Bryan Caplan  

The Public Goods Model vs. Social Desirability Bias: A Case of Observational Equivalence

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Imagine a world where no one ever voluntarily buys good X.  Still, everyone affirms that X is very important, a vital good.  If you hold an election, the population unanimously votes in favor of very generous funding for X.

Most economists will instantly conclude that X is a public good.  It all makes sense: Everyone knows that X is valuable, everyone free rides if given the opportunity, yet everyone eagerly votes to force everyone to support X.  Case closed.

I say that economists are dead wrong to close this case.  A competing science has an equally compelling theory to fit these facts.  The science: psychology.  The theory: Social Desirability Bias (SDB).  SDB begins with a simple observation: When lies sound better than the truth, people often lie.  Wikipedia lists some standard examples:
  • Personal income and earnings, often inflated when low and deflated when high.
  • Feelings of low self-worth and/or powerlessness, often denied.
  • Excretory functions, often approached uncomfortably, if discussed at all.
  • Compliance with medicinal dosing schedules, often inflated.
  • Religion, often either avoided or uncomfortably approached.
  • Patriotism, either inflated or, if denied, done so with a fear of other party's judgement.
  • Bigotry and intolerance, often denied, even if it exists within the responder.
  • Intellectual achievements, often inflated.
  • Physical appearance, either inflated or deflated
  • Acts of real or imagined physical violence, often denied.
  • Indicators of charity or "benevolence," often inflated.
  • Illegal acts, often denied.

Example: If you ask people, "Should people help their mothers more?," they'll probably respond "yes."  Why?  Because "helping mothers" sounds good.  It sounds so good, in fact, that no matter how much help mothers receive, almost no one will ever openly advocate helping them less.  That's SDB for you.

Exactly the same applies if you ask people "Should government do more to help the sick?" People will probably say "yes" - no matter how much government already helps the sick.  Why?  Because "helping the sick" sounds good.  If people were as logical as Steve Landsburg, they'd instantly protest, "X being good is a reason to do a lot of X - not a reason to do more X."  But these words sound terrible - so only courageous thinkers like Steve utter them.  Psychologically normal humans say the words other people want to hear.

So how precisely is SDB an alternative to the public goods model?  Return to the facts in the opening hypothetical.  How come no one voluntarily buys X?  Because people don't actually like X - at least not enough to pay for it.  Why does everyone praise X?  Because praising X sounds good.  Why do people unanimously vote for lavish spending on X?  Because voting is just a special kind of talking.

Admittedly, it's hard to believe that everyone praises X even though no one values X.  But it's equally hard to believe that no one is willing to voluntarily pay for X even though everyone values X.  (Ever heard of charity?)  The opening hypothetical is unrealistically stark, so every model that purports to explain it sounds stilted.  

However, if we tone the hypothetical down to realistic levels, both the public goods model and social desirability bias are quite credible.  Take teen marijuana use.  Lots of people complain about it.  Hardly anyone voluntarily pays to discourage it.  Yet most democracies heavily persecute it.  

Public goods theory provides one explanation: The complainers are largely sincere, but routinely free ride off each other.  Government is the solution: It forces these free riders to provide the funds required to realize their dream of marijuana prohibition.

Social desirability bias provides a very different explanation: The complainers barely care despite their pious platitudes.  Government is the problem: It forces these otherwise harmless bigmouths to put their money where their mouths are.  The result is a costly crusade against a problem most people would prefer to neglect.

Once you start taking the observational equivalence of the public goods model and SDB seriously, you can try to overcome it.  More observations are useless, but different observations may do the trick.  In particular, the two stories make very different predictions about migration and real estate markets.  The public goods model predicts that alleged government solutions will attract migrants and raise rents and housing prices; people crave governments that give them what they say they want.  SDB, in contrast, predicts that alleged government solutions will repel migrants and reduce rents and housing prices; people secretly desire governments that take their pious talk with a grain of salt.

So which story is right?  My best guess is both.  The world is full of public goods problems.  But the world is also full of self-righteous posturing.  Psychology's lesson for economics, strangely, is that we should stop taking voters at their word and focus instead on how consumers spend their housing dollars.



COMMENTS (17 to date)
roystgnr writes:

The theory here is fascinating, but I'm not sure the test proposed helps to disambiguate the two theories in many cases.

Sure, if I want better public libraries, or transit, or such, then I will happily express that desire by moving to locations where more public funding is available for those.

But it's easy to think of mild counterexamples: I find the robotic exploration of the solar system thrilling, but I don't particularly care which country(s) flags the robot carries, so I'm not likely to move to a country with higher space expenses, even if I truly approve of them.

And I can even think of extreme counterexamples: I find value in knowing that very poor people are taken care of, but I find negative value in living near very poor people, so even if I'm genuinely glad that some location has generous immigration and welfare rules, I may still be motivated to move *away* from there, to an alternative whose people-I-don't-want-to-live-next-to population has been reduced because it gets to free ride on other localities' generosity.

BLM4L writes:

You see this a lot in surveys of public opinion on crime. When you ask people "should criminals be punished more" the answer is generally yes even though when asked "how many years in prison should the average thief/robber/druggie get" the answer is usually around or below the lower end of the sentencing range for that crime.

This seems to just be a special case of the substitution heuristic where "should X be punished more" is translated into "is X bad?"

AS writes:

Perhaps one test of a public good vs. SDB is how you would spend public money (given that you could not spend it on yourself). Imagine that you were asked how to allocate $100 of taxes and were given the options of "Military," "Social Security," "Health Care," "Education," etc. If everyone says they want X, but they never spend their own money on X, then if it really is a public good, they ought to allocate their money towards it.

Still, I can imagine problems with this, as the fact that you cannot spend it on yourself leads to the lack of incentive on making good choices in the hypothetical scenario.

Dent writes:

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John Thacker writes:
The public goods model predicts that alleged government solutions will attract migrants and raise rents and housing prices; people crave governments that give them what they say they want.

Excepting, I think, when the government solution proposed is one that limits the supply and elasticity of supply of housing. Then you'll get a second effect that raises the price regardless of the first effect.

Though I suppose you could call that a public good, so long as you're willing to define public good in a way that excludes the have-nots and would-be migrants. If you do that, though, I think you'd end up arguing that immigration restrictions or (with different metrics) price and wage controls were public goods.

John Thacker writes:

I think in general this would be a difficult instrument to use, because the effects of different housing policy on home prices are so much greater than the marginal effects of most other policies, and correcting for housing policy is quite difficult.

RPLong writes:

I'm legitimately puzzled by what, if anything, is truly a public good. All the examples I've ever been given are either (a) things that the private sector produces quite ably, and (b) things that aren't economic goods because they are not scarse (like air).

So I'm all for this notion of Social Desirability Bias. It makes sense to me.

MikeP writes:

I'm legitimately puzzled by what, if anything, is truly a public good.

Indeed, every year there are fewer and fewer public goods as technology improves the ability to limit free-riding.

Take TV and radio. There is no way they are public goods anymore. Digital transmission means that broadcasts can be encrypted, to be seen or heard exclusively by those who have the devices and keys to decrypt them. Yet the FCC persists as more than the simple deed recorder it should be.

Take roads. Automatic tolling devices carried in cars makes all roads private goods. You might still want roads inside the core of a city to be "free", but any road from one place to another place is definitely excludable.

Matt C writes:

> Because voting is just a special kind of talking.

Nice one.

MikeP writes:

> Because voting is just a special kind of talking.

I have to say that every time I read that, I read it as "a special kind of taking."

MingoV writes:

AS has the right idea, but I think the questions should be more direct.

Incorrect question: Do you think marijuana use is bad?

Correct question: How much money will you spend each year to help prevent marijuana use?

RPLong writes: I'm legitimately puzzled by what, if anything, is truly a public good.

Basic science research and medical research can be public goods if the acquired information and knowledge are released to the public.

guthrie writes:

@RPLong,

'Public parks', perhaps? In particular, 'National Parks'...

MikeP writes:

In particular, 'National Parks'...

You must mean the knowledge that national parks exist, rather than the parks themselves.

National parks as parks are entirely private goods that can be funded by entry fees or subscription. If they can't be, then they are subsidized goods, not public goods.

guthrie writes:

Interesting. I'll admit, was incognizant of the distinction. In that sense then, would it be considered a public good for the 'Public' (ie, the State) to prevent private parties from developing the Park's land apart from its function as a Park? Saying, for instance, 'you can create walkways and welcome centers, but installing a steam turbine power plant at Old Faithful is out of the question'. Or something like that?

MikeP writes:

That is along the lines of the knowledge that national parks exist being a public good.

But certainly having the government put that deed restriction on the park as it is auctioned off costs a lot less than the government outright owning the park. Effectively the price that has to be picked up from donors or subscribers is now merely the difference between the price a private buyer would pay to keep it a park and the price a private buyer would pay to make it not a park. Given the presumption that this is a nice park in what otherwise is wilderness, that difference is probably zero.

The question is, does anyone want to buy the park, or is its upkeep too expensive? If no one wants to buy it because it costs Disneyland prices to maintain it, then the government's owning it and keeping it open is a pure subsidy to people who like parks, borne on the backs of people who like Disneyland or who can't afford to travel to parks at all.

guthrie writes:

Thank you MikeP. I think that makes sense to me now.

MikeP writes:

Any chance to get the correct understanding of "public good" out there.

Policy makers' not constraining "public goods" to its actual definition is one of the key forces in the usurpation of voluntary markets by involuntary governments.

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