1.3 - Public goods

Public goods. From an economic perspective intangible objects are so-called “public goods”. In economics, public goods are those goods whose use is non-excludable and non-rivalrous.

Non-excludable.  A characteristic of public goods is that third parties cannot be excluded from the use of enjoyment thereof. Examples of non-excludable goods are clean air, which can be inhaled by anyone, or a lighthouse, of which the signal can be used by any passing vessel. Because of their immaterial nature intangibles can also be used by everyone, once they are communicated with third parties. Thomas Jefferson pointed this out in a famous letter from 1813 to Thomas McPherson. in which he wrote stated: “If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it” (Boyle, 2008, p. 20). 

Non-rivalrous. A good is rivalrous when use by one person effectively excludes the simultaneous use by another person. An example of a rivalrous good is food: what one person eats can no longer be consumed by someone else. Next to consumables, tools – such as a chair or a spoon – are also rivalrous in use. Because of their intangible nature, immaterial goods are also non-rivalrous: the use of an intangible object by one person does not hinder the possible use of that object by one or more other persons. In the same letter Jefferson described the non-rivalrous character of ideas with a famous imagery about the use of a candle: “Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”

Scalability. The positive effect of intangible objects being non-rivalrous is that, because of their intangible nature, these goods are easily scalable. Once the first specimen of an intangible object has been made, the marginal costs for copying and distributing that object are negligible (Lev, 2001, p. 22).

Private goods. Public goods are the opposite of private goods: goods that are rivalrous and excludable in use. Material goods are rivalrous and excludable and therefore the scarcity of such goods is a given.

Excludable and Rivalrous Goods