Rivalry-Excludability & Technology — Part 1 Introductory econ | Professor M

Rivalry-Excludability & Technology — Part 1

Introductory economics textbooks introduce the distinction between private and public goods using the terms rival and excludable.

A good is rival if its consumption by one consumer prevents simultaneous consumption by others. A good is excludable if it is possible to prevent consumers who have not paid for it from having access to it.

Private goods are rival and excludable (e.g., food, clothing, devices, and any tradable tangible good, by and large). Public goods are non-rival and non-excludable (e.g., national defense, air, and street lighting).

“Capitalism without Capital: The Rise of the Intangible Economy” elaborates on how the differences between intangible and tangible assets manifest themselves in the knowledge economy.

Investments into intangibles (e.g., knowledge, design, processes) are prone to large spillover effects. The ideas created by R&D are non-rival. If I eat an apple (a rival good), you can’t also have it. However, the same piece of knowledge (a non-rival good) can serve multiple parties.

Thomas Jefferson agrees: “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”

Think about a weakness in Jefferson’s analogy. I’ll share my thoughts on it in the next part. And I’ll also talk about how technological progress affects the ability to provide goods in rival vs. non-rival and excludable vs. non-excludable ways.