Public Goods and Common Resources
Public Goods &
Common Resources.
Some goods are difficult to exclude people from using; others are depleted through use. Learn how these characteristics shape free riding, overuse, collective action and institutional design.
Observe
Identify access and depletion.
The economic problem depends on
how a good can be used.
Street lighting can serve another pedestrian without reducing the light available to others, and excluding non-payers is difficult. Fish in an open sea are also difficult to exclude, but every catch leaves fewer fish for everyone else.
TWO DIAGNOSTIC QUESTIONS
Can users be excluded? Does one person’s use reduce what remains for others?
Think
Classify the good.
Rivalry and excludability create
four institutional problems.
Private goods work readily through markets. Public goods invite free riding and under-provision. Common resources invite overuse. Club goods can serve members efficiently until congestion makes consumption rival.
EXCLUDABLENON-EXCLUDABLERIVAL
Private good
Food, clothing, machinery
Common resource
Fisheries, aquifers, clean air capacity
NON-RIVAL
Club good
Subscription platform, uncrowded toll road
Public good
National defence, flood warning, knowledge
Social Benefit of a Public Good = Σ Individual Marginal BenefitsBecause everyone can consume the same unit, benefits are added vertically across people.
Analyse
Balance extraction and regeneration.
Can individual incentives sustain
a shared resource?
Choose the number of fishing boats. Each boat creates private income, but total extraction can exceed the fish stock’s natural regeneration.
Common fishery laboratory
INTERACTIVE COMMONS
At this level, regeneration exceeds extraction and the shared stock can recover.
Apply
Design institutions, not slogans.
Collective action can be
organised in several ways.
Successful governance depends on resource boundaries, monitoring, legitimacy, enforcement and local knowledge. State control and privatisation are not the only possibilities; communities can sometimes develop durable shared rules.
Tax finance
Government supplies public goods when voluntary payment would invite free riding.
Quotas and permits
Limits keep aggregate extraction within regenerative capacity.
Collective governance
Users monitor access, agree boundaries and sanction violations.
Decide
Diagnose the category.
What type of good is
an open-access fishery?
It is difficult to prevent boats from entering, while every fish caught reduces the stock available to others.
MODULE 09 · CHECKPOINT
You can now diagnose
collective-action problems.
Excludability and rivalry reveal why some goods are underprovided and some resources are overused—and what institutions may align individual action with collective wellbeing.
