Pay-per-Use roads (Trucker pay more Grandma pays less)
• Houston Outer loop (private road policed by private police)
• I-65 North for Bowling Green to Louisville at 5:00PM (Common Resource for midnight (Public good)
• St. Louis Eads bridge (Public to Private Ownership – toll to enter to exit city quickly)
• Federal western range land (Common Resource) are being overused same for Brazilian forest
• London as a fee to enter the city reduce congestion (S. F. is considering the same)
Copyright eStudy.us 2010 michael.roberson@eStudy.us