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Main content
Current time:0:00Total duration:10:13
AP.MICRO:
POL‑3 (EU)
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POL‑3.C (LO)
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POL‑3.C.1 (EK)
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POL‑3.C.2 (EK)
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POL‑3.C.4 (EK)

Video transcript

in this video we're going to do a bit of a deep dive in classifying different types of goods and before we even get into the thick of things I'm gonna make some definitions so the first definition is that of a rival good now a rival good one way to think about it is if one person uses it it impairs the possibility of another person using it or it impairs the ability of another person using it so one person one person or party using it using it impairs or oftentimes prevents another party another person from using it or getting the benefit using it and we're going to talk a lot about some goods that are rival goods versus non rival goods now another related idea is that of excludability and as we'll see sometimes these things go together but sometimes they aren't so excludable excludable means that you could stop someone from using it can stop someone someone from using it you can exclude them using it so what I'm gonna do is I'm gonna set up a bit of a matrix where on one axis I'm going to think about whether something is a rival good or not and then on another axis I'm going to think about whether it's excludable or not so let me just do a big 2x2 matrix here so that it looks big enough for me and then I said I would do 2x2 that looks like about half way I always underestimate okay that looks about half way and I will do it here as well and so on this axis I'm gonna think about whether something is a rival good or not so rival good question mark this row is it is a rival good this row is it is not a rival good and then for the columns I'm going to think about whether something is an excludable good so x Pluta Bowl excluding question mark yes and no so let's start in this first top left cell so what are examples of things that are both excludable and rival Goods pause this video and see if you can think of any well actually many of the things that we imagine buying or using fall into this top-left category things like a so let's say bananas bananas are for sure excludable I could prevent someone from taking my banana you have to pay in order to have access to a banana and it for sure is a rival good if I have a banana especially if I eat that banana well that's definitely to impair your ability to eat that banana another example is clothing it's definitely a rival good if I'm wearing this shirt it's going to be very difficult for you to wear that shirt as well and like bananas you can force someone to pay money for that clothing they're not just going to get as much clothing as they want for free you could think of housing you can exclude someone from your house or from an arbitrary house they have to pay for it or pay for the rent and it's a rival good if one person or one family is using a house it definitely impairs the ability for another family to use the house and we could keep thinking of more and more ideas in this top left in general goods in this top left are called private goods private private goods now let's imagine going to things that are excludable but maybe not as rival risks and there's a really a large spectrum of things and as we'll see in the future and you could imagine some things are kind of blurring the line or depends on what context you're using it but one example of something that is excludable but is not necessarily a rival good that one person using it doesn't prevent the other person from using it in theory something like satellite television satellite satellite TV why is that excludable well you can force someone to pay to access satellite television only if you have access to some type of a device or some code you be able to watch the signal but the reason why it's not a rival good is you have these satellites in space here's my little satellite and it's beaming its beaming the signal down to earth and in theory if I'm receiving the signal here and I'm watching satellite television it doesn't impair someone else ability to get to watch that satellite signal but we have artificially made it scarce by perhaps making people pay for that even though everyone else everyone could use it without impairing the ability for anyone else to use it and so that's why this category of goods is often called artificially scarce good artificially scarce the scarcity is artificially happening because you're making it excludable but it doesn't necessarily have to another example could be something like a private park if I go buy a bunch of land and I landscape it nicely I might say say that you have to spend $1000 to get entry to that park well that is very very exclusive and I've come clearly excluding people from that park but in theory if I go and enjoy that park and if it's large enough well it doesn't necessarily impair the ability for someone else to him enjoy the park as well now if if all of a sudden thousands or millions of people tried to enjoy the park then it might become a little bit more arrival risk now let's go on the other side things that are not so excludable well if you think about things that are rival Goods but not excludable the classic example here is fish stocks fish stocks we're talking about fish stocks we're talking about let's imagine some body of water here and there are fish in this body of water and let's say that everyone could you can't exclude people from it so anyone can go and stick their fishing rod into this into this pond or into this lake and get fish but the problem is is that if I get a fish that's going to make it hard for someone else to get fish and you could imagine an extreme if enough people are grabbing the fish it is impairing the ability for other folks to get fish and so this type of resource or I used to say this type of good is known as a common resource common common resource and it's prone to what is known as tragedy of the Commons and we have a whole video on tragedy of the Commons but the tragedy of a comments which happens for common resources is when every individual person acts in their own best interests they might say hey I'm just gonna get as much fish as I need to support my family I could even make a business out of it I can sell it at the end of the day you might do something that's not in the common interest and it's actually not even in your own personal interest long term because if enough people fish in the short term and get that benefit you might deplete all the fish and they're not able to reproduce and then at some point there are no fish left so in the medium to long run you have hurt everyone including yourself so that would be the tragedy of the Commons which is typical for a lot of things that are common resources another thing that you could view as a common resource is timber or wood that's on land that anyone could access and a lot of cases clean clean water fresh water I should say non salt water fresh water now on some level if there's a lot of folks doing it it's definitely going to be rivalries but if there's only one or two people and you're at your source of fresh water is huge well then it might feel a little less rival or so once again we can debate it might be under different circumstances now last but not least let's think about what are examples of things that are neither rival risks nor excludable and that whole category is referred to as public public goods pause this video and see if you can think of any well one thing that is often considered a public good is air now you could debate at some extreme level if the air is really used up or something you might start to feel like its rival risk but for most cases when one person is breathing air it's not impairing the ability for someone else to use the air and it's very hard to exclude someone from breathing people just need to take a breath so it sits out here in public goods you could imagine something like national to national defense if you are benefitting from national defense because of aircraft carriers and missile systems and planes and the military that the nation has does that exclude me your neighbor from also benefitting from it no and in fact it would be very difficult to exclude you would have to kick me out of the country for me to not benefit from the National Defense so in general we would consider it to be non-excludable and then is it a rival good well if you are feeling safe because of national defense that doesn't impair my ability to feel safe from national defense so it's also a non rival good at least in most general circumstances so I would consider that a public good as well now when we talk about public goods there's the notion of the free rider problem free rider and that's because you can't exclude folks from using it it's usually not in the incentive of any entrepreneur to try to make these public goods happen and so this is typically the domain of government and in general we're in thinking about this whole column of things that are non-excludable this is a domain where the government tries to get involved so so we don't have the tragedy of the Commons with fish stocks or timber or freshwater they might put some regulation in or some permitting process
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