Coercion and External Costs: Auckland Beast With Two Backs Edition

From our old pal Eric Crampton, something I gather must be a "problem" for undergrads: noisy dorm room canoodling. The GTM had a piece here a while back on side payments for dorm rooms at Duke. The relevant take-away from that story is that room accommodations for students tend to be part of bundled contracts: they're tied to attendance, and typically, no one raises a stink when the housing department leans a little to the thuggish side.

And why should anyone, so long as the conditions aren't too gulag-ish? The kids are out of the house for the first time in their lives, so they're happy. The parents just got one of their rooms back to use for their own externality generation, so they're happy, and the community sure doesn't want roving gangs of young adults churning the local rental markets, so they're, well, they're not unhappy. Universities can get away with a whole lot more coercion with 18-22 year old kids than they might with, say, people my age.

But officials still should probably let students find their own mutually beneficial solutions to common pool problems, right? Being especially rigid with room assignments seems peculiar. Roth has all these cool matching algorithms to perhaps make initial assignments better. You, know, maybe have something like OKCupid for dorm rooms, and then why not have exchanges or something for the fine tuning?

I suppose this is what they call a bleg: at your university, how do administrators determine room assignments? What could be done to make the process better? Is this even an important problem?

Dubbers Asks (Season 1 Ep. 1): Shared Moral Culpability and the Euvoluntary Principle

Art Carden asks:

Inspired by an interesting discussion on a Steve Horwitz status and a comment by Steve Hallman: if you go down the supply chain for any good or service, it probably won't take you long before you find someone who does something or holds views you find repugnant (or who gives money to a group that espouses views you find repugnant). How many degrees of separation do you need before it's OK?

 This touches on something I've posted on before, tying contracts. In this case, instead of two separable consumer goods, a firm may elect to bundle goods with speech.

Recall that firms' mixing business with political action is neither rare nor unexpected. As long as the federal government is in the business of distributing favors to well-connected, powerful business interests, it's irrational for firms to stay west of the Potomac. Companies that refrain from ponying up campaign contributions might end up on a regulator's short list come the regime change.

Hogtied in Hoboken

Tying contracts were at the heart of the 1998 FTC suit against Microsoft. Presumably, by including a copy of Internet Explorer with Microsoft's OS, competitors would be crowded out of the market. I won't comment on the prescience of the Justice Department (as astute readers will surely be able to handle that task on their own) but I will comment that the presumptive logic behind this part of antitrust legislation is deeply rooted in Euvoluntary Exchange.

The idea is something like this: consumers want product X and are willing to pay a fair price for it. Producers also want to sell product Y, but they can't move it because it's naff. So instead of selling products X and Y separately at their respective prices, they sell X and Y together, coercing consumers (by circumstance, mind you) to accept a product (product Y) they otherwise wouldn't have done at too high a price. Producers can get away with this only when they have sufficient "market power" (in other words, the BATNA to buying their product is quite unattractive indeed). That seems to be the rough-and-dirty of the theory. In practice, the Sherman and Clayton Acts are often used as special-interest bludgeons that punish successful (read: good at serving the customer) firms, particularly foreign-held entities (like Alcan).

For some of our younger readers, there used to be a time when music was purchased in small bundles, called variously at times LPs, cassettes, 8-tracks or CDs. Other formats existed, but the notion of buying one song at a time was fairly rare. Sure, there were 45 rpm records with two or three songs pressed on them, but for the most part, folks bought the entire long format album (imagine Sony's despair if they had to make a Walkman using a 45). Isn't this a tying contract? In order to get "Here Comes the Sun", you also had to buy a copy of "Octopus's Garden". Why did nobody ever take Ringo to court? You could say that The Beatles (or their record label) had plenty of market power.

Antitrust as she is writ is meant to ensure distributive fairness. Antitrust as she is practiced stifles the vigor of innovation. Its discretion and caprice mark what Robert Higgs calls regime uncertainty. Approach with caution.