3 Feb 2010

Policies for People, not special interests

During my class at Berkeley, I gave my students "the hardest assignment in the world," i.e.,
Please explain how a leader can promote an environmental program that will benefit the average citizen --- but not special interest groups --- and still get re-elected.
Although I provided numerous clarifications to my students, this assignment is pretty straightforward: solve a collective action problem.

Collective action problems are rife in the water sector, and -- you will see -- many other areas of social and political action. They arise from two factors. First, there is the misalignment of costs and benefits. A collective good gives benefits to everyone (as a "public good" like a radio station or "common pool good" like a community reservoir), and it's hard to exclude those people from enjoying it. Because of this non-exclusionary characteristic, it's hard to force those who benefit from the good to pay for its provision. Thus, we may see (and do see) that people "free ride," enjoying the benefits but avoiding the costs. Because of this free riding, the good may not be provided at all, creating our collective action problem.

While people commonly assume that collective goods will only be provided when the government taxes everyone and uses those funds to create them, there are numerous examples of social and private provision of these goods. (Religion often plays a part in motivating people.)

Right. So that's the context for the assignment I gave my students. Although many of them thought it unfair that I ask them to give a solution to a collective action problem (in one page, no less!), several of them gave interesting suggestions. These are what I wanted when I gave the assignment: some new thoughts from people didn't know how hard their assignment was supposed to be!

Before I get to those, note this further wrinkle: Their brief was directed at a politician who was going to face re-election, and -- it is assumed -- an opponent who would be able to draw support from whatever special interests were free-riding on the currently provided collective good or would suffer if that good (e.g., a clean environment) were to be provided.

And here are the first two ideas:

Andrew C. introduces an interesting idea to promote open spaces. Developers want to build houses, but home-owners (and enviros) want open space next to their properties. Politicians are caught between the two, but they often bow to developer interests. Andrew suggests that residential properties pay a higher tax, that this tax be used to retire undeveloped land, and that developers have the option of selling their parcels for open space -- or developing them -- via a tradable development permit that builds in the open space. This scheme works by linking present and future values, allowing future homeowners to pay off present developers.

Daniela C. has an easy answer to the problem of water that's too cheap -- let rate payers decide what the prices will be. Given that the current system tends to favor a minority -- water hogs -- at a cost (in terms of reduced reliability) to the majority, this makes a lot of sense. Of course, there's the problem of "let's charge nothing!" but that's easily overcome by presenting voters with a series of "break even" price decisions. I like it!

Check in tomorrow for five ideas to address climate and environmental issues..


  1. Very interesting. Thanks to your students and you.

  2. I especially like Daniela's idea. Brilliant!

  3. Andrew's idea sounds very much like Transferable Development Rights (TDRs). A guy in my graduate class did his thesis on this subject and is now working on the King's County WA program. See http://www.kingcounty.gov/environment/stewardship/sustainable-building/transfer-development-rights.aspx

  4. ...and all in one page. I spent a significant amount of time editing for length to make it fit.

    I'm glad you thought my paper had some worthwhile ideas. In the midst of the grind a little positive mojo goes a long way.

    I wanted to make a correction to the description. It's a small error but a big part of my plan.

    The entire open space area would be off limits to builders from the start - paid for over time by higher property taxes. The city would parcel out other developable plots within the city limits (perhaps at favorable rates or with favorable contracts), and divide them among the developers. Essentially, these plots - which would be developed at some point anyway - would be sacrificed so that the open space measure could live. The developer contracts would be tradable, and worth more over time because the open space project would significantly restrict the supply of available land - these were the selling points to get developers on board. Higher future property values was also part of the rationale behind why homeowners would be willing to pay the tax.

    My intention was to leave the land untouched...pristine. Developers would have no access.



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