Nonexcludable but rival goods

There seems to be a widespread sense that while immigration can benefit immigrants, it hurts natives because immigrants grab a share of the pie. This argument is invalid as regards private goods and public goods, but it may be valid for nonexcludable but rival goods.

Economists distinguish private goods from public goods by two criteria: (a) rivalry, and (b) excludability. Private goods are rival and excludable. Public goods are nonrival and nonexcludable. At least, that’s what economists do when they’re being rigorous. There’s a frustrating tendency to stretch the concept of a public good from the narrow niche in which it is most proper and to which the theory of public goods– for example, the idea that you sum demand curves for private goods horizontally and demand curves for public goods vertically— properly applies, and use the word in a loose populist fashion to include lots of stuff that governments in fact provide even though it’s rival and/or excludable. Most obviously, here: public education. If economists had more logical rigor and theoretical integrity, they would proclaim with one voice that public education is not a public good, because classroom seats are rival– only one student can sit in a seat at a time; teachers can only grade one homework assignment at a time– and excludable– it’s perfectly feasible, though not permitted by current law but that’s irrelevant in principle, not to let a student into the classroom. But since that’s too politically incorrect, they usually say, with a shade of embarrassment, that, well, yes, education must be a public good, although it’s not an “impure” public good, since… well, since it doesn’t really meet the criteria for being a public good, at all. (At most, it has positive externalities.) I won’t say that education isn’t a public good, since everyone muddle-headedly insists that it is and I don’t feel I have a right to redefine the phrase public goods to be consistent with the theory. But I would advocate limiting the use of the term to exclude education.

While private and public goods get the most attention, the two criteria clearly imply, not merely a dichotomy, but a four-way typology, as shown in the table below:

Excludable Nonexcludable
Rival Private goods, e.g., food, shelter especially if privacy is a human need, a car if sharing isn’t feasible Parking spaces are one example. These goods might make the basis for legitimate nativist complaints
Nonrival Patented inventions and copyrighted books are the most well-known examples National defense is the classic example; public statues; music in the park; clean air

There would be many grey areas here even if what ought to be the clear case of education were definitely reclassified as a private good. We don’t exclude people from the park; but could we? Could we do it at reasonable cost? The park is usually non-rival, but perhaps on a brilliant bright Saturday when winter suddenly melts into spring, it is so crowded with picnickers that one can’t find a place on the grass, and the park becomes rival. Emergency room care is technically excludable: one could leave people who don’t have insurance or cash bleeding outside the doors. But it’s not legally excludable, since 1986, and perhaps it’s not morally excludable somehow, if we think a doctor has a moral obligation to help someone in desperate need in his field of vision even if they can’t pay. (I’m much less sure that that’s true, than that it’s wrong to exclude peaceful people from US territory by force.)

Now, the comparative advantage argument suffices to show that natives will collectively benefit from immigration to the extent that only private goods are at stake, and in a sort of rough, approximate fashion, migration taxes and transfers to natives should be able to make open borders Pareto-improving with respect to private goods. Basically, just by coming into the country, immigrants don’t acquire access to any of the private goods natives previously possessed. Natives’ exclusive claims to their private goods aren’t affected.

As for public goods, while immigrants can’t be prevented from enjoying them, this is not a downside to immigration, because public goods are, by definition, nonrival. The fact that immigrants are enjoying them doesn’t reduce natives’ ability to enjoy them, at all. Even if immigrants make zero contribution to the public goods of their host country, natives have no grounds for objecting to their presence, because the natives still enjoy just as much of the public good as they did before. More likely, immigrants will make at least a small, possibly a large, contribution to the host country’s public goods. In that case, natives are strictly better off.

Nonrival but excludable (or partially excludable) goods are important because they include designs, ideas, blueprints, technologies, whatever you want to call them. Migrants won’t reduce the supply of those. Well, unless open borders has a negative effect on the progress of the global economic frontier, but that’s a topic for another post.

The category of goods for which the nativists’ “smaller-share-of-the-pie-for-us” notion might be valid is for goods that are nonexcludable yet rival. Parking spaces may serve as an example, for although exclusion is sometimes possible– parking meters, gates and tickets in parking garages– it’s costly to regulate street parking, so to hold down transactions costs it might sometimes be best to treat parking as nonexcludable. If parking is nonexcludable, newcomers to a city may lower the quality of life for existing residents, by crowding the streets with cars and making it hard to find a parking space.

How many nonexcludable but rival goods are there? We treat public education as one, though in principle it need not be. Likewise emergency room care. The streets themselves are treated as nonexcludable (and probably exclusion would be infeasible and/or would violate rights in many cases) and might be rival in some respects, e.g., if you’re using the street for a rally of shouting protesters, I can’t very well use it to play serene classical music. Do storefronts have a nonexcludable but rival character for window shoppers on a crowded day? Does the random interaction of people with strangers on the street somehow have the character of a nonexcludable, rival good?

Nathan Smith

Nathan Smith is an assistant professor of economics at Fresno Pacific University. He did his Ph.D. in economics from George Mason University and has also worked for the World Bank. Smith proposed Don’t Restrict Immigration, Tax It, one of the more comprehensive keyhole solution proposals to address concerns surrounding open borders.

See also:

Page about Nathan Smith on Open Borders
All blog posts by Nathan Smith

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