Economic Goods for Dummies
The four different types of goods and how Space fits into it
In previous articles, we talked about economic goods and how space is, depending on the angle, a common good or a public good. But what are the different types of goods in economic theory, and how can we recognize them? In this article we will look exactly at this, and in so doing we will get a better understand on why the Earth’s orbits are a common good. Without further ado, let’s dive into it!
Goods and services
Let’s look first at the difference between goods and services.
On the market we exchange goods and services. Services are usually provided by other people, such as waiters, hairstylists, doctors and so forth. Goods on the other hand are items, sometimes tangible and sometimes not, that can be sold. There is not a binary distinction between goods and services: in fact, economists say that there is a sort of continuum between “Pure commodity Goods” and “Pure services”. A pure commodity good can for example be rice or flour, something physical you buy and then consume, is delivered all at one and can be returned, whereas a pure service can be teaching, an intangible service which is usually delivered in time, and which you cannot return once it has been delivered. Goods have been classified, and there are four types of goods: private goods, common-pool resources, club goods and public goods.
Public goods
These are goods that are non-excludable and non-rivalrous. This means that once provided, individuals cannot be effectively excluded from using them. For example, if the city council decides to set up a new set of streetlights, the taxes of the citizens should pay for them. However, there is no way of excluding from this service tax evasors or foreigners visiting the town, for example. These goods are also non-rivalrous, because one person’s use doesn’t diminish their availability to others: if there is a public park in my city we can all use it, and still the park will remain there and other people will be able to enjoy it. Usually it’s the government that provides for these types of goods, as private markets might fail to supply them due to the risk of people benefiting without paying (free riders).
Private goods
Private goods are both excludable and rivalrous. They are excludable because they can be restricted to certain individuals: for example, if I bought all the cherries this morning from the fruit stall down the block, by so doing I would take away the chance of someone else consuming them. They are also rivalrous, because one person’s use of the good reduces its availability to others. If during Black Friday we both find ourselves in front of the same belt, only one of us will manage to get their hands on it, and the other will go empty-handed. Most goods in everyday markets can be categorized as private goods: from oranges and pork ribs to smartphones, cars, books, kettles, and toys. Anything and everything you can buy in a store is a private good.
Club goods (quasi-public goods)
Club goods are excludable but non-rivalrous. This means that potentially they can be restricted to a specific group of people, but despite this, one person’s use doesn’t diminish their availability to others. These goods are often associated with membership or subscription models, which is why they are called “club” goods or sometimes “toll” goods. We are all familiar with club goods: not all of us go to the golf club, but most of us nowadays have a subscription to one (or more than one) streaming platform, or to a gym. Me “consuming” a TV series on Netflix does not stop anyone from watching the same, as many times as they wish to. Therefore, they are excludable, but they are non-rivalrous.
Common Goods
Common goods are also known as common-pool resources, and they are the kind of goods that are rivalrous but non-excludable. This means that they can be depleted if overused, and their use by one person reduces their availability to others. For example, if only one country used up all the oil, nobody else would be able to buy it and use it to power their car. However, it’s difficult to prevent people from using common goods, which is where most of the problem comes from. Common-pool resources are mostly found in nature, and given the human tendency to deplete the natural environment, they often face problems of overuse and degradation.
When we talk about common goods we talk about fisheries, clean air and water, and we at Cosmos for Humanity talk specifically about the Earth’s orbits. We have said already that these are common goods, and now we know exactly why that is. If we all start sending things in orbit, and if we do not try to avoid cluttering all that space with debris, soon there will not be enough space to use those orbits. They are, in this sense, rivalrous. But they are non-excludable because it is either impractical or impossible to stop people from benefiting from these goods: though not everyone can practically go to space (not for legal as much as for economic reasons) we can all access the benefits that space gives us, such as GPS services, weather forecasts or more simply, the beauty of the night sky.
For these reasons, it is important to raise awareness on the danger of depletion and degradation that the Earth’s orbits face, as common goods. It is also vital to understand that once we have depleted this resource, there is no coming back (there is no way back (at least, depending on the orbit, not for years, decades or even centuries). For this reason it is important to be mindful of the impact space activities have on the orbits and hold space actors accountable, which is what our Outer Space Footprint will help you do, in the future.
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