Value, price, fMRI and consumer surplus
Mark Thoma posts an interesting article from EurekAlert about some Caltech research. The researchers set out to solve the free rider problem by measuring people's real valuation of public goods. The classic problem with public goods is that if you ask people what the service is worth, they have an incentive to lowball their answer. I may claim that a new railway line, or the NHS, is worth only £10 a year to me. That way, I am likely to pay lower fees or taxes for it, and since I think that lots of other people will put a higher value on it, the government will build the railway and keep funding the NHS regardless of my feelings. It's the same dynamic as in the tragedy of the commons; no matter what I do, the behaviour of all the other people will determine whether the good is provided. My action won't make any real difference to the outcome, so I may as well act selfishly. The consequence, however, is that if everyone claims to put a low value on the outcome, the governme...