A market economy cannot supply goods and services efficiently unless they are private goods (excludable and rival in consumption).
There are four types of goods. The type of a good depends on (1) whether or not it is excludable—whether a producer can prevent someone from consuming it; and (2) whether or not it is rival in consumption—whether it is impossible for the same unit of a good to be consumed by more than one person at the same time.
Rival in consumption | Nonrival in consumption | |
Excludable | Private Goods | Artificially Scarce Goods
|
Non-excludable | Common Resources
| Public Goods
|
Source: Krugman-Wells macroeconomics text
Thomas Friedman: "The only thing as powerful as Mother Nature is Father Greed." The market economy is highly effective.
