Common good (economics)

Common good (economics)

Wild fish are an example of common goods. They are non-excludable, as it is impossible to prevent people from catching fish. They are, however, rivalrous, as the same fish cannot be caught more than once.

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

  • whether the consumption of a good by one person precludes its consumption by another person (rivalrousness)
  • whether or not one must pay for a good in order to use it (excludability)

A classic example of a common good are fish stocks in international waters; no one is excluded from fishing, but as people withdraw fish without limits being imposed, the stocks for later fishermen are potentially depleted. To describe situations in which people withdraw resources to secure short-term gains without regard for the long-term consequences, the term tragedy of the commons was coined. For example, overfishing leads to a reduction of overall fish stocks which eventually results in diminishing yields to be withdrawn periodically.

Common goods which take the form of a renewable resource, such as fish stocks, grazing land, etc., are sustainable in 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  • As long as demand for the goods withdrawn from the common good does not exceed a certain level, future yields are not diminished and the common good as such is being preserved.
  • 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community level by restricting exploitation to community members and by imposing limits to the quantity of goods being withdrawn from the common good, the tragedy of the commons may be avoided.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 which are sustained thanks to an institutional arrangement of this kind are referred to as common-pool resources.

Sometimes, common goods and club goods are subsumed under the broader term of public goods. However, common goods should not be confused with a different type of public goods: social goods, which are defined as goods that could be delivered as private goods, but are delivered instead by the government for various reasons (usually social policy). This second definition of public goods does not refer to the characteristics of the goods (such as rivalrousness and excludability), but rather to the type of their provision.

Excludable Non-excludable
Rivalrous Private goods
food, clothing, cars, personal electronics
Common goods (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