Excludability

In economics, a good or service is called excludable if it is possible to prevent people (consumers) who have not paid for it from having access to it. By comparison, a good or service is non-excludable if non-paying consumers cannot be prevented from accessing it.

Examples

An architecturally pleasing building, such as Tower Bridge, creates an aesthetic non-excludable good, which can be enjoyed by anyone who happens to look at it. It is difficult to prevent people from gaining this benefit. A lighthouse acts as a navigation aid to ships at sea in a manner that is non-excludable since any ship out at sea can benefit from it.

The ease and availability of file sharing technology has made many forms of information, especially music, movies, e-books, and computer software non-excludable. If the content producers want to make their works excludable, they have to use either "copy protection" schemes, or use law enforcement in order to prevent one owner of a copy from being able to share it with others.

An example of an excludable good could be a magazine; people who do not pay for the subscription are mostly excluded from obtaining a copy directly from the publisher. Another case is a pay television subscription, which is excludable but non-rivalrous.

	Excludable	Non-excludable
Rivalrous	Private goods eg. food, clothing, parking spaces	Common-pool resources eg. fish stocks, timber
Non-rivalrous	Club goods eg. cinemas, software, private parks	Public goods eg. free-to-air television, air, national defense

Implications and inefficiency

Non-excludable goods will generally be under produced and under supplied in absence of government subsidies or intellectual property right enforcement, relative to a socially optimal level. This is due to the fact that potential producers will not be able to realize a profit (since the good can be obtained for free) sufficient enough to justify the costs of production. In this way the provision of non-excludable goods is a classic example of a positive externality which leads to inefficiency. In extreme cases this can result in the good not being produced at all, or it being necessary for the government to organize its production and distribution.

A classic example of the inefficiency caused by non-excludability is the Tragedy of the commons (which Hardin, the author, later corrected to the 'Tragedy of the unmanaged Commons' because it is based on the notion of an entirely rule-less resource) where a shared, non-excludable, resource becomes subject to over-use and over-consumption, which destroys the resource in the process.

See also

• Free rider problem

Further reading

• Excludability, in: Joseph E. Stiglitz: Knowledge as a Global Public Good, World Bank. Last accessed 29 May 2007. Copy at the Internet Archive

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