The Design Space of Market Provision for Public Goods

Incidence is the degree to which a good's effects fall on the agent who controls it. Where it is exclusive, purchase is itself the expression of valuation, and the pricing system allocates efficiently at any scale. Where it is diffuse, those the effects reach hold no lever over them: acting costs an agent the whole and returns a fraction, so what is held in common is underprovided and what is borne in common under-restrained, and both worsen as the population reached grows. Two responses are available-compute what the affected agents would have chosen and impose it, or restore the lever they would themselves have pulled.

This paper takes the second and asks what fidelity to a restored lever requires. It finds compulsion necessary, a voluntary mechanism being subject to the failure it exists to remedy. It considers how the democratic vote reveals public values, by returning more to an agent's expression the more others hold it-the signature by which a diffusely incident effect is known.

While both prove necessary, merging them with the private market's own principles raises multiple contradictions. This paper derives their costs, as prices of the response rather than of any design.