Census Data: Private or Public?

    The U.S. Census Bureau runs many annual or monthly programs to guide congressional apportionment and federal funding. This data is a public good as it is non-rival and non-excludable. Anyone can use the data to conduct analysis and it is impossible to exclude as people are needed to conduct the polls. However, the Census suffers from the free rider problem, the poll rates have been falling over the past couple years. People will continue to use the data but fail to respond to polls sent out by the Bureau. As a result, the polls are not representative of the population they seek to emulate. 

    With the emergence of the iPhone and the increased digitalization, technology companies have unprecedented amounts of data on the U.S consumer. Along this shift, the government could turn to private companies to supplement or replace its own polling. This is already partially happening, the BLS uses a dataset purchased from J.D. Power to estimate its new-vehicles price index, and airline fares data from the Department of Transportation instead of running its own survey. If this trend continues, access to population data could depend on paying a company for it, turning a non-excludable public good into an excludable private one. 

I Swear We're Not That Messy.

I’ve lived with my roommates for over a year, and despite the substantial amount of time we spend together, collectively cleaning our apartment is the worst. Either we are too lazy, too busy, or unwilling to claim our mess. However, we prefer to keep a clean living environment. Since some of my roommates refuse to use a chore chart, how our apartment’s common spaces ultimately end up getting cleaned presents itself as a classic prisoner’s dilemma. 

The ultimate goal is to have clean common spaces in our apartment. We each have the choice between cleaning and not cleaning. Each of us has a dominant strategy: don’t clean and hope the other cleans up. The sub-optimal options would be for one person to clean and the other free ride on the results of the roommate’s cleaning. The Pareto Optimal solution would be for all of us to clean collaboratively, where even though we would have to put in effort, it would take less time and our apartment would be clean. However, we all expect someone else to do the work, and while we wouldn’t have to do the work (meaning higher utility), our apartment stays dirty (sub-optimal utility). 

This being said my roommates and I ironically hate a dirty living environment. Outside of this dilemma, we do end up cleaning our apartment, but rarely collaboratively. Our apartment ultimately gets cleaned, but at the sub-optimal utility levels where we all put in different amounts of effort. Maybe this year I can finally convince everyone to get the chore chart.

Why do we always have to stand at concerts?

I love live music. I am writing this as Mumford and Sons is playing at JPJ. While I wish I could go, I am going to see Sam Barber on Thursday, and I told myself I wouldn’t do two concerts in a week. But there is one thing that always makes me mad at concerts. And it’s a classic prisoner’s dilemma. Take Ting Pavilion here in Charlottesville. It has a great lawn in the back where you could set out some chairs or a picnic blanket. And yet I never do. Why? Because there are always a few people standing right in front of me blocking the view. 

If we all cooperated, we could sit down, be comfortable, and enjoy the concert without sore legs from standing for hours. However, since the people in front of me are always chasing the best view by standing up, they block my view and it is rational for me to stand up as well. At this point, we have ended up with about the same view we would have had sitting down, but with tired legs and people bumping into you.

Yet, everyone is acting rationally and will stand so as not to be the seated person with his view blocked by the standing crowd. As a result, we will likely not reach the desired cooperation that maximizes comfort and view unless the event venue provides different areas where you must either sit or stand. But my solution. Just get pit tickets so you can be closer to the stage since you’re going to be standing regardless. 

Tiebout vs. Housing Crisis

 After graduating and securing a job offer, most college students will often require living in a different city from their parents. Thus, living costs and specifically housing rent act as a major determinant in the selection process. According to Tiebout, preferences for public goods are revealed through the location each person chooses thanks to their expected full mobility. Even when people are mobile, real-world financial constraints may cause them to trade off their preferred bundle of public goods against lower housing costs. This fact diminishes the importance of your living location being informative about your public goods’ preferences which ends up distorting the optimal allocation of government funds. In this way, we can come up with the understanding that personal savings/gains outweigh the importance of the revenue - expenditure patterns in your community. 

In the case of the Bay Area, people are moving out of San Francisco in recent years because of the spikes in housing costs. Tiebout recognizes mobility costs, but modern housing costs provide an additional and particularly important financial constraint that can affect whether people can actually choose the community that best matches their public-good preferences. For this example in California, families are moving to areas with lower quality schools and greater climate risk which are quite unusual for a normal or rational person. This shows people are ready to trade their public goods’ preferences for acquiring a greater personal financial benefit on living costs. Tiebout's model could be extended with an additional assumption by explicitly considering the tradeoff between private financial benefits and local public goods. This can be another way you can consider self-interest to act as your marginal cost and public good to be your marginal benefit. You will continue consuming the right public good for you as long as your self interest would not be harmed. In other words, housing costs can cause the observed location choice to reflect a tradeoff between private financial costs and preferences for local public goods, rather than revealing public-good preferences alone.

Watch Your Trash! (Or Charlottesville Will)

Over the first few weeks of the semester, a pile of trash quickly amassed at my friends' house on University Circle - cardboard, trash bags, carpets, and every item you can possibly imagine that is involved in moving into a college residence. This mountain of trash was a negative externality that reduced the well-being of UCircle residents by being an eyesore, stinking up the area, and blocking people wanting to walk on the sidewalk without my friends compensating them. I initially imagined several Coasian solutions that could be employed to solve this problem, such as paying a sum to other residents that allowed my friends to maintain this level of trash or paying a resident to dispose of the trash themself.

The issue of trash collection was highlighted in Mueller 7, focusing on the city of Dhaka, Bangladesh, where the municipal government solution was ineffective because employees would often fail to show up, which left the garbage to rot in the streets and angered residents. Luckily we have stronger institutions in the United States than Bangladesh, and the municipal government's trash collection service is largely effective from what I gather by word-of-mouth. Yet even though residents pay a fee for trash collection in Charlottesville, it does not mean residents are free to dispose of it how they please. Charlottesville's Code of Ordinances section 5-148 prohibits the accumulation of trash and debris on private property, including but not limited to garbage, rubbish, paper, trash, among other forms. 

After my friends' trash mountain had nearly doubled in size, one day a man living on UCircle literally walked in through their front door and threatened to report them to the city. My friends researched the repercussions and realized the city of Charlottesville would have the property cleaned by a contractor but would send them a bill for a minimum of one half-hour of labor plus an administrative fee of $75. They quickly elected to clean up the trash themselves. In this case, the other residents would be unlikely to take a Coasian bargain my friends proposed when a quick phone call could fix their problem. Charlottesville city ordinances apply regardless of whether residents pay for the government's collection service or a private one (e.g., Skyline Disposal). It appears the threat of Friedman's rule-maker and umpire came to the rescue of the other UCircle residents.

Eyes on the Street: Urban Presence as a Public Good

When we think of the public goods that constitute our public safety apparatus, our minds are usually drawn to things like police and sidewalks. We've discussed both of these examples at length in class, highlighting their non-rivalrous and non-excludable characteristics, alongside their contribution to public safety. While these are indeed public goods, there exists a far more consequential public good that we often omit from our conception of this so-called public safety apparatus: our eyes.

The constant presence of eyes on city streets, that is, people occupying city streets and sidewalks, is perhaps the most effective public safety method of all. Jane Jacobs characterizes this idea as "eyes on the street" and explains it extensively in her book the Death and Life of Great American Cities. The argument goes, that the presence of other people on city streets serves as a deterrent for potential criminals and people up-to-no-good. In this sense, we are our own police, and also the first line of defense against crime. Our eyes, then, are a public good because they serve as the "eyes on the street" which deter crime, and this benefit is both non-rivalrous and non-excludable. It's non-rivalrous in the sense that our "consumption" of crime deterrence does not prevent others from the same indulgence. It's non-excludable in the sense that we cannot exclude others from "consuming" the crime deterrence that our eyes offer.

Thanks, Tiebout. You’ve fixed the EU.

Opponents of the European Union’s jurisdictional expansion cite numerous reasons. “Brussels is too opaque,” some say. “Fiscally responsible countries will have to further subsidize irresponsible ones.” Yet, few posit the Tieboutian argument: at status quo, the EU enables the European continent to approach an optimal allocation of public goods. Consider the scholar’s assumptions. The Schengen Area removes international mobility barriers for individuals and businesses, with regional subsidies further lowering relocation costs. The internet, artificial intelligence, and the EU’s language-translation requirements foster the proliferation of information about government services, and the free-movement area includes 29 member states from which to choose. The number of Europeans working remotely has doubled since the pandemic, reducing career-related constraints. Centuries of national division and conflict has limited externality spillover of some public goods. And each nation’s immigration policy suggests there is an optimal population size to which each government aspires. Per Tiebout’s model, a European—his “consumer-voter”—can select the EU member state with the government services which most closely align with their preferences. A health-conscious Hungarian might seek out Finland's air quality, or family-oriented Romanian might enjoy Austria's high law-enforcement efficacy.

Of course, in reality, cultural barriers and job constraints prevent perfect application of Tiebout’s model, which was also designed for local public good allocation. However, never before has the European continent been closer to the model’s assumptions, and largely due to the EU’s integration efforts. At a time in which European public sentiment oscillates between the EU’s dissolution or federalization, perhaps the Tieboutian model can serve as a guiding force. The EU could be an institution which solely seeks to maximize the model’s assumptions, while leaving decisions regarding government resource allocation to its member states. Some public goods, such as defense, may be ceded to the EU, especially to prevent the free-rider problem NATO faces. Yet, Tiebout offers a middle ground which ensures economic efficiency—the goal of programs such as the Schengen Area—while maximizing national sovereignty.

AI Risk: A Coasian Solution?

The recent attack on Hugging Face by rogue OpenAI agent swarms has encouraged discussion of AI risk. "Doomers," or those who favor a shutdown of AI development, fear that continued development poses an existential risk that human civilization will be destroyed as AI agents spiral out of control. Let us assume that these doomers do not use AI, as they believe their usage would create incentives for labs to continue development. If we assume that development does in fact increase existential risk, developers (the producers) and users (the consumers) are imposing an uncompensated cost on the doomers, creating a negative externality. 

Thanks to Coase, we know that there exists a potential solution if transaction costs are sufficiently low and property rights are defined. An individual doomer with sufficient funds or a collective can bargain with the leaders of AI development, and if they can agree on a price to shutdown, the externality can be internalized. However, this solution seems relatively implausible for several reasons listed below. 

• The value that labs demand to shut down may be prohibitively large for a non-government entity. Consider Google's market cap of roughly $4 trillion, SpaceXAI's present valuation of $2 trillion, and Anthropic's and OpenAI's suggested IPOs at roughly the same value. And the heads of these labs believe strongly in the value of continued development. Dario Amodei suggests a future with 10-20% annual GDP growth! 
• There is a potential holdout problem. Even if Anthropic and OpenAI agree to terms with the doomers, Google, SpaceXAI, or Chinese developers like Moonshot may hold out for a higher dollar value or on principle, making bargaining difficult. 
• There is a free-rider problem. Each doomer fearing catastrophic risk benefits from the reduction in risk regardless of their contribution to the proposed payment. 

Is Voting Rational

Voting exhibits many traits of a public good. It is non-rival; my vote does not impede your ability to enjoy the right of voting, and I cannot exclude you from voting if you meet the appropriate qualifications. Therefore, since voting is a public good, it ought to display the trends of other public goods. Namely, that as the population increases, so does the free rider problem. As the number of people in the electorate increases, the power of any individual vote decreases. As a result, there would be less incentive in a large election to bear the cost of voting, as the likelihood of your vote deciding the election of a particular candidate or policy drops. 

But the numbers seem to tell a different story. Take the state of Virginia. In the 2024 presidential election, 72.9% of eligible voters in Virginia turned out to vote. In the following year, only 54.9% of eligible voters voted in the gubernatorial election. This does not make sense from a pure public goods framework. In the presidential election, the population of voters is vastly bigger, and so it would follow that more people would not vote and act as a free rider. However, 18% more Virginians voted in the presidential election than in the gubernatorial election the following year. Clearly there are other factors at play, but why do these other factors cause people to deviate from what the public goods framework would suggest so drastically? 

Richmond's Search for n*

     The past two summers, I have interned at an economic development organization (EDO) in Richmond that has the goal of attracting businesses, investment, and new talent to the area. This organization, as well as the practice of economic development as a whole, immediately came to mind as I read Tiebout, specifically assumption #7. In general, Tiebout explains that consumer-voters reveal their preferences for public goods when they choose where to live, given seven necessary assumptions. Assumption #6 states that all communities have an optimal population (n*), and assumption #7 states that communities will actively attempt to populate towards this n*. So, communities that are above their optimal level of residents will work to drive consumer-voters out, and those below their optimal population will work to attract consumer-voters to the community. EDOs fulfill the latter part of this assumption, working to bring in new residents by marketing the region and supporting policies that will make it more attractive for investment.

    According to Tiebout, if Richmond has such a dedicated EDO working to attract consumer-voters, that means they believe the population of the area is currently below n*. Based on data, this appears to be a realistic assumption, as the population density of Richmond in 2020 was 40% less than it was in 1950. While there are no figures on what the appropriate n* actually is, this significant difference suggests there is certainly room to grow. In addition, the existence of EDOs in general highlights progress towards Tiebout’s listed policy implications. Tiebout states that practices that increase the knowledge of the consumer-voters, which EDOs do through marketing initiatives, will bring the government closer to the efficient allocation of public goods.

Just Ask the Students at Virginia Tech

    When I toured colleges, I had a spreadsheet with rows for each school, with headers including “rank,” “location,” “nearest airport,” “Greek life,” “tuition,” “school colors,” etc. After each tour I filled in my spreadsheet, but little did I know I was actively shopping in a market. Tiebout’s model illustrates a preference revelation concept that requires many strict assumptions, likely the most unrealistic of which is that consumer-voters are fully mobile. In his case, consumers vote for an area’s revenue-expenditure model (the public goods they provide using tax dollars) by choosing to move there. In the case of universities, consumer-voters are much more mobile (they do not yet attend any school), there is an abundance of schools to choose from, and universities publish tons of statistics, making school selection a very applicable case for Tiebout’s model. My spreadsheet served as a personal utility function, where I measured characteristics of the schools I cared about, then ultimately weighed them against each other. I was deciding which school would give me the most “bang for my buck,” and would then “vote” for its services by giving it my tuition money.

    However, different from the Tiebout model, consumer-voters cannot simply decide which institution gives them the highest utility and attend. A second decision-maker is involved in the transaction: the university’s admissions office, which can be interpreted as maximizing an entirely different utility function. The university wants to admit students who give it the most “bang for its buck,” in other words, the students who contribute to the institution's goals/reputation. So, the university’s anticipated utility from a given student is a function of their grades, extracurriculars, talents, likelihood of enrolling, etc. This is a stark difference from the housing market, where there are much tighter legal constraints on which characteristics can be considered for selection or exclusion. This two-sided matching market is an interesting limitation to the “vote with your feet” model, and seems to serve as an ultimate mobility constraint. A student may be willing to bear any moving cost to attend UVA, but if UVA says no, the preferences on the spreadsheet don’t matter – it’s no longer a feasible choice in the market. So, while students can craft a beautiful application spreadsheet with an vast number of schools to apply to, their final decision is limited by a second decision-maker (just ask the students at Virginia Tech).

Cheap Eradication, Costly Consequences

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Glyphosate is a powerful herbicide that Colombia used in its Aspersión Aérea program to fumigate coca plantations from 1994 to 2015, before the Constitutional Court suspended it over health concerns. Now, as new president Abelardo de la Espriella settles into office, the debate is back. Weeks into his term, he has decided to repeal the ban. It seems increasingly likely that Colombia will return to the use of glyphosate, considering how hard the Trump administration is pushing for it and how critically high cocaine production levels are. De la Espriella defends this stance by arguing that glyphosate is cheap, fast, and has no real alternative, as manual eradication is dangerous and has limited reach in remote coca-growing areas. 

However, this argument only holds up if you ignore who actually pays for it. The direct costs ( aircraft, chemicals, pilots) fall on the government, and by extension, taxpayers. Yet, the real cost falls on farmers whose legal crops get wiped out along with the coca, on rural communities dealing with higher rates of cancer and respiratory illness, and on ecosystems that get contaminated. Meanwhile, cartel leaders, the people actually profiting off coca cultivation, remain unaffected by this transaction.

None of this is reflected in the government’s “cheap” price tag for eradication. In economic terms, this is a negative production externality: the true social cost of an activity exceeds the private cost paid by the decision-maker. The relevant question, therefore, is not simply whether glyphosate is cheaper than manual eradication, but whether it remains cheaper once the costs imposed on farmers, communities, and the environment are included.

The Cost of AI: Not So Hidden Externalities

Recently, AI data centers have been being built up at an astonishing pace across the country, with extreme negative effects, from pollution to residential problems. In three separate cities this summer, residents filed law suits against data centers for the noise pollution. This noise comes from massive industrial fans that are used to keep the memory chips from melting. It emits a constant, low frequency noise that can be heard and felt by neighbors up to a mile away. The subsequent effects are residents complaining of chronic sleep deprivation, headaches, and internal ear pressure. Furthermore, AI data centers build gas-powered power plants to provide energy for these centers. The New York Times reports that these could produce as much pollution as about half of all passenger vehicles in the United States, alongside a report of plants in Pennsylvania that will burn roughly the same as 15-million gasoline cars in one year. These numbers are staggering, and both the environmental and noise pollution have created extreme negative externalities for residents and the globe.

Looking at this from the Coasian perspective, in theory, it is possible for the residents and the data centers to bargain. Some data centers have begun to build in forests, using the trees as a natural sound buffer. But that comes at the cost of deforestation, habitat loss, and other negative environmental factors. The executive for Hyperscale Data has offered to buy homes at property value and provide a subsidy for the cost of moving, but that comes with the effect of uprooting the lives of hundreds to thousands of people. Unfortunately for residents near data centers, AI data centers have the bargaining power. In the 1980s, Reagan disbanded the EPA's Office of Noise Abatement and Control and local regulation is not built to encapsulate the problem of the noise from data centers. This means that it would likely require the residents of these neighborhoods to collaborate and pay the data center to minimize the noise. Getting so many people, though, to agree, would be nearly impossible. As such, the best possible solution would be to get the government to implement certain regulations, either by having a decibel limit or requiring the data centers to internalize the costs by paying out settlements. 

My Dumplings, Your Problem

As college students rushing between classes, jobs, activities, and (hopefully) a social life, we look for time-saving shortcuts wherever we can. The food we eat is one of many examples. While my fridge boasts empty shelf space, closing my freezer requires a skillful maneuver to prevent packs of dumplings from falling out. When the time comes to eat, I routinely select three-minute microwave meals, rather than an hour-long cooking endeavor. My experience mirrors that of many college-age decision-makers, but it also reflects the broader American public's quest for convenience. The CDC found that “During August 2021–August 2023, the mean percentage of total calories consumed from ultra-processed foods (UPFs) among those age 1 year and older was 55.0%.” UPFs have been found to have a causal effect on obesity and are correlated with higher rates of cardiovascular disease, type 2 diabetes, and all-cause mortality. From an individual perspective, my frozen dumpling habit may seem like a simple tradeoff between increased personal convenience and a higher risk for negative health consequences. 

The problem, however, is that I do not bear the full cost of that decision. In America, healthcare costs are shared through private insurance programs, employer health plans, and taxpayer-funded programs, including Medicare and Medicaid. With these redistributive systems in place, some of the medical costs associated with an individual’s diet-related diseases are borne by other people. This is a classic negative externality in consumption, which leads to overconsumption of UPFs in the unregulated market. Of course, I welcome my classmates to engage in Coasian bargaining with me. I am prepared to dramatically reduce my frozen dumpling consumption if someone (or a group of people) would like to provide me with a private chef. Unfortunately, because the healthcare costs of my dumpling consumption are small, extremely dispersed, and unlikely to arise for at least a decade, I have yet to receive a decent offer.

Maybe the government should consider funding a private chef…. But until then I’ll say a little thanks to all you taxpayers when I microwave my dinner tonight.

The Coase Theorem Heats Up

    The air conditioning in my apartment has been broken for the past week, and as outside temperatures reach nearly 100 degrees, this malfunction has created almost unbearable living conditions. As I sit in the sickening heat waiting for the maintenance crew to come, I have begun to reflect on what a bargaining remedy for this may look like in Coase's world. In this instance, my three roommates and I are the victims of harm and MSCUVA is the producer of harm, and luckily for us, property rights are clearly defined. MSCUVA owns the property that we are paying to reside in, and they are therefore liable for upholding the terms of the lease agreement we signed, which includes a functioning air conditioning unit. In addition, as Coase did, I will assume there are no transaction costs for negotiating this matter.

    I know that even though MSCUVA is liable, they should only replace our unit if the marginal social cost of doing so is lower than the marginal social benefit. That is, if my roommates and I would be willing to bear the heat in this apartment for a payment lower than the cost of a new air conditioning unit, we could negotiate to receive payment instead of AC, and that would be the socially efficient outcome. According to my research, a central AC unit costs around $16,000, which would be a maximum payment of $4,000 to each roommate if we chose to negotiate instead. While this is a very large sum of money, my roommates and I value functioning AC (especially in Virginia heat) at a much higher price. This means that the cost of replacing our AC is lower than what we would need to be paid to tolerate no AC (MSC<MSB), so they should go through with our replacement request. To extend the Coase Theorem further, I know the efficient solution does not change based on who has property rights. Though the act of spending $4,000 feels quite scary, as I sit in this heat, I can confidently say that if the liability fell onto my roommates and I, I would spend almost any sum of money to get out of this heat. So again, the marginal social benefit of purchasing a new unit is greater than the marginal social cost, and maintenance should hurry up and get here!!

Mining the Boundary Waters; Rising Externalities

This spring, Congress and President Trump passed a resolution to open the areas around the Boundary Waters for mining. Environmentalists are concerned for the health of the ecosystem, as mining is known to create problems in surrounding areas, and Industrialists are happy that this huge supply of copper is available for the market.

Our discussion of Coase had me thinking about this issue from a liability perspective. It seems like for a long while, the "right" to clean land and water was held by the Environmentalists in the sense that no mining was allowed. Suddenly, the right was taken away and handed to Industrialists. 

Likely, there was, and is, opportunity for bargaining. When Environmentalists had the Right, mining companies coveted it, and probably would have been willing to pay for the right to mine above and beyond traditional production costs. The government deemed this transaction too dangerous to occur and raised the bargaining costs to an impossible level. All this time, solar and other battery needs have increasingly boosted demand for the precious materials in the Boundary Waters so that the amount Industrialists were willing to pay increased, as did the externality that Environmentalists were putting on mining companies. The opportunity cost for the government was also rising, as tax dollars were being left uncollected from copper sales. This demonstrates the reciprocal nature of an externality, and one that eventually became too large to bear.

This Right shifted, and suddenly Environmentalists are in the position of having to bargain to prevent the mining companies from polluting the water, as the mining companies own the right to mine. One can see how this might be a issue, as environmental causes often suffer from a Free Rider problem and thus cannot raise money to bargain to the socially optimal quantity. This is an interesting case on property rights being moved around, and them NOT ending up in the same place as Coase's theorem part II would have, as the government, and Free Rider problems, make transactions impossible.