“Things tend to work out best when people have to live with the consequences of their own behavior”, or, to paraphrase, “things tend to work out poorly when the consequences of our actions spill over onto other people.”
- This is a general principle in economics which has the power to undermine vast deposits of conventional wisdom.
2. It suggests that the world has too few people, too few misers, and not enough casual sex, but the right amounts of secondhand smoke and child labour.
3. It implies that a thirst for gold is socially ruinous, but a taste for revenge can be a social godsend.
4. It casts light on why the tall, the thin, and the beautiful earn higher wages.
5. It suggests sweeping reforms of the legal system, the political system, the tax code, and the rule against jumping to the front of the water-fountain line.
6. More mundanely, it tells us there’s too much litter on the streets less obvious than you might suppose.
7. But if you feel the benefits while someone else feels the costs, you’ll tend to overindulge. And conversely, if you feel only the costs while someone else feels the benefits, you’ll underindulge.
8. Spillovers cause bad outcomes. Feel free to pollute your own swimming pool, but if your sludge spills over into the stream we all share, Kenyans must then hold you to account and possibly remove you from the coveted office!
Call it, then, the communal-stream principle.