Come out to my suburban neighborhood on any crisp October Saturday, and I will show you a minor tragedy: on every lawn a man with a leaf blower, blowing his leaves onto the next manâs lawn. Eventually, they all go inside to recover from a hard and thoroughly unproductive morningâs work.
Thatâs a bad way to spend a Saturday. If we all ditched our leaf blowers and stayed inside to watch football, weâd all be happier. Unfortunately, human beings are too rational for that. Blowing leaves always makes sense, whatever your neighbors do. If everyone else blows leaves, youâd better blow them also to avoid a double cover. Or, if everyone agrees not to blow leaves, your best strategy is to cheat and have the only clean lawn in the neighborhood.
Economics is largely about the surprising and sometimes tragic consequences of rational behavior. When thereâs an exciting moment at the ballpark, everybody stands up trying to see better, and therefore nobody succeeds. At parties with a lot of simultaneous conversations, everyone speaks loudly to be heard over everyone else, and everyone goes home with a sore throat. Still, itâs rational to stand at the ballpark, and to yell at the party. We stand and we yell for the same reason we blow leavesâfrom exquisite (and entirely rational) concern for our own interests and none for the harm that spills over onto our neighbors.
Itâs a general principle of economics that things tend to work out best when people have to live with the consequences of their own behavior, or, to put it another way, things tend to work out poorly when the consequences of our actions spill over onto other people. Simple and obvious as that general principle might sound, it has the power to undermine vast deposits of conventional wisdom. It suggests that the world has too few people, too few misers, and not enough casual sex, but just the right amounts of secondhand smoke and child labor. It implies that a thirst for gold is socially ruinous, but a taste for revenge can be a social godsend. It casts light on why the tall, the thin, and the beautiful earn higher wages. It suggests sweeping reforms of the legal system, the political system, the tax code, and the rule against jumping to the front of the water-fountain line. And it explains why automobile insurance in Philadelphia is so damn expensive.
More mundanely, it tells us thereâs too much litter on the streets. Thatâs less obvious than you might suppose. Sure, thereâs a lot of litter, but a lot isnât always the same as too much. After all, some litter ought to be there because the alternatives are worse. That half-eaten sandwich you just stepped on? Maybe someone dropped it to avoid being stung by a hornet. The newspaper wrapped around your ankles? Maybe the wind took it while someone chased down the tax returns that had just fallen out of his briefcase. And if you have a heart attack while youâre walking down the street with a Popsicle, nobody thinks you should make a beeline for the nearest trash receptacle before collapsing to the ground.
In principle, all the litter on all the sidewalks in all the cities of the world could be there for good reasons. But in fact, Iâm sure there is too much litter on the streets, and hereâs how I know: the person who drops a banana peel and the person who slips on it are not usually the same person. That pretty much guarantees that people sometimes drop banana peels even when the cost (to passersby) exceeds the benefit (to the litterbug). Each time that happens, the world becomes a poorer placeâand thatâs what I mean when I say thereâs too much litter.
âToo much,â in other words, is no mere value judgment. It means precisely that in a world with less littering, we could all be happierâjust as we could all be happier in a world with fewer leaf blowers and a prohibition on standing at the ballpark.
Whether youâre blowing leaves or discarding litter, having children or having sex, saving or spending, smoking or drinking, setting fires or reporting themâyour actions have costs and benefits. As long as you feel all the costs and benefits, youâll tend to get the quantity right. Youâll drop the right number of banana peels, or have the right number of children, or choose the right number of sex partners. But if you feel only the benefits while someone else feels the costs, youâll tend to overindulge. And conversely, if you feel only the costs while someone else feels the benefits, youâll underindulge.
When youâre splitting the dinner check, ordering dessert can be a lot like litteringâyou get the benefits and the costs spill over onto your friends. If the $10 double chocolate mousse is worth only $4 to you, you really shouldnât order itâand you wonât, if youâre paying your own way. But when you split the check ten ways, that mousse starts to look (to you) like a bargain. You place your order, the group pays $10 to buy you a $4 dessert, and the group (including you) is collectively $6 poorer. Thatâs what I call a bad outcome.
Spillovers cause bad outcomes. That much, I think, is clear, at least in theory. The art is in figuring out what counts as a spillover. Take, for example, the problem of secondhand smoke in restaurants. Itâs called secondhand smoke precisely because it spills over from one table to another (or from a table into the kitchen). But that doesnât make it a spillover in the relevant sense. It counts as a spillover only if the decision maker ignores it. In this case, thereâs no spillover because the restaurant ownerâthe fellow who decides to allow smoking in the first placeâis unlikely to ignore something that offends his customers.
Of course, heâll offend some customers no matter what he does. A permissive smoking policy offends nonsmoking customers and employees; a restrictive policy offends the smokers. But itâs in the ownerâs financial interest to keep the offense to a minimum. He bans smoking if the benefits of the ban exceed its costs, and allows it otherwiseâfor the simple reason that every cost and every benefit hits him directly in the pocketbook, via customersâ willingness to spend money in his establishment. Heâs got all the right incentives so he makes all the right decisions. Thatâs why most economists agree that second-guessing the ownerâsay, by passing a law that overrides his choicesâis a bad idea.
Call it, then, the communal-stream principle: Feel free to pollute your own swimming pool, but if your sludge spills over into the stream we all share, you should pay for the damage. Conversely, if you volunteer for cleanup duty, you should get a reward. Otherwise we end up with too much pollution and too few volunteers.
A simple and obvious principle, no? But the consequences can be astonishing.
Itâs true: AIDS is natureâs awful retribution for our tolerance of immoderate and socially irresponsible sexual behavior. The epidemic is the price of our permissive attitudes toward monogamy, chastity, and other forms of extreme sexual conservatism.
Youâve read elsewhere about the sin of promiscuity. Let me tell you about the sin of self-restraint.
Consider Martin, a charming and generally prudent young man with a limited sexual history, who has been gently flirting with his coworker Joan. As last weekâs office party approached, both Joan and Martin silently and separately entertained the prospect that they just might be going home together. Unfortunately, Fate, through its agents at the Centers for Disease Control, intervened. The morning of the party, Martin happened to notice one of those CDC-sponsored subway ads touting the virtues of abstinence. Chastened, he decided to stay home. In Martinâs absence, Joan hooked up with the equally charming but considerably less prudent Maxwellâand Joan got AIDS.
When the cautious Martin withdraws from the mating game, he makes it easier for the reckless Maxwell to prey on the hapless Joan. If those subway ads are more effective against Martin than against Maxwell, they are a threat to Joanâs safety. This is especially so when they displace Calvin Klein ads, which might have put Martin in a more socially beneficent mood.
If the Martins of the world would loosen up a little, we could slow the spread of AIDS. Of course, we wouldnât want to push this too far: if Martin loosens up too much, he becomes as dangerous as Maxwell. But when sexual conservatives increase their activity by moderate amounts, they do the rest of us a lot of good. Harvard professor Michael Kremer estimates that the spread of AIDS in England could plausibly be retarded if everyone with fewer than about 2.25 partners per year were to take additional partners more frequently. That would apply to three-fourths of all British heterosexuals between the ages of 18 and 45.
A cautious guy like Martin does the world a favor every time he hits the bars. In fact, he does the world two favors. First he improves the odds for everyone whoâs out there seeking a safe match. The second favor is more macabre, but probably also more significant: If Martin picks up a new partner tonight, he just might pick up an infection as well. Thatâs great. Because then Martin goes home, wastes away in solitude, and eventually diesâtaking the virus with him.
If someone has to get infected tonight, I want it to be Martin rather than Promiscuous Pete, who would probably infect another twenty people before finally dying.
Iâm always glad to see guys like Martin in the bars. When he takes home an uninfected partner, he diverts that partner from a potentially more dangerous liaison. When he takes home an infected partner, he diverts that partner from giving the virus to someone who might spread it far and wide. Either way, I sure hope he gets lucky tonight.
Sadly, none of this makes for a good pickup line. Youâre unlikely to get very far with an approach like âYou should sleep with me so you can get infected, die, and take the virus with you.â That would be like saying âYou should sell your leaf blower so your neighborsâ lawns stay cleanerâ or âYou should stay seated at the ballpark so everyone else can see.â The whole point is that whatâs good for the group can be bad for the individual, and thatâs why we get bad outcomes.
If multiple partnerships save lives, then monogamy can be deadly. Imagine a country where almost all women are monogamous, while all men demand two female partners per year. Under those circumstances, a few prostitutes end up servicing all the men. Before long, the prostitutes are infected; they pass the disease on to the men; the men bring it home to their monogamous wives. But if each of those monogamous wives were willing to take on one extramarital partner, the market for prostitution would die out, and the virus, unable to spread fast enough to maintain itself, might well die out along with it.
The parable of the monogamous wives has a more profound moral than the legend of Martin and Joan, because it shows that even on a society-wide level, increased promiscuity could retard the epidemicâat least in principle. But what about practice? Thatâs where Professor Kremerâs research comes in. With plausibly realistic assumptions about how people choose partners, his work shows that the moral remains essentially the same. When your relatively demure neighbor experiences a rare moment of rakishness, he really is doing his part to combat the deadly scourge.
Thatâs one reason why you should root for Martin to have sex with Joan. Hereâs another: theyâll probably enjoy it.
Enjoyment should never be lightly dismissed. After all, reducing the rate of HIV infection is not the only goal worth pursuing; if it were, weâd outlaw sex entirely. What we really want is to minimize the number of infections resulting from any given number of sexual encounters. Thatâs the same as maximizing the number of (consensual) sexual encounters leading up to any given number of infections. Even if Martin fails to deny Maxwell a conquest, he can at least make someone happy.
If you are a monomaniac whose goal is to minimize the prevalence of AIDS, then you should encourage Martin to have more sex.* But if you are a sensible person whose goal is to maximize the difference between the benefits of sex and the costs of AIDSâthen you should encourage Martin to have even more sex.
To an economist, itâs crystal clear why people with limited sexual pasts choose to supply too little sex in the present: their services are underpriced. If sexual conservatives could effectively advertise their histories, HIV-conscious suitors would compete to lavish them with attention. But that doesnât happen, because conservatives are hard to identify. Insufficiently rewarded for relaxing their standards, they relax their standards insufficiently.
When you take a new sex partner, you bear some costs and you reap some benefits. Those are your business. You also impose costs and benefits on others, and those are everyone elseâs business. If you have a history of reckless promiscuity, thatâs a cost. Everyoneâs fishing for partners in a great communal stream and youâve polluted that stream just by entering it.
But if youâve always been cautious and selective, youâre likely to raise the average quality of the partner pool. Just by jumping into the stream, you make it purer. Thanks to you, everyone who goes fishing for a partner tonight has a better chance of catching a safe one.
Like any other communal stream, the stream of partners has too many polluters and too few volunteers to clean it up. The reason factory owners donât do enough to protect the environment is that theyâre insufficiently rewarded for environmental protection (or insufficiently punished for neglecting it). They reap some rewards (even factory owners like clean water and clean air), but most of the benefits go to total strangers. Likewise, the reason Martin might not do enough to fight the scourge of AIDS (by sleeping with Joan) is that, while he certainly would reap some rewards (such as sexual pleasure), many of the benefits would go to Joanâ...