I attended a talk recently, in which the topic of pure public goods was covered, and the 2×2 matrix came up for discussion:
Quick background: this is about the concept of public goods. A good that is rivalrous is a good that only one person can use at a time. The laptop on which I am typing this out is a rivalrous good. Only I can use it, and when I am using it, nobody else can.
A good that is non-excludable is one which I cannot prevent people from using. This blog, for example, is one which anybody, anywhere can see at any point of time. It is, and will always be free.
Have fun playing around with the matrix, and asking yourself where you would place which good. If you would like to give you examples to play around with, here’s a short list:
- Classes in a university
- Water in the water tank in your housing society
- A course on Coursera
- Seats on a bus
- The Mumbai-Pune expressway
But things can quickly get complicated! I gave the example of a laptop earlier on this post. What if five students are watching a movie on a laptop? A good that was rivalrous suddenly become non-rivalrous.
I also gave the example of this blog. What if I move over to Substack and turn this into a paid blog? A good that was non-excludable can suddenly be made excludable.
There are two points to make over here – the first is that context really matters.
But the second point, and the one that I want to talk about today, is the idea that those four boxes up top shouldn’t be thought of as discrete boxes, but rather as a continuum. Within each box, a good can lie either definitively in one box, or closer towards the edge, or indeed can jump across the boundary of the box, depending upon the context.
Statisticians would call this range estimates, rather than point estimates. Amit Varma would say that we all contain multitudes. Both are referring to the same underlying idea. That idea being this one:
When passing judgment upon a person, a concept or an institution, realize that your judgment doesn’t necessarily hold true for all possible scenarios. The same person can be good in one context, and bad in another. I’m good (I hope) at explaining concepts, but horrendous at meeting deadlines.((Or very, very good at missing them.))
The United States of America can be wonderful in certain contexts, and less than wonderful in others. India too, of course.
The point is, when you think about nebulous, hard-to-pin-down concepts, don’t think in definitive terms of a narrow point estimate. Think, rather, in terms of a range. Always a better idea, and one that I need to internalize better myself.
My thanks to the Anupam Mannur for helping my crystalize this idea, and to a friend who shall remain unnamed for helping me realize that I need to apply it in more areas than I do at present.
EconForEverybody 