Throughout my time in high school, everyone was talking about our new beautiful sports complex. The new stadium would allow my school to host home football games for the first time, and the addition of a turf field would prevent rolled ankles, dirt patches, and other inconveniences that come with a poorly maintained grass field. Serving as a public good, community members would be free to use the facility at any time of the day.
One evening, I attended a discussion between homeowners and representatives from the school district. The homeowners were upset. "You think I want stadium lights streaming through my windows every Friday evening?!" In addition to the external cost of the lights, the residents in the neighborhood argued that increased noise levels, greater traffic congestion on game days, and the eye-sore of a giant cement stadium would decrease the value of their homes and negatively impact their quality of life. In terms of public choice, it is probable that the construction process (road closures, jackhammering, etc.) of the stadium would have been a negative production externality, meaning the social marginal cost of building the stadium would exceed the school's private marginal cost. Furthermore, the ongoing use (lights, noise, traffic congestion) of the facility would also provide a negative consumption externality felt by the homeowners, meaning the social marginal benefit of the sports complex would fall below the school's private marginal benefit of using the facility. In order to achieve allocative efficiency, both the school and the homeowners were forced to compromise. The school proposed using a new lighting technology that would minimize light pollution, thereby decreasing external cost. After negotiations, the school constructed a redesigned sports complex with the new lighting technology and limited seating capacity. After considering the preferences of the homeowners, these concessions by the school district brought the allocation of resources closer to the allocative efficient level. An interesting fact about this case is that my school, a public school, is a good provided by the government. The school district accounted for some of the community's preferences by initiating the building project, while neglecting the preferences of the homeowners. In the Role of Government, Friedman asserts that the government can establish new neighborhood effects in a community "by failing to charge or to compensate individuals properly". If these negative externalities had not been addressed, this new sports complex would have left nearby homeowners disproportionately worse off.
2 comments:
Tiebout would offer a simple solution to those who are don't like the new complex. Move with your feet! In an world that where there is no cost of moving, and you could wake up in a place with a different school, they would. In this situation, the costs of moving are too high compared to cost of trying to change the public goods that are offered in the community. But it is totally possible that someone moves if the preferences reflected in the community become far different than that of the individual and the cost of moving is not prohibitive.
Oops, meant to say: Vote with you feet!
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