Working Paper: NBER ID: w31095
Authors: Casey B. Mulligan
Abstract: The extent of voluntary cooperation in the presence of externalities is shown as an equilibrium outcome in the supply and demand framework. The analysis uses familiar ingredients to provide a new way of understanding the results of the extensive literature beginning with Buchanan, Coase, Ostrom, Shapley, Telser, Tullock, and Williamson showing that a Pigouvian tax is not the only alternative to independently acting individuals who are coordinated merely through distorted market prices. Voluntary cooperation can have a far different incidence than Pigouvian taxes and subsidies while changing the character of the costs resulting from externalities. The paper discusses applications including forest management, volume discounts, residential associations, energy policy, the scope of planning of household activities, and the role of workplaces in preventing infectious disease.
Keywords: externalities; voluntary cooperation; Pigouvian taxes; civil society
JEL Codes: D62; D71; H23; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| externalities (D62) | voluntary cooperation (P13) |
| voluntary cooperation (P13) | incidence of costs associated with externalities (D62) |
| voluntary cooperation (P13) | equilibrium outcomes (D51) |
| cooperation (P13) | marginal costs (D40) |
| cooperation (P13) | character of costs from externalities (D62) |
| institutions of civil society (O17) | voluntary cooperation (P13) |
| voluntary cooperation (P13) | market behaviors and outcomes (L13) |
| cooperation (P13) | marginal social cost curves (D61) |
| marginal social cost curves (D61) | equilibrium quantities (D50) |