Non-excludability
Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Class 12, Ch 5 "Government Budget and the Economy"
Meaning
Non-excludability is a property of a good: there is no practical way to stop people who do not pay from enjoying it. Once the good exists, everyone nearby gets its benefit. This leads to the free-rider problem, where people enjoy the good without paying and expect others to pay. Nobody pays voluntarily for something they get free, so the link between producer and consumer breaks, and the market supplies too little. This is a key reason the government supplies such goods through the budget.
Example
Clean air in a city and national defence are non-excludable. When the government cuts pollution, every resident breathes cleaner air, whether or not they paid taxes. A cinema is different. The rule there is simple: no ticket, no movie.
Don't confuse with
- Non-rivalry: this is about whether one person's use reduces what others get. Non-excludability is about whether non-payers can be kept out. A good can be non-rival but excludable, as with cable TV.
Related concepts
- Allocation function
- Redistribution function
- Stabilisation function
- Public goods
- Private goods
- Non-rivalry
- Free-rider problem
- Club goods
- Merit goods
- Demerit goods