Energy Policy

Public and Private Goods / The Tragedy of the Commons


For this discussion, we need to establish some definitions associated with goods and services.

  • Rivalrous - the consumption/use of the good or service by one person reduces the availability of the good or service to another person
    Example: There are a dozen donuts in the kitchen at work. I eat one (well, more likely, I eat two) - and therefore there are fewer donuts for my colleagues to enjoy.
  • Non-rivalrous - the consumption/use of the good or service by one person does not reduce the availability or utility of the good or service to another person (these goods are often, but not limited to, intangibles)
    Example: Kauai is quite possibly my favorite place on earth. And I really enjoy the beautiful scenery there. Enjoying this view doesn't prevent others on the island from enjoying it too.
  • Excludable - any excludable good or service is one that someone can be prevented from accessing if they do not pay for it
    Example: You need a ticket to ride the train; without paying for the ticket, you do not get to use the good/service of riding the train (unless you break the law, of course).
  • Non-excludable - any good or service that someone cannot be prevented from accessing because of non-payment (or it is extremely expensive to exclude)
    Example: While our taxes go to fund the military, we do not (and cannot) deny national defense services to those people in our society who have not paid taxes.

So, when we make different combinations of rivalrous/non-rivalrous and excludable/non-excludable goods, we get what are called public and private goods. Take a look at the matrix below to see examples of different types of goods, and be thinking about how different topics related to energy and our environment fit into these categories.

Goods and Services Matrix
excludable non-excludable

Private Goods

A private good is both rivalrous and excludable; I own and drive my sports car. I paid for it, and I drive it. While I'm driving it, no one else can. And I don't let people who didn't pay for my car drive it anyway.

Common Goods

A common good is rivalrous but non-excludable; in other words the supply can be depleted, but people are not restricted in their use of the good. Natural resources can be thought of as common goods - their supplies are not infinite, but their utilization benefits all.

Common goods, because they are limited but largely available to all, are susceptible to the Tragedy of the Commons.


Club or Toll Goods

A club or toll good is excludable, but non-rivalrous (at least to a point); this would involve things like subscriptions to cable TV, access to private parks, or even membership in the European Union.

Public Goods

A public good is both non-rivalrous and non-excludable; you and I can enjoy this good at the same time without diminishing its utility, and we didn't have to directly pay for it to enjoy it. Public goods are things like breathing air or enjoying a robust national defense system.

The Tragedy of the Commons

I know: you've all seen this before, but it's worth refreshing our thinking on The Tragedy of the Commons and what that means for climate and energy policy decision-making.  In 1968, Garrett Hardin wrote about the potential for common goods to be exploited and depleted, specifically in the context of fears of overpopulation. While this article is now more than 40 years old, the concept persists and is certainly a challenge with energy and sustainability issues we face today, and in particular with climate change. (I used to require it for this lesson, but most students had already encountered it in multiple courses prior to this one. If you've not read it, I encourage you to do so as your time permits.)

Some points to consider in thinking about the Tragedy of the Commons:

  • Like the herdsmen seeking to maximize their own gain, we all do things that don't seem that bad in the bigger energy picture....It doesn't matter if I leave my TV on all the time, it's just one TV...So what if I drive a big SUV I don't really need; my commute is short...How much water does it really waste if I leave the sink on while I brush my teeth? While some of these goods aren't necessarily common goods, our environment is, and it's difficult sometimes to see what our individual impact really is. And it's not just individuals that operate with this thinking - think about oil companies, for example, who are seeking to maximize their own profits by producing more and more oil. Do they know there are climate consequences down the road? Of course they do, but they're thinking first about their own positions...just like those herdsmen.
  • Common goods utilized for private benefit will always be vulnerable to exploitation. We tend to fend for ourselves, not considering how our actions affect others now or future others. Keep in mind that the atmosphere is a common-pool resource (it provides the service of absorbing our pollution and can be referred to as the "atmospheric commons"), and I don't think I have to convince you that humans are exploiting it, mostly for personal (or corporate) gain.
  • Hardin was concerned with how a rapidly increasing population would affect the commons of the environment. As we examine the problem of the commons from an energy policy perspective, we can see that it is (at least in part) a function of our growing population - and not just a growing population - but a growing affluent population. As more and more people aspire to enjoy the creature comforts of modern western life, this puts pressure on our energy systems and resources and necessitates consideration in our policies governing those systems and resources.  (Think back to GEOG 30N and I = P*A*T)