Henry: Ripstein and Market Failures

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Using Immanuel Kant's framework, Arthur Ripstein reframes certain economic market failures as issues of rights and not efficiency.

Negative externalities occur when the behavior of one individual imposes external costs on a third party. For example, if Noah were to play EDM music in his dorm in Appleby at 110 decibels at 3am in the morning, this behavior would generate a negative externality for his neighbors Kirby and Tutu. From the economist's perspective, this represents an inefficient allocation of resources that generates deadweight loss, which can be mitigated by excise taxes levied by the government.

Ripstein holds that "freedom requires that you be able to have usable things fully at your disposal, to use as you see fit" (Ripstein 19). For this reason, Ripstein argues that an individual can be wronged "by having [his] property used on behalf of another, or by being prevented from using [his] property on [his] own behalf" (20). Ripstein applies this thinking to land, writing that "each owner is entitled to determine what happens on his or her piece of land" (244). Ripstein explains that in the case of certain types of negative externalities, individuals are wronged. Ripstein holds that the owner of a property is well within her right to "complain if water, unusual insects, a bad smell, or excessive noise from the other's property reaches [her] own in a way that interferes with her ability to use it" (244). That said, Ripstein holds that the same owner cannot "complain about what takes place entirely on the other's land" (244). While Kirby and Tutu are within their rights to complain if Noah plays loud EDM music, they do not have grounds to complain if Noah puts up an ugly painting on the outer wall of his dorm. Thus, for Ripstein, the focus is on right and not on inefficiency.

Positive externalities occur when the behavior of one individual generates external benefits for a third party. For example, if Noah were to put up a beautiful painting on the outer wall of his dorm, this behavior would generate a positive externality for Kirby and Tutu, who would get to view this beautiful artwork at no cost. Economists explain that items that generate positive externalities are usually underproduced since the people producing them usually lack the incentive to produce the socially efficient amount. Public goods are those goods that generate positive externalities and suffer from the free rider problem, which can be understood as a person reaping the benefits of cooperation without cooperating. For example, I can enjoy the benefits of a vaccinated population even without being vaccinated myself. From the economist's perspective, these issues result in an inefficient allocation of resources that generates deadweight loss, which can be mitigated through government subsidies.

Ripstein believes that positive externalities do not prima facie justify government intervention. He explains that "the mere fact that problems of collective action may lead to an undersupply of a certain good, relative to people’s willingness to pay for it, does not underwrite mandatory contribution" (260). Even if we all wished that there were more parks, and none of us wanted to individually pay for a park, that does not necessarily mean that the government should intervene and pay for the park. Even if the market fails to produce something people value, Ripstein argues that that "does not entitle them to use the coercive apparatus of the state to compel others to join them in their efforts at producing it" (260). Instead, Ripstein insists that governments should fund public goods insofar as "they are required to sustain a rightful condition" (260). For example, he explains that national defense and public health are necessary to secure the ability of citizens to exercise their freedom.

Similarly, Ripstein believes that the free rider problem is not an issue of inefficiency but an issue of right. Ripstein argues that the "'free rider' wrongs his fellow citizens by taking advantage of their efforts" (258). The free rider does not comply with mandatory cooperation, which is the idea that "the obligation to enter a rightful condition is unconditional" (258). The free rider's behavior also violates the principle of reciprocity, whereby "everyone must do his or her own part" (258). Thus, the free rider is not merely an inefficient nuisance, but a threat to the rightful conditions that legitimate individual cooperation.

Thus, Ripstein upends the traditional economic model that values efficiency in favor of a Kantian model that values freedom.

Comments

  1. Paul HurleyMarch 20, 2023 at 9:46 PM

    Right on every major point here, it seems to me. If freedom is independence from the arbitrary will of others in setting and pursuing our ends, then that Tutu and Kirby don't want Noah to use his means in some way is simply not the sort of thing that the state can take into account; to do so would be for Tutu and Kirby to be able to dictate Noah's use of his means, violating his equal individual freedom. You are also right, it seems to me, about the music. Noah's is free to use his means to set and pursue his ends subject to the equal freedom of each other person to use their means to set and pursue their ends. Certain things that Noah will do on his property will violate Tutu and Kirby's ability to use their means to set and pursue their ends, hence are precluded as violations of their equal individual freedom. I don't violate your equal individual freedom when I paint my house a color that you hate, I simply exercise my equal individual freedom. But I do violate your equal individual freedom when my stench, or my intense noise, or my leaning tree, violate or endanger your equal individual freedom.

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