Private Goods, Club Goods and Public Goods

Lighthouse at Point Reyes
Lighthouse at Point Reyes

Charging home owners’ association dues based on the size of the property is common practice in many places across the world. Is that economically efficient and is it equitable? The short answer to the question raised by reader Mr Baransam1 is yes. The longer answer needs to start with distinguishing different categories of goods that are produced, traded and consumed.

Private Goods

The most common category are called “private goods.” These are formally defined by being “rival” and “excludable.” The rivalrous characteristic arises from the fact that one’s consumption of the good precludes any other person from consuming it. If you eat an apple, that apple is not available for consumption by others. Excludability means that one can be prevented from consuming the good. You can lock up the apple and exclude others from consuming it.
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