Common Goods in Microeconomics: Definition, Comparison & Examples

Instructor: Martin Gibbs

Martin has 16 years experience in Human Resources Information Systems and has a PhD in Information Technology Management. He is an adjunct professor of computer science and computer programming.

Certain goods or resources can seem in infinite supply. However, common goods can be used up. This lesson will define common goods, provide comparisons to other goods, and highlight examples.

Common Goods

A common good, also called common property resource, is a good that is non-excludable and rival. A good is non-excludable if you can't prevent anyone from using it, for example, a national forest or a public river. Rival means that the good can be used up. An entire forest can be mowed down in a single clear-cut.

Other Goods

In order to understand the function of common goods, let's compare it with other types of goods.

  • Private goods are excludable and rival. Excludable goods can be excluded from those who don't pay. Unlike a trout stream, you CAN restrict access to private goods. Think of food, clothing, and other consumer goods. These goods are rival goods because they can be used up. Grocery stores can be cleaned out quickly before a big storm.
  • On the other hand, public goods are non-excludable and non-rival. They cannot be restricted and they can't be used up. A trout stream may be non-excludable but it can be over-fished (rival). However, no one can consume all of the airwaves from the local radio station so this is a public good.

The Tragedy of the Commons

The tragedy of the commons is an economic phenomenon in which multiple individuals try to exploit shared resources to the point that demand rapidly outpaces supply. The resource is then unavailable for the greater society. When it comes to common goods, the tragedy of the commons can happen quickly. A good example is the over-fishing of the Grand Banks fisheries in Newfoundland. Improvements in fishing technologies led to a depletion of the cod fish population and an entire industry failed.

Better Use of Common Goods

Since common goods can be used up, draining both resources and wrecking entire industries, proper use of common goods can ensure the resource provides a benefit. This can be done through management and regulation. Local management of common resources can be a way to ensure that resources are used appropriately. For example, suppose you own a parcel of land that is registered as managed forest. It cannot be clear-cut. Rather, every 15 years, registered foresters select only certain trees for the timber harvest. This creates a sustainable yield for this good.

Common goods are also regulated. When you purchase a fishing license you are supporting this regulatory effort. Licenses are only granted for certain times of the year. The size and amount of fish are also limited. Game wardens enforce the regulations.

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