The New Debate
Edited by Tyler Cowen and Eric Crampton
Chapter 14: Public choice experiments
Elizabeth Hoffman A number of important issues in public choice have been addressed in experimental research.1 This chapter summarizes experimental research on the role of allocation mechanisms and agent behavior in the ability of groups of agents to achieve optimal allocations of public goods and externalities when there are gains from cooperation and coordination. This line of research includes studies of the free-rider problem with voluntary contributions; studies of the ability of small and large bargaining groups to achieve Pareto-optimal allocations of externalities or public goods; and studies of the design and behavioral implementation of synthetic allocation mechanisms for the allocation of public goods, externalities, and complex commodities. 1. THE FREE-RIDER PROBLEM WITH VOLUNTARY CONTRIBUTION MECHANISMS The free-rider problem is a central focus of experimental research in public choice.2 Economists, psychologists, and sociologists have jointed the debate, answers to which are central to a number of larger issues in public choice. The basic premise of economists is that individuals, acting in their own self-interest, will underprovide public goods and positive externalities and overprovide negative externalities, relative to those quantities that would maximize social welfare. In the limit, with pure public goods and appropriability, no public goods will be provided. Psychologists and sociologists counter both with arguments criticizing the basic assumptions of economic models and with the observation that societies do provide public goods for themselves, sometimes without governmental intervention. Economists, themselves, subscribe to two different ÔremediesÕ to the free-rider problem. One group suggests that the only solution is for government...
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