Why I Should Blog More

In standard economics, the production of public goods is a real problem. Because public goods are nonrivalrous, they create value for people beside the producer; because they are nonexcludable, the producer has no way of charging for this extra value. Consequently, people won’t create as much value through public goods as they ought to. The standard solution that most economists arrive at is to compel the production of public goods through taxation and government production.

Economists are frequently ridiculed for their failure to understand the alleged “human” factor in human behavior. Humans are not rational automatons, we are told, but evolved social beings with confounding foibles that make a strict rational actor model incomplete. But it’s striking that amid all of this ridicule and condescension from the rest of society, the public goods problem has emerged relatively unscathed. People still think that the public goods problem is a problem.

The naïve view of public goods is often at odds with reality, however. This is especially so when one considers the things we might care most about: our jobs and relationships. In modern society, better jobs and relationships are often the reward for the production of positive externalities. As it turns out, people like to work and socialize with those who create value for others.

This effect is pretty strong. Can you name a person who ended up poor and unhappy because they devoted too many resources to the voluntary production of public goods of actual value to the rest of society? I can’t, at least not off the top of my head.

My standard advice for those few younger people who ask me for it is simply to produce a lot of external value. Don’t worry about being compensated for it right away. If you succeed in producing things that are of value to others, they will want you around, and you will have plenty of rewarding opportunities you would not have had otherwise.

So I resolve to follow my own advice. I’m not claiming that my blog posts are revolutionary, but some people seem to enjoy them, and I like making people happy. Therefore I am planning to blog more. Check back soon, and in the meantime feel free to consider this a request for requests.

28 replies to “Why I Should Blog More

  1. Adam

    OK, responding to the “request for requests” part:

    I’ve always wondered how it’s possible to square claims of irrationality against the notion of subjective preferences. It seems to me that if you take the latter seriously, then nothing is irrational–maybe people don’t keep all the money in the dictator game because the subjective value they assign the stuff they could get with the extra cash is lower than the subjective value of a certain image of themselves, or an image they like to maintain in front of an experimenter. Maybe “seeing big numbers” just happens to be a scenario that increases people’s subjective valuations. Etc.

    But it seems that if you go down that road you just end up in a tautology that isn’t very useful.

    Would love to hear your thoughts on this.

  2. Jason Briggeman

    If we can’t or won’t even name any poor and unhappy people so that we can judge the causes for their so being, it isn’t much of a test of your hypothesis! I suspect most candidates would deny that they are unhappy, and who’s to say otherwise? Even if we had a pool of the poor and admittedly unhappy, then we’d get into the problem of determining what they’re responsible for having produced, as well as what constitutes “actual value” to society. The ‘market test’ may not suffice to resolve the latter problem, given that the evidence you’ve offered for the external value of your blog posts is that “some people seem to enjoy them.” ;)

  3. Bawld

    Redux: people are unaware of their true value of private utility (perhaps because of over-discounting future value) when engaging in activities that create positive externalities.

    Create enough awareness of this and private utility may approximate social utility.

  4. Tyler Bickford

    Can you name a person who ended up poor and unhappy because they devoted too many resources to the voluntary production of public goods of actual value to the rest of society?

    Isn’t child-bearing and child-rearing the classic and completely overwhelming example of this? Maybe non-market domestic work generally?

  5. Evan Soltas

    Eli, This is an excellent post. If someone hasn’t already mentioned it — I fear someone has somewhere, and I am unintentionally echoing them — I encourage you to take a look at “warm-glow” effects on cooperation in games in which participants know they are creating positive externalities. This is one rigorous definition of the social-reward mechanism you are describing for creating externalities. (http://www.dklevine.com/archive/refs4671.pdf)

  6. Eli Post author

    Thanks, Evan. I see the connection with warm glow effects, but keep in mind that those are all about framing. I’m arguing that when you consistently produce positive externalities, you will in fact often be rewarded down the road.

  7. Pietro Poggi-Corradini

    “Can you name a person who ended up poor and unhappy because they devoted too many resources to the voluntary production of public goods of actual value to the rest of society?”

    Undocumented migrant workers?

    Drug dealers?

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  9. Jason Briggeman

    Completely coincidentally, today, stumbled across this from Ed Leamer (2004):

    “I am reminded of the French physician Simmelweiss who discovered that washing ones hands prior to childbirth in a chlorine solution could substantially lower maternal death rates, but, in the 1860s bacteria were still unknown, and he couldn’t get anyone to listen. He finished his life in an insane asylum.”

    According to Wikipedia the name is spelled Semmelweiss, and he was Hungarian, but the story is the same.

  10. Jason Briggeman

    Well, you could argue that by not getting anyone to listen, he actually failed to produce external value…

  11. Fmb

    Request: discuss any literature on and/or speculate wildly about ways to make price discrimination more efficient.

    One component of pd is often arbitrary time wasting. Could that be equally effective but more socially useful? Instead of clipping coupons, complete some mechanical Turk task requested by a charity.

    Or watch khan academy videos for coupons might effectively achieve the same useful discrimination without actually wasting time (might require some irrationality).

    Basically, what’s the total friction cost of current pd schemes? Is that waste totally unavoidable?

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  14. Phil H

    Coming to this late, but I think you’ve missed a bit of a whopper here.

    “Can you name a person who ended up poor and unhappy because they devoted too many resources to the voluntary production of public goods of actual value to the rest of society?”

    Women.

    First, think about it. I’m pretty sure I’m right that half the human race has contributed massive amounts of unpaid work, and yet often ends up unhappy and unappreciated.

    Second, think about yourself. Why did you miss this? I know it’s exciting when you think of a new idea, but this is the 21st century. Surely we’ve learned enough about sexism/racism/disability prejudice now to know that when you think of an exciting new idea about society, you should try running it from the perspective of some disadvantaged groups before worrying about other white male doctors from Hungary.

  15. Tyler Bickford

    Phil @15 yes! I tried to raise this @7 and there was no response, but I’m pretty sure that even in the GMU worldview the production of new labor is a major public good / positive externality. It’d be nice if Eli would address this without dismissing it, because I agree with you that it’s pretty huge.

  16. Eli Post author

    Tyler, it was not my intention to ignore your (and now Phil’s) point; I just thought I would let it stand. But since you want a response:

    I agree that new humans are a social good! However, I don’t think that the dissatisfaction of women, to the extent it exists, is primarily due to inadequate return to the positive externalities they create. I think it is due to ex ante mistaken beliefs about how much private satisfaction they will get from motherhood.

    Also, Phil, if women specialize in home production, that is non-market work, but it’s not fair to consider it uncompensated in the sense of welfare economics. Women are often paid by access to market goods purchased with men’s market wages.

  17. Tyler Bickford

    Ah, I didn’t intend the susbtance of my comment to be bitching that you hadn’t responded, but I guess that’s mostly what I said.

    I will say, though, that I think this really is a dismissal. For starters, though I don’t think it was Phil or my main touchpoint, the modern two-income family seems to me to be a strong counterargument against the idea that women share in men’s income, since it’s pretty well-documented that women by and large do a “second shift” of non-market domestic work at home, after also working for wages during the day.

    Or that fact that until very recently divorce impoverished women and also left children in their care suggests that the care of children was not in fact implicitly being compensated by a portion of husbands’ wages.

    “I think it is due to ex ante mistaken beliefs about how much private satisfaction they will get from motherhood.” But this assumes all sorts of control/choice over things like family planning that women certainly haven’t always had access to. As I understand this, you’re saying “women choose to have children thinking it will be nicer than it turns out to be,” but that’s really not how it always has or even still does work, no?

    And haven’t you conceded the point here, anyways? If women’s dissatisfaction is due to errors on their part about the choices they make, it’s still the case that they are “poor and unhappy because they devoted too many resources to the voluntary production of public goods.” Your suggestion is that people usually underrate the amount of satisfaction they’ll receive from pursuing activities with positive externalities, but then you seem to be saying here that dissatisfied caregivers most likely overrated that satisfaction. At minimum it would seem that childbearing and childrearing are activities with significant positive externalities that, regardless of the reason, do not so consistently lead to the sort of happy rewards you are suggesting they should, and first-person reports of that dissatisfaction are sufficient as counterexamples to the question you posed (“can you name a person”).

  18. Tyler Bickford

    That said I do think the main point of the OP holds widely and is valuable, but that there are important exceptions that matter and may require limiting the generalizability or rearticulating the principle being proposed

  19. Eli Post author

    To put my point another way, if some women are dissatisfied with their domestic arrangements, it is probably because of inadequate direct flows of compensation that they were expecting, not because society fails to compensate them for the external benefits of motherhood, which for any given child, are not enormous.

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