Talk:Forced rider

Initial Copy Edit

I did a copy edit on this new article and removed some irrelevant and WP:SYNTH text. I left all of the original in-line citations in place, but many of the ones I checked contained irrelevant material or material not reflecting article text. These can be removed in the future if editors do not find useful material in them. For the time being it seemed worthwhile to leave them available for review. SPECIFICO talk 18:28, 27 February 2013 (UTC)

Utility maximization

SPECIFICO removed this section...

It's presumed in economics that individuals are utility maximizers. In other words, people want the most bang for their buck. This means that consumers prefer paying less for all goods/services both public and private. A Spoonful of Choice

...and Rubin removed this section...

In order to determine the actual demand for public goods, one possible solution would be to implement tax choice. If taxpayers had to pay taxes anyways, but they could choose where their taxes go, then, again presuming utility maximization, they would have an incentive to allocate their taxes according to their true preferences. In theory this would result in a Pareto optimal provision of public goods. The Economics of Earmarked Taxes

Let me break this down...

1. Individuals are utility maximizers
2. Utility maximization is what leads to the Pareto optimal provision of private goods
3. With public goods however, because of their very nature, utility maximization can result in their underprovision
4. Forcing people to pay taxes creates the forced rider problem
5. But because individuals are utility maximizers, creating a market in the public sector would result in the Pareto optimal provision of public goods

Utility maximization (people wanting more for less) is the basic premise of economics. Because 1. people want more for less and 2. public goods are non-excludable...then it's reasonable to expect that people will attempt to free-ride. But compelling people to pay taxes creates a forced rider problem and it does not solve the preference revelation problem. Therefore, to solve these two problems we simply return to the basic premise of economics. If people have to pay taxes anyways, because they want more for less, then they'll spend their taxes on whichever public goods maximize their benefit. That's why the outcome would result in a Pareto optimal provision of public goods.

As a result of this tag team effort by Rubin and SPECIFICO this article no longer covers...

1. the logical basis for this problem (utility maximization)
2. the logical obstacle (preference revelation)
3. the logical solution to this problem (taxpayer sovereignty/utility maximization)

--Xerographica (talk) 23:58, 27 February 2013 (UTC)