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