Phil Magness Exposes As Shoddyship Some So-called “Scholarship”

Buchanan’s paper filled a gap in the taxonomy that economists used to describe the ‘privateness’ or ‘publicness’ of goods. Most goods (and services) are “private goods”; these are goods that are both “excludable” and “rivalrous.” (The first term refers to the ability to withhold the good from Jones while supplying it to Smith. The second term refers to the fact that if the good is supplied to Smith for Smith’s consumption, Jones cannot be supplied with a like unit of this good at zero cost. Think of a hamburger. McDonald’s supplies a Big Mac to Smith who agrees to pay for it, but ‘excludes’ Jones from a Big Mac if Jones refuses to pay for it. Also, if McDonald’s were nevertheless to supply a hamburger to Jones after arranging to supply one to Smith, McDonald’s would incur an additional positive cost to do so.)

Classic “public goods” are the opposite of “private goods.” A “public good” is both nonexcludable and nonrivalrous. Think of the abatement of air pollution in the Los Angeles basin. If pollution is abated there, everyone in the L.A. basin gets to enjoy the cleaner air; no one there can practically be excluded from breathing the cleansed air. This good is also nonrivalrous: Once Jack in the L.A. basin is supplied the cleaner air, no additional cost is required to enable Jill also to consume the cleaner air. Jack and Jill aren’t in ‘rivalry’ with each other – or with Sam and Sarah and Bob and Betty – for a unit of greater air-cleanliness.

Clubs, Buchanan pointed out, are neither pure private goods nor pure public goods. Access to a club is excludable, but club goods are – when club membership is small – nonrivalrous, but rivalrous when club membership is large. (As membership grows, the rivalrousness of the club goods intensifies.) Thinks of a swimming club. Non-payers can be excluded from swimming in and lounging around the club’s pool, and when membership is small, the pool is nonrivalrous: adding a new member does not detract from the ability of existing members to enjoy the pool. But the pool becomes rivalrous when membership grows so large that Smith’s use of the pool means that Jones cannot enjoy the pool as he would if Smith weren’t a member.

Clubs are a common feature of human society, but until Buchanan wrote his paper there was no good economic theory of them. Buchanan offered such a theory. And all clubs condition membership on some condition or conditions – that is, all clubs exclude.

As Elinor Ostrom noted in her Nobel lecture:

Studying how individuals cope with diverse public problems in the world led us to reject [Paul] Samuelson’s two-fold classification of goods. Buchanan (1965) had already added a third type of good, which he called “club goods.” In relation to these kinds of goods, it was feasible for groups of individuals to create private associations (clubs) to provide themselves nonrivalrous but small-scale goods and services that they could enjoy while excluding nonmembers from participation and consumption of benefits.

The fact that Darity, M’Balou, and MacLean read devilish meaning into Buchanan’s use of the word “excludable” indicates only that they are utterly clueless about the scientific meanings of the terms that economists use. “Excludable” has scientific meaning in economics, and it is that meaning to which Buchanan clearly adhered throughout his article.

…..

Read Buchanan’s paper. You tell me if you find in it as much as a shadow of hint of a whiff that this paper is a surreptitious effort to endorse or to justify racial segregation.