Classification Table for Types of Goods
A good is excludable if people (ordinarily, people who have not paid for it) can be prevented from using it.
It is rival, or subtractable if one person's consumption of a good necessarily diminishes another person's consumption of it.
| ||Excludable: |
| ||Yes ||No |
|Subtractable: Yes ||Private Goods ||Common-Pool Resources |
|No ||Club Goods ||Public Goods |
What each category means
- Private Goods: An economic good, or a tangible item that can be purchased and traded within a market. Private goods are excludable. They are also rival, or subtractable. You can't eat a hamburger that is being eaten by someone else.
For example: Most goods that are commonly traded, from hamburgers to furniture to 747 airplanes.
- Club Goods: Goods that are excludable but non-rival, or non-subtractable. This means that while certain people can be excluded from the consumption of a good, one person's consumption of it does not diminish another person's.
For example: Community services, including those provided by religious organizations; cable television; computer software.
- Common-Pool Resources
For example: Fisheries, forests, oil fields, groundwater basins, and so on.
- Public Goods
For example: National defense, public parks, street lighting, lighthouses, and so on.
These categories are not always immediately clear. Consider, for example, a road. If it's a toll road, it is excludable, since only those who pay the toll can travel by it. Therefore a congested toll road is a private good, since it is both excludable and subtractable, or rival, in consumption -- every additional car on the road reduces the space available to others (and increases their level of aggravation). An uncongested toll road, on the other hand, is excludable but non-subtractable, making it a club good.
What about regular non-toll roads? Well, if it's a busy road at rush hour, it's non-excludable but certainly subtractable, making it a common-pool resource. However, if it's a lonely rural highway, or even a city street late at night, it's neither excludable nor subtractable -- the presence of another car on an uncongested road does not diminish the space left for other drivers.
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