Public goods defined, with one example each of a private good, a public good, a club good and a common resource

Two properties of goods. Goods are classified by asking two questions about them:

• Is it excludable? A good is excludable if people who do not pay can be kept from using it. It is non-excludable if keeping anyone out is extremely hard, or possible only at a very high cost.
• Is it rival in consumption? A good is rival if one person's use of it reduces the amount left for others. It is non-rival if one person's use takes nothing away from what others can use.

Public goods: definition. A public good is a good that is both non-excludable and non-rival: once it is provided, no one can practically be kept from enjoying it, and each person's enjoyment of it leaves as much for everyone else. It is enjoyed by a group together, whereas a private good is used by individuals. Because a person who does not pay cannot be shut out, everyone is tempted to enjoy it without paying, which is the free rider problem. Left to the market, a public good is therefore supplied in too small a quantity, so the government usually provides it, deciding which ones to provide by comparing their total benefit with their total cost.

The four kinds of goods.

A private good. Example (our own): a plate of pav bhaji from a street stall in Mumbai.

• Excludable: the stall owner serves only those who pay.
• Rival: the plate one customer eats is not available to anyone else. Ordinary markets handle such goods well, because the price decides who gets each plate.

A public good. Example (our own): a cyclone early-warning system of sirens and radio alerts along the Odisha coast.

• Non-excludable: once a warning is sounded, every person within hearing is warned; there is no way to warn only those who have paid.
• Non-rival: one family hearing the siren does not make the warning any weaker for the next family. A private firm could not charge each person who hears the warning, so the market would supply too little of it, if any; that is why it is provided by the government.

A club good. Example (our own): an online video streaming service sold by monthly subscription.

• Excludable: only subscribers with a login can watch.
• Non-rival: one subscriber watching a film does not reduce what another can watch, as the same film streams to all at once. Goods of this kind are non-rival but excludable.

A common resource. Example (our own): groundwater under the farms of a village in Punjab.

• Non-excludable: any farmer can sink a tubewell on his own land and pump.
• Rival: every litre one farmer pumps is a litre less for the others, and the water table falls for all. Because no one can be kept out and each user ignores the effect of his pumping on the others, such a resource tends to be used beyond the efficient level, the tragedy of the commons.

The lines are not fixed. The same good can move between groups as conditions change: a road with no toll and no congestion behaves like a public good, but congestion makes it rival and a toll makes it excludable. In the same way a public good can be supplied by a private firm once some way of charging is found, as in the source's case of a lighthouse firm that collects its fee from ports and can switch the light off for a port that does not pay. Non-excludability makes market supply difficult and inefficient, not always impossible.

Conclusion. A public good is one that is both non-excludable and non-rival, such as a cyclone warning system. A private good (a plate of pav bhaji) is excludable and rival, a club good (a streaming subscription) is excludable but non-rival, and a common resource (village groundwater) is rival but non-excludable.