Rival and Excludable: the Four Kinds of Goods

Excludability asks whether a seller can keep non-payers out. A movie theater checks tickets at the door, so it's excludable. A fireworks show lights up the whole sky; anyone nearby watches for free, so it's non-excludable. Rivalry asks whether one person's use leaves less for everyone else. A seat in the theater is rival; once it's filled, it's filled. A radio signal is non-rival; your neighbor tuning in doesn't weaken your reception.

Crossing these two questions gives four boxes. Excludable and rival goods are private goods, like a sandwich: you buy it, you eat it, nobody else can. Non-excludable and non-rival goods are public goods, like national defense or that fireworks show. Excludable but non-rival goods are club goods, like cable TV or an uncrowded toll road with E-ZPass: the company can lock you out, but your watching or driving doesn't stop anyone else. Non-excludable but rival goods are common-pool resources, like a fish stock in open ocean: nobody can be charged to keep fishing, but every fish caught is one less for the next boat.

Technology can slide a good between boxes. A radio signal was long non-excludable; scrambling and subscription decoders made satellite radio excludable, turning it into a club good. This matters for policy because the box a good sits in predicts whether private markets will supply it efficiently. Public goods invite free-riding and underproduction, common resources invite overuse, so government involvement in Unit 6 targets exactly these two boxes, not goods that are merely government-run.