Monday, October 18

A conflict between externalities and libertarianism

At the University of Victoria, my alma mater, there are no fraternities or sororities. Last week, students voted to keep things that way.

I like to think of myself as a libertarian. I have no interest in joining a frat myself, but if someone else wants to join one, I wouldn't want to stop him or her. One of my friends was in a fraternity at another university, and the beer-drinking, crazy party stereotypes are a little overblown; they do some good charity work.

So when one of my left-leaning Facebook friends, Shamus Reid, posted on Facebook in support of the ban ("Today, 64.5% of UVic students voted at their students' union's AGM to oppose frats and sororities on campus. I'm proud to own 42.5% of a degree from that fine institution."), I set out writing a snide retort on his wall accusing him of paternalism. It irked me that Shamus sees it as a good thing that UVic is preventing people who want to join a frat or sorority from doing so, just because some students don't like the idea. If you don't like frats, don't join one, I thought, but don't stop someone else from signing up if they want to.

But as I was typing my retort, it hit me: maybe Shamus and the UVic students got it right. Sure, you could just ignore the frat house on the edge of campus if you don't approve of frats. But if it makes you grumpy every time you walk by it, it's imposing a cost on you — what economists call a negative externality. If enough students get a distasteful feeling in their mouth every time they see a frat house, then it might be an efficient outcome to bar others from joining a frat.

We do this all the time in society. Smoking restrictions are an extremely common example (and one where the negative externality of second-hand smoke is much more vivid than the frat-house example), but there are others (polygamy, zoning bylaws that protect the views from our balcony and restrictions on what kind of words can be put on novelty license plates are other examples that come to mind). Still, sometimes libertarianism wins. Women are allowed to breastfeed in public, even if it sometimes draws vehement, well-publicized objections.

At any rate, reaching an efficient outcome is difficult. Ideally, one would add up how much pleasure all the frat-lovers get from having a frat, and add up all the displeasure frat-haters get from having frats around, and compare the two. A simple majority vote on whether or not to have a frat wouldn't necessarily reach an efficient outcome if, for example, the minority of people who want a frat really, really, really want it, while those who oppose it only mildly dislike having frats around. But it's hard to figure out people's intensity of preferences, so a majority vote might be as good as it gets in practice.

If that's the case, UVic students reached the proper, efficient outcome.