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Saturday, January 04, 2003

I am kind of busy writing a paper on the tragedy of the commons at the moment, as I've posted earlier. I plan to post on that when I'm finished, but now I would like to share a thought about why I am blogging.

I am a part-time postgraduate student in economics (I work full-time in a university library) and a huge part of this blog will be, I hope, to improve my clarity of thought on the subject matter I have to cover on my course. That does not mean I restrict myself to taught areas; my posts on Starbucks and on crime, for example, are on areas not directly covered by my microeconomics course this term. This does not mean that I'm wrong, only that I'm learning; and I hope that what I post about makes sense all around. I have a belief that if what I learn can be adequately expressed here then I'm on the right track.

Take for instance, my comment (scroll down) on Jane Galt's post about lighthouses as public goods, pointing her to Zirman Ahmed's post on the same subject. I commented that by enforcing the collection of usage fees for lighthouses, "the government was, in effect, creating a market. Much of contemporary microeconomics is about mechanism design--fashioning incentives and, sometimes, creating markets where none currently exist. The lighthouse owners lobbying probably had this effect."

Now I may have misinterpreted Zirman, or I could have been flat out wrong. Mechanism design, from what I gather, is generally aimed at finding an optimum, or, failing that, a second-best solution to a problem. The political process, on the other hand, produces solutions which, while dealing with some aspects of a problem, often accrue benefits to rent-seekers, who use lobbying to influence the process of policy design. (For example, I've recently read a journal article on JSTOR with a model of common-pool resource management that incorporates political lobbying.) That does not makes the process any less one of mechanism design--just that the design benefits certain parties. Anyway, Daniel Davies original post on Ronald Coase and lighthouses has sparked much debate; Jane herself read Zirman's post, and she posted an update on the subject here. The debate continues.

Am I right? I think I'm on the right track, though I'm still not entirely sure. Story of my life.