Wednesday, April 15, 2015

Helping Liberals Understand The Free-rider Problem

In case you were wondering... Matt Bruenig never responded to my liberal friend request. :(   But, thanks to his blog... I found a consolation prize!  My consolation prize is a liberal named "nick".  At UCLA I had good friend named Nick.  He studied econometrics and we argued about his "Zombie Apocalypse Rules".  Not all of them... just the one about not having sex with zombies.  I argued that if Jennifer Connelly was a zombie... and most of her was still there... then I might toss Nick's rule out the window.  Every rule has an exception?

What does my new "nick" friend think about the no sex with zombies rule?  I don't know... I didn't ask him.  In my most recent reply I tried to explain why the free-rider problem is a problem.

Context:  If Clueless People Shouldn’t Vote, Then Should Damon Linker?

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You'd buy Bruenig a $5 beer because... he's male? You value his maleness at $5? If so, then is it a problem that you don't actually buy him a $5 beer for being male? Is it a problem that you don't accurately communicate how much you truly value his gender? Well... just ask all the people who didn't buy Donald McCloskey a $5 beer for being male.

That example is so terrible that I couldn't resist it. But perhaps it's so terrible that it will linger longer with you.

Let's be a bit more realistic and say that you would have bought Bruenig a $5 beer because he's liberal. If you don't actually buy him the beer... then you wouldn't accurately communicate how much you value his political orientation. Does this mean that, in the absence of your positive feedback, he's going to turn into a libertarian? Probably not.

Let's be a bit more specific and say that you would have bought Bruenig a $5 beer because he blogs about how to eliminate poverty. If you don't actually do this... then you wouldn't accurately communicate how much you value his blogging. Does this mean that he's going to stop blogging? Probably not? You hope not? But is it possible that he'd blog less frequently than you'd truly prefer?

In case you missed it... we're talking about the free-rider problem. I'm trying to help you understand how and why the free-rider problem is a problem.

If you...and all the other people who derive a positive value from Bruenig's blogging... don't accurately communicate the amount of value that you derive from his blogging... then he won't be able to correctly weigh his options. And if he can't correctly weigh his options... then this increases the chances that he will not choose the most valuable option. It increases the chances that he will not choose to blog... which would clearly hurt you... a consumer of his blog.

In this situation you're really not doing yourself any favors by not accurately communicating how much you value this blog entry and all of Bruenig's other blog entries. You're hurting yourself by lying to the hand that's feeding you.

To be fair, if you only value this blog entry at a nickle... then it's really not going to be worth it to go through all the steps of sending Bruenig a nickle. If you're the only person in this boat... then it's not a big problem. But the more people that are in this boat... the larger the problem becomes.

The solution is to facilitate one click micro giving. Well... it wouldn't eliminate the free-rider problem entirely... but "quarters up" would eliminate all the transaction costs.

If eliminating all the transaction costs turns Bruenig into a millionaire... then what does marginal utility have to do with anything? By helping to turn Bruenig into a millionaire you've essentially created a gold rush. But rather than a bunch of prospectors rushing to find some pretty rocks... there'd be a bunch of brains rushing to blog about how to eliminate poverty. And given enough eyeballs, all Easter Eggs are exposed (Linus's Law).

If you can grok all of this... then perhaps you can understand why it's a really excellent idea to allow people to choose where their taxes go. Because whether a producer is in the private sector or the public sector... we really don't want them barking up the wrong trees. We really don't want producers tilting at windmills. We really don't want producers going on wild goose chases.

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