Bryan,
You don't need altruism to get a crowding-out effect if people are
initially contributing towards the public good as part of a Nash
equilibrium. In the Nash Equilibrium people contribute to the public
good but less than the optimum amount (the case where people contribute
nothing is the limit of this model as the number of people get large.
As this may describe pollution, the NE model may not be relevant - but
it is something to think about). Now imagine some people have a change
in preferences that increases their demand for the public good - thus
they contribute more (they pollute less). *What happens depends on the
preferences of everyone else for the public good.* Since more of the
public good is being provided everyone else has an effective increase in
income. How is this income spent? If everyone else is satiated in the
public good then there is one-to-one crowding out. If the public good
is normal then some of the effective increase in income will not be
converted into the private good and public good provision will increase
but less than the increase contributed by those whose preferences
changed. If the public good is superior then there can even be an
increase in public good provision above that provided by those whose
preferences changed.
Alex
--
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]
