Many actions that we take affect other people that are not involved in the decision-making process. In economics, these effects are commonly referred to as “externalities” and the presence of externalities is one of the main concerns that may render free markets inefficient. “Inefficient” means that the ultimate outcome of people ignoring the externalities that they cause on other people is such that there is an alternative outcome that would be better (or at least as good) for all people! The presence of externalities is the main problem behind climate change and also at least one reason why we still have a problem with Covid-19. People, when making their holiday planning, car driving, air conditioning, car purchasing, et cetera decisions often ignore the effect their actions have on the environment and, thus, on all others. People make vaccination decisions weighing their own subjective assessment of the risks for themselves, without necessarily considering that with a vaccination they would also increase the protection from Covid-19 for everyone around them.
There are a variety of measures that governments or other organized groups of people can take to reduce the harm caused by people ignoring these externalities. One can, for instance, debate the (higher) taxation of fossil fuels or laws to force everyone to vaccinate. Often, such measures are probably necessary. There are (possibly rare) cases, however, in which even in fairly anonymous societies, the problem sorts itself out. It can do so through a mechanism of community enforcement. In this post I will describe an argument derived from a 1992 paper by Michihiro Kandori entitled “Social norms and community enforcement” in the Review of Economic Studies 59.1 (1992): 63-80. I will use the examples of mountain tops on which people do not leave their rubbish, bathrooms on trains that remain reasonably clean despite heavy usage, and communal kitchens (such as the one in my department) that despite a lack of regular professional cleaning service and despite a fair number of people using them, remain reasonably clean and usable.
I would first like to stress that in all three examples people are unlikely to observe your actions, so no one could punish you for bad behavior directly. When you are having your well-earned lunch or snack at the mountain top you are quite possibly alone at that moment. If you decide to leave some rubbish behind no one would see you doing it. I also hope that nobody can see what you do in the train bathrooms. And yes, occasionally you may not be alone in the department kitchen when you are making your coffee or warming up your lunch, but you are also often by yourself and unobserved. [It is, by the way, also not immediately clear what would happen if someone did observe your lack of adherence to the social norm of what is thought of as decent behavior (be it on the mountain top, the bathroom on the train, or the departmental kitchen). I often find that misbehavior in public may perhaps induce a fair bit of stern staring, but nothing much more than that. Nobody seems to want to engage in an altercation. An interesting phenomenon in its own right.] So why do people not leave rubbish on the mountain top, why do they clean up after themselves after using a bathroom, why do people wash, dry, and put away their dishes in the communal kitchen?
First, you might say, why wouldn’t you? Well, I guess the idea is that you would derive some benefit from not having to carry rubbish back down the mountain (after all it weighs something, also you might not have a good bag for your rubbish and it might soil all the other stuff you have in your backpack). You probably have to undertake some slightly unpleasant cleaning effort to keep the bathroom or the kitchen in a reasonable state. In fact, in your kitchen at home you might leave dirty dishes in the kitchen for quite some time, cleaning them later, while in a communal kitchen you probably do it (if at all) right away.
Then you might say, that ok, yes, it is a bit annoying having to do these things, but it is not too bad and anyway, you are a moral person. Maybe. I also would like to think that I am a moral person, but perhaps there is a more tangible reason behind our supposedly moral stance. [I generally don’t believe that people make all these decisions always so consciously. They may simply follow some more or less automatized protocols (perhaps as part of how they were raised as a child and now not often questioned). Then I will here provide a possible reason why such behavior might in fact be in your own self-interest despite the effort that is involved.]
Then you might say, and now you are on to something, that you have an interest in keeping the place clean, because you might want to use it yourself again. True, if it were your own mountain you would probably keep it clean. Perhaps you would not tidy up your kitchen immediately, but you would probably tidy it up at some point every day. But then you do not own the mountain and you are just one of many users. Wouldn’t this fact dilute your incentives to keep the place clean? Well, yes and no.
In fact, it seems quite plausible (and I have often observed this) that people do not clean up (much) after themselves if, for instance, the bathroom on the train is already in a bad state, even if they think that they might need to use it again. But they might well do so if the bathroom was clean when they started to use it. How can this be rationalized?
Let me sketch the model here (I will try and describe it in full detail in another post). Imagine you have a largish number of users of a place (such as the mountain top, the train bathroom, or the communal kitchen). Imagine that everyone uses this place infrequently but recurrently at random points in time. So, everyone always thinks that they may use this place again at some point in the future (I guess this works less well for the example of train bathrooms towards the end of the train ride – but then at that stage these bathrooms often are quite dirty). When they use it people can either be very clean (or clean up after themselves) or they can litter or soil the place. The instantaneous payoffs are such that people would (at that moment) prefer to litter or soil rather than clean. Finally, assume that nobody observes any actions of any other people, but everybody observes the state of the place when they use it (how much rubbish there is on the mountain, how clean the bathroom or kitchen is).
Then the following strategy, if employed by all people, can be made to be a subgame perfect Nash equilibrium of this symmetric stochastic repeated game, at least under some plausible conditions. [Subgame perfect Nash equilibrium means that this strategy is self-enforcing (everyone finds it in their interest to adhere to it when everyone else does) and does not involve a non-credible threat (any threats that are used to incentivize people to adhere to the strategy are also self-enforcing when they are supposed to be employed).] As long as the place is perfectly clean, keep the place clean (just as in the often-advertised statement “please leave the bathroom as you would like to find it”). If the bathroom is not perfectly clean, regardless of how bad it is, do not clean up after yourself.
If everyone follows this strategy, then the place would stay perfectly clean throughout. If, for some reason, somebody does not follow this strategy and does not clean up after themselves, this is a “tipping point” and the avalanche of dirt starts rolling: the place will just get dirtier and dirtier from then on. In reality, it may need more than one piece of rubbish on the mountain or more than just one sheet of loo paper on the floor to trigger the “tipping point”, and one could probably adapt the model (that you can find here) so that this would be the case. In any case we do get that people will behave very differently when the place is already a mess and when it is clean and it is, at least partly, the fear of triggering the tipping point that incentivizes people to behave and to internalize the externality that bad behavior would impose on others.