Emergence of cooperation in public goods problems

Abstract

In this paper, we discuss several issues related to public goods problems. Unlike many Austrians, we do not think that the concept of public goods - or of collective action - is an inherently flawed idea, even though we reject the alleged welfare implications of public goods theory, as proposed by orthodox public finance literature. We argue that the structure of a generic public goods problem is a game of Chicken or an Assurance game, rather than a Prisoner's dilemma and that this has important implications with regard to the plausibility of cooperative outcomes. Namely, when the public goods problem has the weakest link structure and can be represented by an Assurance game, then the cooperative outcome will be self-enforcing. In many cases, the public goods problem can be transformed into a weakest link game or different mechanisms can be found to ensure cooperation. We also discuss the difference between a public goods problem and collusion. We assert that, unlike public goods problems, collusive agreements have the structure of a Prisoner's dilemma. Overall, our paper suggests that there are reasons to be optimistic about stability and efficiency of stateless societal orders.

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