The Legal Analyst: A Toolkit for Thinking about the Law

By Ward Farnsworth | Go to book overview

11 Public Goods

One type of prisoner’s dilemma is important enough to deserve a chapter of its own. It involves public goods. Public goods are things that, once made, are available to everyone; you can’t exclude people from enjoying them. The other defining feature of a public good is that one person’s enjoyment of the thing doesn’t use it up or reduce the pleasure anyone else takes from it. So now you can see what a high quality of air in a country has in common with its army. Once either the air or the army exists, anyone can enjoy their fruits—the pleasures of breathing or of feeling secure against invasion; you can’t exclude people who didn’t contribute to the cause. And my enjoyment of those pleasures, whether I paid for them or not, doesn’t use them up at your expense; my sense of security in knowing the army is out there doesn’t leave any less security behind for you. Since we don’t have to compete to enjoy these things, they are sometimes called “nonrivalrous” goods.

The structure of these cases means that they both lend themselves to free riding and to a variety of the prisoner’s dilemma. You can ask everyone to contribute voluntarily to pay for the cost of an army or an environmental cleanup effort. Some people will do it, but many won’t. They will see it as a prisoner’s dilemma. If everyone else is going to chip in for an army, there’s no reason for me to bother: I’ll get all the benefits of it anyway. And if others aren’t going to contribute, then there’s even less reason for me to bother. We’re all better off if we all contribute than if none of us do, but the best (or most economically rational) play for me acting alone is always to figure I will ride for free on the efforts of others. Unfortunately, the others think the same thing, so there are no efforts—or anyway not enough. It’s more common to think about public goods, though, by turning the problem around and looking at it from a different perspective. Suppose you are thinking about making a public good. Why should you bother? Once it exists, everyone will be able to enjoy it and you won’t have any way to charge them (since nobody can be excluded from it); the consumers of it won’t pay voluntarily because they will regard it as a prisoner’s dilemma. So perhaps you won’t provide it at all, and in any event you almost certainly will provide less of it

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The Legal Analyst: A Toolkit for Thinking about the Law
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface vii
  • Acknowledgments xi
  • Part I - Incentives 1
  • 1 - Ex Ante and Ex Post 3
  • 2 - The Idea of Efficiency 13
  • 3 - Thinking at the Margin 24
  • 4 - The Single Owner 37
  • 5 - The Least Cost Avoider 47
  • 6 - Administrative Cost 57
  • 7 - Rents 66
  • 8 - The Coase Theorem 75
  • Part II - Trust, Cooperation, and Other Problems for Multiple Players 85
  • 9 - Agency with Eric Posner 87
  • 10 - The Prisoner's Dilemma 100
  • 11 - Public Goods 109
  • 12 - The Stag Hunt 117
  • 13 - Chicken 126
  • 14 - Cascades 136
  • 15 - Voting Paradoxes 144
  • 16 - Suppressed Markets with Saul Levmore 152
  • Part III - Jurisprudence 161
  • 17 - Rules and Standards 163
  • 18 - Slippery Slopes with Eugene Volokh 172
  • 19 - Acoustic Separation 182
  • 20 - Property Rules and Liability Rules 188
  • 21 - Baselines 198
  • Part IV - Psychology 207
  • 22 - Willingness to Pay and Willingness to Accept- The Endowment Effect and Kindred Ideas 209
  • 23 - Hindsight Bias 218
  • 24 - Framing Effects 224
  • 25 - Anchoring 230
  • 26 - Self-Serving Bias, with a Note on Attribution Error 237
  • Part V - Problems of Proof 247
  • 27 - Acoustic Separation 249
  • 28 - Standards of Proof 257
  • 29 - The Product Rule 273
  • 30 - The Base Rate 281
  • 31 - Value and Markets 294
  • Notes 305
  • Author Index 329
  • Subject Index 335
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