AQA Specification focus:
‘The significance of technological change, eg television broadcasting is now excludable.’
Introduction
Technological change has reshaped how goods are classified and consumed, especially in broadcasting. Once public, new technology now enables excludability, altering economic resource allocation.
Public, Private and Quasi-Public Goods
Characteristics of Public Goods
Public goods are traditionally non-rival (one person’s consumption does not reduce availability) and non-excludable (people cannot easily be prevented from using them).
Public Good: A good that is both non-rival and non-excludable, meaning it can be consumed simultaneously by many without exclusion.
Examples include national defence or street lighting, where individuals cannot be charged directly for consumption.
Technology’s Role in Changing Characteristics
Technological innovations can alter these characteristics. Goods once regarded as pure public goods may become quasi-public goods if new methods make exclusion possible.
Broadcasting as a Case Study
Traditional Broadcasting
Historically, television broadcasting was considered non-excludable. Anyone with a signal receiver could access broadcasts without direct payment, creating free-rider problems and reliance on public funding.
Modern Broadcasting and Excludability
Technological advances, particularly digital encryption and subscription systems, have made it possible to restrict access to paying consumers only.
Excludability: The ability of producers to prevent non-payers from accessing a good or service.
This development transforms broadcasting from a public good into a quasi-public good, with mixed features.
Implications of Excludability in Broadcasting
Resource Allocation Effects
The move to excludability changes how resources are allocated:
Funding models shift from taxation or advertising to subscription and pay-per-view systems.
Market incentives now encourage investment in higher-quality programming, since consumers can be directly charged.
Accessibility becomes dependent on ability to pay, potentially reducing universal access to information.
Incentives and Efficiency
With excludability:
Firms gain incentives to innovate and improve content.
Revenues from subscriptions support expansion of channels and services.
However, socially desirable programming (e.g., educational content) may be underprovided if it lacks profitability.
Broader Applications of Technology and Excludability
Internet Services
The internet illustrates similar transformations:
Open-access websites act like public goods, free to all.
Subscription-based streaming platforms (Netflix, Spotify) show how encryption and login technology create excludability.
Quasi-Public Goods in Practice
Goods once treated as public can develop private characteristics:
Toll roads (technology enables charging via electronic tolls).
Digital media (password-protected access prevents free riding).
These examples highlight how markets adapt to technology by monetising access.
Economic and Social Considerations
Advantages of Excludability
Encourages innovation by rewarding producers.
Improves efficiency as resources flow to goods with high demand.
Reduces free-rider problems, ensuring only those who pay consume.
Disadvantages of Excludability
Equity concerns: low-income groups may be excluded from essential information or services.
Public welfare issues: socially beneficial goods may be under-consumed.
Market dominance: firms controlling excludability technology may gain excessive monopoly power.
Key Points for Evaluation
The Significance of Technological Change
Excludability is not static; it evolves with technology.
Goods may move along the spectrum between public, private, and quasi-public as new methods emerge.
The Broadcasting Example
Once non-excludable, now subscription-based.
Demonstrates how markets adapt to technological innovation.
Policy Implications
Governments face important questions:
Should access to vital information (news, education) remain universal?
Should subsidies or regulations ensure minimum levels of access?
How should markets balance efficiency with equity?
FAQ
Encryption scrambles a broadcast signal so that only authorised devices with a decryption key can access it. This prevents non-paying viewers from watching.
Conditional Access Modules (CAMs) and smart cards store subscriber credentials, ensuring only paying customers can decode the signal. This converts a previously non-excludable good into an excludable one.
Broadcasting retains some public good characteristics because viewing remains non-rivalrous—one person’s use does not reduce another’s.
However, technological change introduces excludability, allowing providers to limit access to paying users. This mix of features defines broadcasting as a quasi-public good.
Once broadcasting becomes excludable, access depends on ability to pay. Low-income households may be excluded from important content.
This can worsen inequalities in:
Access to educational programming
Participation in shared cultural events
Access to vital information during emergencies
Subscription revenue allows firms to directly link income to consumer demand.
Providers are incentivised to invest in higher-quality shows to retain subscribers.
Niche programming can thrive if enough customers value it.
However, socially beneficial but less profitable content may be underfunded.
Governments often intervene to ensure universal access to essential content.
Policy responses include:
Funding public service broadcasters through taxation or licence fees
Requiring free-to-air access for news and emergency broadcasts
Subsidising educational programming to maintain social benefits alongside excludable services
Practice Questions
Define the term excludability in the context of goods. (2 marks)
1 mark for recognising that excludability refers to whether consumers can be prevented from accessing a good or service.
1 mark for linking this to the ability to charge or restrict access (e.g., through subscription or encryption in broadcasting).
Explain how technological change has altered the classification of television broadcasting, and assess one possible economic consequence of this change. (6 marks)
Up to 2 marks for explanation of how television broadcasting was originally non-excludable (traditional public good).
Up to 2 marks for explaining that technological innovations (e.g., encryption, subscription systems) have made broadcasting excludable, turning it into a quasi-public good.
1 mark for identifying an economic consequence (e.g., improved incentives for quality, funding models, or equity concerns).
1 mark for providing development of the consequence with analysis (e.g., subscription revenue incentivises investment in programming, but may reduce universal access).
Maximum: 6 marks.
