Issue #7, Winter 2008


Twentieth-century government was all about public goods. This century will be all about public bads.

I live in Northwest Washington, D.C., but one need not reside in the nation’s capital to sympathize with the experience I have endured several times at the intersection of Florida Avenue, 18th Street, and U Street. The six-way intersection is convoluted enough, but it is made even more hectic by several take-out restaurants, a mini-mart, and a check-cashing concern on its southeast corner. Invariably, some driver–a person who, based on my non-scientific sample, is almost always a man–adds to the mess by temporarily turning the intersection into his private parking lot.

He double-parks in front of one of the restaurants and puts on his flashers. Smoking a cigarette, he disappears inside while talking on his cell phone so loudly he disturbs the sit-down customers. Traffic outside is bottling up behind his obstructing vehicle when another driver inadvertently brushes the double-parked car’s bumper, setting off its alarm and waking a midnight-shift worker in her nearby apartment. Eventually, the man exits with his Styrofoam takeout box, flicks his cigarette butt to the curb, and drives away.

Grabbing lunch is hardly a capital crime, and even double-parking is barely a traffic misdemeanor. The man’s behavior is inconsiderate at best, rude at worst. But clearly he is a public nuisance. Through actions both direct and indirect, he has created a series of small but not insignificant “public bads”–or “negative externalities,” as economists call them–the costs of which, by definition, are borne by the people around him. Specifically, our “public baddie” has created the following externalities: traffic congestion that ripples in all directions for several blocks; sidewalk litter from his cigarette butt; second-hand smoke inhaled by restaurant customers; noise pollution from his phone chatter inside the restaurant and car alarm outside it; ozone depletion from the CFC-laden Styrofoam box destined for the local landfill; and, yes, even space junk, in the form of the satellite carrying his cellular transmission which, when obsolete, will remain in orbit, colliding with other trash presently circling the planet.

What happens next? Most likely, nothing. Drivers may lean on their horns. Diners may cast scornful looks. The poor woman in bed will probably pull the pillow over her head in disgust. Inaction is perfectly rational because the costs of doing something–anything–exceed any potential benefits. As innumerable scholars in the social sciences have demonstrated, such collective action dilemmas are timeless features of every human society. The public paralysis these dilemmas create is precisely what emboldened our public baddie to disregard everyone in the first place.

But that is changing. As expressed in the popularity of certain public officials, such as New York’s Mayor Michael Bloomberg, and by the passage of relevant referenda or new laws, voters are using the electoral process to express their demand for solutions to public bads. Some are rather obvious, minor, or widely agreed upon, such as anti-littering laws; other responses are more controversial, like highway surveillance cameras to catch speeders. Somewhere in between is the growing number of restrictions or punitive taxes (the so-called “sin taxes”) on a variety of individual behaviors deemed harmful to the general public or some significant portion of it. States as politically diverse as Maryland, Montana, Tennessee, and New Mexico are among 18 that have passed some version of clean-indoor-air laws restricting smoking in public places. Call it the coming era of the public-bads government, analogous to the public-goods government that dominated policymaking in the twentieth century.

Because a public good, like national defense, is both something from which citizens cannot be excluded and their consumption of which cannot deplete, there is little incentive for individual citizens to contribute to its provision. In pure market situations, they therefore tend to be under-produced, which is why, during the last century, governments increasingly stepped in to provide them. Conversely, in the absence of government, markets tend to overproduce public bads. Pollution, in all its forms, is the classical example: Because pollution’s diffuse costs and its sources may be difficult to detect, few individuals will be motivated or empowered to take action to limit the behavior of “public baddies.”

Public-goods governance certainly had its moment. From Teddy Roosevelt’s conservation efforts to Harry Truman’s Cold War national security apparatus, from Franklin Roosevelt’s Works Progress Administration to Dwight Eisenhower’s Interstate Highway System, the provision of public goods was a hallmark of American policymaking during most of the twentieth century. The Great Society was, in many ways, a turning point, as it added to public-goods provision the first serious efforts at public-bads control, particularly environmental regulations (it also included a large number of redistributive private-goods programs, such as Medicaid). Today, however, a new frontier of public policy, characterized by the mitigation of public bads, has emerged. Governments have shifted their attention away from building highways and redistributing wealth to protecting us from harming one another, in ways large and small. More than ever, governments supervise and referee a variety of interpersonal behaviors and public transactions that were once governed solely by the self-restraint of personal courtesy and social mores. Put more simply, where once governments concerned themselves with creating public goods and redistributing private goods to help citizens out, today they are increasingly involved in trying to keep us out of one another’s way.

In fact, the increased public demand for reducing negative externalities–in the types of policies enacted, the variation in policies across states or across time, and the ingenuity of solutions devised–is altering the role of government and the public’s understanding of that role. Because the regulation of public bads invariably defines or constrains how citizens interact with one another, this greater encroachment of modern governments is changing the public sphere. Highway signs not only encourage us to phone in suspicious, potentially terrorist-related behaviors, but Megan’s Law–inspired alerts ask us to report potential kidnapping activities during those crucial early hours when such heinous crimes are most easily thwarted.

In a democratic system, we should expect that the prevention of public bads, like the provision of public goods or benefit programs, will become entrenched as politicians determine which efforts the electorate favors. Just as the maintenance of the national highway system or the distribution of Medicare benefits are today untouchable national programs, it is easy to imagine a day (if it’s not already here) when onerous anti-smoking legislation is equally hard to scale back, regardless of arguments that may arise against it. Arguments about regulating public bads stand to dominate our politics in the twenty-first century much as arguments over public goods did in the twentieth. It is therefore incumbent on policy thinkers to begin to consider what principles guide public-bads legislation. They should address (at least) four questions: How do we determine the point at which the government must step in to correct for a public bad? What is the proper level of government to address that bad? What types of government solutions are best suited for reducing public bads? And how do we weigh civil liberties against the benefits of reducing public bads?

The Causes and Types of Public Bads

Underlying the emergence of public-bads policymaking is rapid population growth, and in particular increases in population density. No longer do a majority of Americans live, as they did only a century ago, in towns of 500 or fewer people. Small, kin-centered communities living in close proximity are better able to avoid the destructive collective-action problems that plague modern, sprawling, semi-anonymous nations. As a powerful form of social sanction, scorn works best when individuals anticipate the possibility of repeat interaction. In a rural, nineteenth-century town where neighbors knew one another by name and face, acting discourteously in public settings was socially costly. Though conservatives and liberals may argue about whether deviancy has been defined downward, the fact is that we live in a more congested, more mobile, and therefore more anonymous society than ever. And there is no going back.

For the modern and mobile nation-state, the problem of anonymity takes on almost unfathomable proportions. As evolutionary biologist and geographer Jared Diamond points out in his Pulitzer Prize–winning book Guns, Germs and Steel, the math is both daunting and ineluctable: “[R]elationships within a band of 20 people involve only 190 two-person interactions (20 people times 19 divided by two), but a band of 2,000 would have 1,999,000 dyads.” For a medium-sized city of 200,000 people, the number of unique dyads approaches two billion. In short, as populations grow geometrically, the difficulty of solving collective action problems like the overproduction of public bads increases exponentially. We are a nation of strangers, and public baddies exploit this reality.

Not all public bads, or the public baddies who create them, are the same. The cigarette smoke from a fellow partygoer is hardly comparable with the construction firm that creates several months’ worth of loud noises during the demolition of an old apartment building and construction of its replacement. This distinction is not just a matter of degree, but also of the dynamics of public decisions themselves. Political scientist Michael Munger classifies public decisions based on two dimensions: the number of individuals who contribute to the creation of the public bad (the bad’s “collectiveness”), and the number affected by those bads (its “publicness”). To extend the Munger typology, a third dimension might be added to capture the degree to which a public bad is relatively temporary or permanent in its effects. A cell phone conversation by an audience member attending a performance of Hamlet is a temporary annoyance that dissipates and does no real, permanent harm to anyone; carbon dioxide emissions, on the other hand, can have permanent and potentially fatal consequences. Public bads can thus be classified based on (a) the number of public baddies; (b) the scope of impact of the bads they create; and (c) the degree of permanency of the damage caused.

Consider the public bads related to automobiles. In terms of the number of producers, almost every American drives or uses a car at some point and thus contributes to noise pollution on major thoroughfares and highways, but only a small subset of motorists menace others with aggressive driving maneuvers. With regards to scope, motorists who double-park or “block the box” at intersections cause local gridlocks, whereas uninsured drivers create risks that all other drivers must absorb through higher insurance premiums for uninsured motorist coverage. In terms of permanence, a massive traffic accident on an interstate creates the temporary economic inefficiencies caused by resulting major delays, whereas most worn out automobile tires end up clogging the nation’s landfills and refuse piles. An example of a narrow, temporary bad produced by a few is double-parking, the delays for which are limited to surrounding vehicles and disappear once the offending double-parker moves. At the other extreme, a widespread, permanent bad created by many is something like global warming, the human and industrial contributors to which are countless and the potential long-term effects of which are considerable and potentially irreversible. These category differences can–indeed, should–elicit differing responses from citizens and their governments. Moreover, if we have met the enemy and it is ourselves, so too must the solutions come from us collectively, whether or not and to whichever degree governments are involved.

Why Government Action Is Needed

In 1991, Ronald Coase won the Nobel prize for economics with a groundbreaking paper he wrote more than three decades earlier on the subject of transaction costs and social contracts. Coase’s Theorem essentially posits that, in the absence of transaction costs, there is no need for government assignment of property rights because individual parties can voluntarily negotiate or contract these rights. Though often cited by economic and political conservatives to validate calls for limited government, the rub in Coase’s Theorem are those pesky transaction costs, which are often unavoidable in public life–and particularly when a contracted relationship simply does not or cannot exist. A farmer can contract with the owner of the neighboring field for grazing rights, but the suburban homeowner cannot send a bill to the neighbor whose unmowed, unkempt lawn is driving local property values down. At the most rudimentary level, the public court system provides a latent governmental solution to the transaction costs which arise naturally from disputes over property rights: Citizens living together or adjacent to one another in an urban condominium or a suburban residential community can, for example, negotiate the arrangements of their shared space by forging contracts that prescribe or proscribe certain behaviors and, when disagreements inevitably arise, they can adjudicate their disputes in court.

That said, what Coase’s Theorem cannot account for are the informal contracts between and among persons going about their daily lives in close proximity in densely crowded, modern societies. A person who talks during the key part of a film at a movie theater or cuts off other drivers with an aggressive maneuver on the highway has no contractual relationship with those he or she has harmed; indeed, it’s impossible to imagine a situation in which a preexisting, enforceable private contract between these parties could exist. And since the type of “rights” at issue in such situations are often not literal, physical properties but rather loosely defined commodities that are difficult to contract legally, even if there were no transactional costs, the government would still need to provide some semblance of order to resolve the disputes we create for each other as a natural occurrence of modern life.

Asking the question in a different way, how much and what parts of the public sphere do we need to regulate?

Issue #7, Winter 2008
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Good article. Much too long.:

And some of the examples are silly: Suing the ACLU for making Christians feel bad? Dismissing the effect of ruining a paid performance of Hamlet?

Too many personal whims here. Of course, Whistling Past Dixie was another example of Straussian political economics.

I was sitting in the front row at the Kos Konvention in Vegas, and wasn't impressed with the deep connections of the speaker. A prime example of the academic approach to governance.

Dec 12, 2007, 1:48 PM

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