Excludability

In economics, a good or service is called excludable if it is possible to prevent people (consumers) who have not paid for it from having access to it. By comparison, a good or service is non-excludable if non-paying consumers cannot be prevented from accessing it.

Definition matrix

Excludable Non-excludable
Rivalrous Private goods
food, clothing, cars, parking spaces
Common-pool resources
fish stocks, timber, coal
Non-rivalrous Club goods
cinemas, private parks, satellite television
Public goods
free-to-air television, air, national defense

Examples

An architecturally pleasing building, such as Tower Bridge, creates an aesthetic non-excludable good, which can be enjoyed by anyone who happens to look at it. It is difficult to prevent people from gaining this benefit. A lighthouse acts as a navigation aid to ships at sea in a manner that is non-excludable since any ship out at sea can benefit from it.

The ease and availability of file sharing technology has made many forms of information, especially music, movies, e-books, and computer software non-excludable. If the content producers want to make their works excludable, they have to use either "copy protection" schemes, or use law enforcement in order to prevent one owner of a copy from being able to share it with others.

An example of an excludable good could be a magazine; people who do not pay for the subscription are mostly excluded from obtaining a copy directly from the publisher. Another case is a pay television subscription, which is excludable but non-rivalrous.

Implications and inefficiency

Public goods will generally be underproduced and undersupplied in the absence of government subsidies, relative to a socially optimal level. This is because potential producers will not be able to realize a profit (since the good can be obtained for free) sufficient to justify the costs of production. In this way the provision of non-excludable goods is a classic example of a positive externality which leads to inefficiency. In extreme cases this can result in the good not being produced at all, or it being necessary for the government to organize its production and distribution.

A classic example of the inefficiency caused by non-excludability is the tragedy of the commons (which Hardin, the author, later corrected to the 'tragedy of the unmanaged commons' because it is based on the notion of an entirely rule-less resource) where a shared, non-excludable, resource becomes subject to over-use and over-consumption, which destroys the resource in the process.

Economic theory

Brito and Oakland (1980) study the private, profit-maximizing provision of excludable public goods in a formal economic model.[1] They take into account that the agents have private information about their valuations of the public good. Yet, Brito and Oakland only consider posted-price mechanisms, i.e. there are ad-hoc constraints on the class of contracts. Also taking distribution costs and congestion effects into account, Schmitz (1997) studies a related problem, but he allows for general mechanisms.[2] Moreover, he also characterizes the second-best allocation rule, which is welfare-maximizing under the constraint of nonnegative profits. Using the incomplete contracts theory, Francesconi and Muthoo (2011) explore whether public or private ownership is more desirable when non-contractible investments have to be made in order to provide a (partly) excludable public good.[3]

See also

References

  1. ^ Brito, Dagobert L.; Oakland, William H. (1980). "On the Monopolistic Provision of Excludable Public Goods". The American Economic Review. 70 (4): 691–704. JSTOR 1803565.
  2. ^ Schmitz, Patrick W. (1997). "Monopolistic Provision of Excludable Public Goods under Private Information". Public Finance = Finances publiques. 52 (1): 89–101.
  3. ^ Francesconi, Marco; Muthoo, Abhinay (2011). "Control Rights in Complex Partnerships". Journal of the European Economic Association. 9 (3): 551–589. doi:10.1111/j.1542-4774.2011.01017.x. ISSN 1542-4766.

Further reading

Club good

Club goods (also artificially scarce goods) are a type of good in economics, sometimes classified as a subtype of public goods that are excludable but non-rivalrous, at least until reaching a point where congestion occurs.

Often these goods exhibit high excludability, but at the same time low rivalry in consumption. Because of that low rivalry in consumption characteristic, club goods have essentially zero marginal costs and are generally provided by what is commonly known as natural monopolies.

Furthermore Club goods have artificial scarcity. Club theory is the area of economics that studies these goods.

One of the most famous provisions was published by Buchanan in 1965 "An Economic Theory of Clubs", in which he addresses the question of how the size of the group influences the voluntary provision of a public good and more fundamentally provides a theoretical structure of communal or collective ownership-consumption arrangements.

Common good (economics)

Common goods are defined in economics as goods that are rivalrous and non-excludable. Thus, they constitute one of the four main types based on the criteria:

whether the consumption of a good by one person precludes its consumption by another person (rivalrousness)

whether it is possible to prevent people (consumers) who have not paid for it from having access to it (excludability)One modern example is climate stability. Classic examples of common goods are water and air. Water and air can be polluted: water flows can be tapped beyond sustainability, and air is often used in combustion, whether by motor vehicles, smokers, factories, wood fires. In the production process these resources and others are changed into finished products such as food, shoes, toys, furniture, cars, houses and televisions. Another example of a private exploitation treated as a renewable resource and commonly cited have been trees or timber at critical stages, oil, mined metals, and crops. Fish stocks in international waters are also cited often. In this latter example, when fish are withdrawn from the water without any limits being imposed, living stocks of fish are likely to be depleted for any later fishermen. To describe situations in which economic users withdraw resources to secure short-term gains without regard for the long-term consequences, the term tragedy of the commons was coined. For example, forest exploitation leads to barren lands, and overfishing leads to a reduction of overall fish stocks, both of which eventually result in diminishing yields to be withdrawn periodically.

Debates about sustainability can be both philosophical and scientific. However, wise-use advocates consider common goods that are an exploitable form of a renewable resource, such as fish stocks, grazing land, etc., to be sustainable in the following two cases:

As long as demand for the goods withdrawn from the common good does not exceed a certain level, future yields are not diminished and the common good as such is being preserved as a 'sustainable' level.

If access to the common good is regulated at the community level by restricting exploitation to community members and by imposing limits to the quantity of goods being withdrawn from the common good, the tragedy of the commons may be avoided. Common goods that are sustained through an institutional arrangement of this kind are referred to as common-pool resources.

Customary land

Customary land is land which is owned by indigenous communities and administered in accordance with their customs, as opposed to statutory tenure usually introduced during the colonial periods. Common ownership is one form of customary land ownership.

Since the late 20th century, statutory recognition and protection of indigenous and community land rights continues to be a major challenge. The gap between formally recognized and customarily held and managed land is a significant source of underdevelopment, conflict, and environmental degradation.In the Malawi Land Act of 1965, "Customary Land" is defined as "all land which is held, occupied or used under customary law, but does not include any public land". In most countries of the Pacific islands, customary land remains the dominant land tenure form. Distinct customary systems of tenure have evolved on different islands and areas within the Pacific region. In any country there may be many different types of customary tenure.The amount of customary land ownership out of the total land area of Pacific island nations is the following: 97% in Papua New Guinea, 90% in Vanuatu, 88% in Fiji, 87% in the Solomon Islands, and 81% in Samoa.

Field experiment

Field experiments, like lab experiments, randomly assign subjects (or other sampling units) to either treatment or control groups in order to test claims of causal relationships. Random assignment helps establish the comparability of the treatment and control group, so that any differences between them that emerge after the treatment has been administered plausibly reflect the influence of the treatment rather than pre-existing differences between the groups. The distinguishing characteristics of field experiments are that they are conducted real-world settings and often unobtrusively. This is in contrast to laboratory experiments, which enforce scientific control by testing a hypothesis in the artificial and highly controlled setting of a laboratory. Field experiments have some contextual differences as well from naturally-occurring experiments and quasi-experiments. While naturally-occurring experiments rely on an external force (e.g. a government, nonprofit, etc.) controlling the randomization treatment assignment and implementation, field experiments require researchers to retain control over randomization and implementation. Quasi-experiments occur when treatments are administered as-if randomly (e.g. U.S. Congressional districts where candidates win with slim-margins, weather patterns, natural disasters, etc.).

Field experiments encompass a broad array of experimental designs, each with varying degrees of generality. Some criteria of generality (e.g. authenticity of treatments, participants, contexts, and outcome measures) refer to the contextual similarities between the subjects in the experimental sample and the rest of the population. They are increasingly used in the social sciences to study the effects of policy-related interventions in domains such as health, education, crime, social welfare, and politics.

Free-rider problem

In the social sciences, the free-rider problem occurs when those who benefit from resources, public goods, or services do not pay for them, which results in an underprovision of those goods or services. For example, a free-rider may frequently ask for available parking lots (public goods) from those who have already paid for them, in order to benefit from free parking. That is, the free-rider may use the parking even more than the others without paying a penny. The free-rider problem is the question of how to limit free riding and its negative effects in these situations. The free-rider problem may occur when property rights are not clearly defined and imposed.The free-rider problem is common with goods which are non-excludable, including public goods and situations of the Tragedy of the Commons.

Although the term "free rider" was first used in economic theory of public goods, similar concepts have been applied to other contexts, including collective bargaining, antitrust law, psychology and political science. For example, some individuals in a team or community may reduce their contributions or performance if they believe that one or more other members of the group may free ride.

Immigration Act of 1891

The Immigration Act of 1891, also known as the 1891 Immigration Act, was a modification of the Immigration Act of 1882, focusing on immigration rules and enforcement mechanisms for foreigners arriving from countries other than China. It was the second major federal legislation related to the mechanisms and authority of immigration enforcement, the first being the Immigration Act of 1882 (there were other, more minor pieces of legislation passed in the 1880s). The law was passed on March 3, 1891, at the end of the term of the 51st United States Congress, and signed into law by then United States President Benjamin Harrison.

Information good

Information good in economics and law is a type commodity whose market value is derived from information it contains. Examples include CDs containing pieces of music, DVDs containing movie content, and books containing short stories. Information goods are in contrast to material goods such as clothes, food, and cars. These can exist in either digitized form or analog format.In information goods, the valuable part is a pattern in which the material is arranged including the arrangement of ink on paper or a series of information on a compact disc. Those patterns might be either directly consumed through reading, viewing, or may be used to operate other devices such as a cassette player or a computer. The device, in turn, may produce some consumable pattern of information (such as visual, sound, or text).

Intangible asset

An intangible asset is an asset that lacks physical substance. It is defined in opposition to physical assets such as machinery and buildings. An intangible asset is usually very hard to evaluate. Patents, copyrights, franchises, goodwill, trademarks, and trade names. The general interpretation also includes software and other intangible computer based assets are all examples of intangible assets. Intangible assets generally—though not necessarily—suffer from typical market failures of non-rivalry and non-excludability.

Intangible property

Intangible property, also known as incorporeal property, describes something which a person or corporation can have ownership of and can transfer ownership to another person or corporation, but has no physical substance, for example brand identity or knowledge/intellectual property. It generally refers to statutory creations such as copyright, trademarks, or patents. It excludes tangible property like real property (land, buildings, and fixtures) and personal property (ships, automobiles, tools, etc.). In some jurisdictions intangible property are referred to as choses in action. Intangible property is used in distinction to tangible property. It is useful to note that there are two forms of intangible property: legal intangible property (which is discussed here) and competitive intangible property (which is the source from which legal intangible property is created but cannot be owned, extinguished, or transferred). Competitive intangible property disobeys the intellectual property test of voluntary extinguishment and therefore results in the sources that create intellectual property (knowledge in its source form, collaboration, process-engagement, etc.) escaping quantification.

Generally, ownership of intangible property gives the owner a set of legally enforceable rights over reproduction of personal property containing certain content. For example, a copyright owner can control the reproduction of the work forming the copyright. However, the intangible property forms a set of rights separate from the tangible property that carries the rights. For example, the owner of a copyright can control the printing of books containing the content, but the book itself is personal property which can be bought and sold without concern over the rights of the copyright holder.

In English law and other Commonwealth legal systems, intangible property is traditionally divided in pure intangibles (such as debts, intellectual property rights and goodwill) and documentary intangibles, which obtain their character through the medium of a document (such as a bill of lading, promissory note or bill of exchange). The recent rise of electronic documents has blurred the distinction between pure intangibles and documentary intangibles.

John P. Walsh (sociologist)

John (P.) Walsh is a sociologist and a Professor of Public Policy at Georgia Institute of Technology. His research interests include the study of innovation, sociology of science and the sociology of work and organizations.

List of types of formally designated forests

This is a list of types of formally designated forests, as used in various places around the world. It is organized in three sublists: by forest ownership, protection status, and designated use.

Local average treatment effect

The local average treatment effect (LATE), also known as the complier average causal effect (CACE), was first introduced into the econometrics literature by Guido W. Imbens and Joshua D. Angrist in 1994. It is the treatment effect for the subset of the sample that takes the treatment if and only if they were assigned to the treatment, otherwise known as the compliers. It is not to be confused with the average treatment effect (ATE), which is the average subject-level treatment effect; the LATE is only the ATE among the compliers. The LATE can be estimated by a ratio of the estimated intent-to-treat effect and the estimated proportion of compliers, or alternatively through an instrumental variable estimator. Since the LATE may not be equivalent to the ATE, we should be cautious of extrapolation.

Market failure

In economics, market failure is a situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss. Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point of view. The first known use of the term by economists was in 1958, but the concept has been traced back to the Victorian philosopher Henry Sidgwick.

Market failures are often associated with time-inconsistent preferences, information asymmetries, non-competitive markets, principal–agent problems, or externalities.Estimates suggest that 5 to 15 percent of U.S. GDP may be consumed by negative externalities. Thus, unregulated markets in goods or services with significant externalities generate prices that do not reflect the full social cost or benefit of their transactions; such markets are, therefore inefficient.

Public goods are both non-rival and non-excludable (i.e., public goods are not only non-excludable) thus existence of a market failure is often the reason that self-regulatory organizations, governments or supra-national institutions intervene in a particular market. Economists, especially microeconomists, are often concerned with the causes of market failure and possible means of correction. Such analysis plays an important role in many types of public policy decisions and studies. Proposals to internalize negative externalities include mandatory insurance, regulation, greater tort liability, and charging firms for limited liability according to the benefits it provides them. However, government policy interventions, such as taxes, subsidies, bailouts, wage and price controls, and regulations, may also lead to an inefficient allocation of resources, sometimes called government failure.Given the tension between, on the one hand, the undeniable costs to society caused by market failure, and on the other hand, the potential that attempts to mitigate these costs could lead to costs from "government failure", there is sometimes a choice between imperfect outcomes, i.e. imperfect market outcomes with or without government interventions. But either way, if a market failure exists the outcome is not Pareto efficient. Most mainstream economists believe that there are circumstances (like building codes or endangered species) in which it is possible for government or other organizations to improve the inefficient market outcome. Several heterodox schools of thought disagree with this as a matter of ideology.An ecological market failure exists when human activity in a market economy is exhausting critical non-renewable resources, disrupting fragile ecosystems services, or overloading biospheric waste absorption capacities. In none of these cases does the criterion of Pareto efficiency obtain.

Private good

A private good is defined in economics as "an item that yields positive benefits to people" that is excludable, i.e. its owners can exercise private property rights, preventing those who have not paid for it from using the good or consuming its benefits; and rivalrous, i.e. consumption by one necessarily prevents that of another. A private good, as an economic resource is scarce, which can cause competition for it. The market demand curve for a private good is a horizontal summation of individual demand curves.Unlike public goods, private goods are less likely to have the free rider problem. Assuming a private good is valued positively by everyone, the efficiency of obtaining the good is obstructed by its rivalry, that is simultaneous consumption of a rivalrous good is theoretically impossible; the feasibility of obtaining the good is made difficult by its excludability, that is people have to pay for it to enjoy its benefits.One of the most common ways of looking at goods in the economy is by examining the level of competition in obtaining a given good, and the possibility of excluding its consumption; one cannot, for example, prevent another from enjoying a beautiful view, or clean air.

Property rights (economics)

Property rights are theoretical socially-enforced constructs in economics for determining how a resource or economic good is used and owned. Resources can be owned by (and hence be the property of) individuals, associations or governments. Property rights can be viewed as an attribute of an economic good. This attribute has four broad components and is often referred to as a bundle of rights:

the right to use the good

the right to earn income from the good

the right to transfer the good to others

the right to enforce property rightsIn economics, property is usually considered to be ownership (rights to the proceeds generated by the property) and control over a resource or good. Many economists effectively argue that property rights need to be fixed and need to portray the relationships among other parties in order to be more effective.

Public good

In economics, a public good is a good that is both non-excludable and non-rivalrous in that individuals cannot be excluded from use or could be enjoyed without paying for it, and where use by one individual does not reduce availability to others or the goods can be effectively consumed simultaneously by more than one person. This is in contrast to a common good which is non-excludable but is rivalrous to a certain degree.

Public goods include knowledge, official statistics, national security, common language(s), flood control systems, lighthouses, and street lighting. Public goods that are available everywhere are sometimes referred to as global public goods. There is an important conceptual difference between the sense of "a" public good, or public "goods" in economics, and the more generalized idea of "the public good" (or common good, or public interest), "a shorthand signal for shared benefit at a societal level". Examples of public good knowledge is mens, womens and youth health awareness, environmental issues, such as maintaining a nation's biodiversity, provision of welfare services and safety nets for future generations, sharing and interpreting contemporary history with a cultural lexicon, particularly about protected cultural heritage sites and monuments, popular and entertaining tourist attractions, libraries and universities.

Many public goods may at times be subject to excessive use resulting in negative externalities affecting all users; for example air pollution and traffic congestion. Public goods problems are often closely related to the "free-rider" problem, in which people not paying for the good may continue to access it. Thus, the good may be under-produced, overused or degraded. Public goods may also become subject to restrictions on access and may then be considered to be club goods or private goods; exclusion mechanisms include copyright, patents, congestion pricing, and pay television.

There is a good deal of debate and literature on how to measure the significance of public goods problems in an economy, and to identify the best remedies.

In a non-economic sense, the term is often used to describe something that is useful for the public generally, such as education and infrastructure, although these are not "public goods" in the economic sense.

Tangible property

Tangible property in law is, literally, anything which can be touched, and includes both real property and personal property (or moveable property), and stands in distinction to intangible property.In English law and some Commonwealth legal systems, items of tangible property are referred to as choses in possession (or a chose in possession in the singular). However, some property, despite being physical in nature, is classified in many legal systems as intangible property rather than tangible property because the rights associated with the physical item are of far greater significance than the physical properties. Principally, these are documentary intangibles. For example, a promissory note is a piece of paper that can be touched, but the real significance is not the physical paper, but the legal rights which the paper confers, and hence the promissory note is defined by the legal debt rather than the physical attributes.A unique category of property is money, which in some legal systems is treated as tangible property and in others as intangible property. Whilst most countries legal tender is expressed in the form of intangible property ("The Treasury of Country X hereby promises to pay to the bearer on demand...."), in practice banknotes are now rarely ever redeemed in any country, which has led to banknotes and coins being classified as tangible property in most modern legal systems.

The Lighthouse in Economics

"The Lighthouse in Economics" is a 1974 academic paper written by British economist Ronald H. Coase.

This paper challenges the traditional view that lighthouses are examples of public goods by showing that privately owned lighthouses existed in England. Coase aligned lighthouses more with club goods because they are excludable by way of charging port fees. Stopping short of a full analysis, the paper is generally viewed as an excellent insight into the dimensions of public goods and an invitation by Coase for a full economic analysis of the lighthouse.

Recently, the paper has been criticized by Van Zandt (1993) and Bertrand (2006) for not fully appreciating the characteristic of non-excludability of public goods. Historical records showed that those lighthouses which ran on voluntary payment did not survive long and eventually had to be granted the right to collect a light due by the government. Although other lighthouses were run privately, the right to collect a non-negotiable light due was supported by a patent from the crown. In other words, they were not privately provided via the free market as understood by the earlier writers.

Eventually, all these rights were withdrawn or bought up by the authorities because the total light dues that had to be paid by ships were too high as a result of rent-seeking activities of these so-called private providers of lighthouses. Barnett and Block (2007) qualify these critiques by showing that private lighthouses are possible, but do not show up in the historical record. Private lighthouses could obtain fees through negative publicity, voluntary clubs, and turning off the light to free riders.

United States v. Kaiser

United States v. Kaiser, 363 U.S. 299 (1960), was an income tax case before the United States Supreme Court.

Types of goods
By owner
By nature
Commons
Theory
Applications
Disposession/
redistribution
Scholars
(key work)

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