Question

In much of the United States and Canada, logging takes place in both privately owned and government-owned forests. [LO 19.3] a. Are privately owned forests excludable? Are they rival? What type of good are they? b. Suppose that anyone is legally allowed to enter a government-owned forest and start logging. What type of good are these forests? c. Do you expect the rate of logging in government-owned forests to be faster, slower, or equal to the efficient level?

Short answer

Privately owned forests are private goods. Government-owned forests, if open to all loggers, are common resources. Logging in these forests will likely be faster than the efficient level.

Step-by-step solution

Define Excludability and Rivalry

Excludable goods are those where people can be prevented from using them, whereas rival goods are those where one person's use diminishes another's. Understanding these terms helps in classifying goods into different categories.

Analyze Privately Owned Forests

Privately owned forests are excludable because the owners can restrict access to them. They are also rival goods because the forest resources (like timber) diminish as they are used by one person, leaving less for others. Thus, privately owned forests are private goods.

Analyze Government-Owned Forests

If anyone is allowed to enter and log in government-owned forests, these forests become non-excludable because no one is prevented from accessing them. They remain rival because logging by one person still reduces the amount of resources available for others. This makes them common resources.

Predict Logging Rates

Since government-owned forests are common resources, they are susceptible to overuse, known as the 'tragedy of the commons.' Therefore, the rate of logging in these forests is likely to be faster than the efficient level, as individuals will tend to over-exploit the resource without proper regulation.

Key concepts

Excludability

Excludability refers to the ability to limit access to a certain good or resource. When a good is excludable, its owners can prevent others from using it without permission. This is often managed through legal rights, physical barriers, or pricing mechanisms.
For example, consider a privately owned forest. The owner of the forest can control and limit who enters the area, making it an excludable good. If you want to log in a privately owned forest, you need permission from the owner. This characteristic helps manage and protect resources within the forest effectively.
On the other hand, some goods are non-excludable, meaning no one can be effectively restricted from using them. Government-owned forests open to the public for logging represent a non-excludable resource because no particular group or individual is barred from accessing it. This often leads to challenges in resource management as these resources are open to all.

Rivalry

Rivalry in economics describes a situation where one person's consumption of a good diminishes the availability of that good for others. When goods are rival, only a limited amount can be used, and they get depleted as individuals consume them.
Privately owned forests are a prime example of rival goods. If someone cuts down trees for timber, there will be fewer trees left for others. This characteristic is central to the consumption of many natural resources, where using the resource reduces its availability.
Even in a non-excludable scenario, such as a government-owned forest open for logging, the rivalrous nature persists. As one person logs the forest, the resources gradually diminish, affecting what remains for others. This depletion aspect is vital in understanding and managing shared resources.

Common Resources

Common resources are goods that are non-excludable yet rival. They are accessible to everyone, but their usage by one person directly affects the availability for others. This creates a unique challenge in resource management, often leading to what is known as the "tragedy of the commons."
In a government-owned forest, where anyone can enter and log, the forest represents a common resource. Everyone has access, but each tree removed reduces the total available. Without regulations or management plans, overuse and depletion are likely as individuals gather as much as possible, spurred by personal gain.

• Common resources are neither private nor exclusive.
• They require sustainable management strategies to prevent overexploitation.

The key to protecting common resources lies in finding a balance between accessibility and sustainability, often requiring governmental or community intervention to maintain their longevity.

Private Goods

Private goods are both excludable and rival. These goods can be accessed only by those who have permission or have paid for them. Unlike common resources, private goods allow for effective control and management by their owners.
Forests that are privately owned fit perfectly into this category. Since the owners can restrict access and usage, they can actively manage the forest resources to ensure that consumption does not surpass their sustainable thresholds.

• Excludability ensures only authorized individuals can use the resource.
• Rivalry ensures consumption affects its availability for others.

Owners of private goods often have the incentive to preserve their value, investing in conservation practices and sustainable use. This helps maintain the resource in the long term, balancing current usage with future availability.