Empathy and the Efficient Provision of Public Goods / Geoffrey Heal.

By:

Heal, Geoffrey

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w29255.Publication details: Cambridge, Mass. National Bureau of Economic Research 2021.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: I consider the effect of empathy towards others on the internalization of interpersonal externalities and on private contributions to the provision of public goods. I show that if preferences are empathetic in the sense of depending on the well-being of others, then in an extreme case external effects are fully internalized, and private contributions to the provision of a public good will be sufficient for it to be provided at an efficient level. Furthermore I show that an increase in the level of empathy shown by any agent will lead to an increase in the level of provision of the public good, and that as empathy levels increase towards their upper bound, the level of provision of the public good converges to the efficient level. Under certain conditions an increase in empathy is Pareto improving. As it is well-documented that people display some degree of empathy, it is arguable that our failure to provide public goods at efficient levels is attributable to lack of empathy as well as to the free rider problem.

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September 2021.

I consider the effect of empathy towards others on the internalization of interpersonal externalities and on private contributions to the provision of public goods. I show that if preferences are empathetic in the sense of depending on the well-being of others, then in an extreme case external effects are fully internalized, and private contributions to the provision of a public good will be sufficient for it to be provided at an efficient level. Furthermore I show that an increase in the level of empathy shown by any agent will lead to an increase in the level of provision of the public good, and that as empathy levels increase towards their upper bound, the level of provision of the public good converges to the efficient level. Under certain conditions an increase in empathy is Pareto improving. As it is well-documented that people display some degree of empathy, it is arguable that our failure to provide public goods at efficient levels is attributable to lack of empathy as well as to the free rider problem.