David Schmidtz

The Theory of Market Failure explores how markets respond, both in theory and in practice, to public‐goods and externality problems. Most of the articles in this anthology find that markets often meet the demand for public goods in a variety of cases where existing theory would lead one to expect market failure. Moreover, upon reflection, existing theory reveals itself to be in need of supplementation by a more realistic picture of how flexible markets (and evolving systems of property rights) respond to the demand for public goods and for the means of internalizing externalities.

Reasonable people disagree about what is just. Why? This itself is an item over which reasonable people disagree. Our analyses of justice (like our analyses of knowledge, free will, meaning, etc.) all have counterexamples. Why? In part, the problem lies in the nature of theorizing itself. A truism in philosophy of science: for any set of data, an infinite number of theories will fit the facts. So, even if we agree on particular cases, we still, in all likelihood, disagree on how to pull those judgments together to form a theory. Theorizing per se does not produce consensus. Why not? An argument is sound or not. So why isn’t a theory compelling to all of us, if sound, or none of us, if not?

Our days are a vast, intricate, evolving dance of mutual understandings. We stop at a traffic light, offer a plastic card as payment for a meal, leave our weapons at home, or enter a voting booth. We live and work in close proximity, at high speed, with few collisions: on our roads and in our neighborhoods, places of worship, and places of business. Somehow, having all those people around is more liberating than stifling. The secret is that we know roughly what to expect from each other. Knowing what to expect enables us to adapt to each other. Not being obliged to conform to expectations—being free to test the previously untested— is likewise a great benefit. The two benefits seem mutually exclusive, yet property rights, combined with freedom of contract, enable us to reap both at once. We can rely on being able to go to market and find someone selling cauliflower at an affordable price. We can also rely on being able to go to market and find someone rendering obsolete what a few years ago had been cutting-edge technology. We make progress by testing what has not previously been tested. We experiment. One problem with experiments is: many of them don’t work.1 Or, the ideas being tested turn out to be bad ideas. Thus a successful society encourages people not only to experiment, but also to shut down experiments whose inspiration proves unsound. What kind of framework encourages experimentation without at the same time perpetuating bad ideas? Here is one hypothesis: in societies that sustain progress over long periods, people are free to experiment at their own expense and free from having to pay for other people’s bad ideas. This is the true test of a system of property. It is natural to assume instead that the true test of a system of property is a question of whether the system is just. That is, philosophers should theorize about justice first, and only then begin to theorize about what can legitimately become a person’s property. I have become skeptical about this.

The typical method of acquiring a property right involves transfer from a previous owner. But sooner or later, that chain of transfers traces back to the beginning. That is why we have a philosophical problem. How does a thing legitimately become a piece of property for the first time ? In this essay, I follow the custom of distinguishing between mere liberties and full-blooded rights. If I have the liberty of doing X , then it is permissible for me to do X . But the mere fact that I am at liberty to do X leaves open the possibility that you might be at liberty to interfere with my doing X . Accordingly, liberties are not full-blooded rights, since my having a right to do X has the additional implication that others are not at liberty to interfere with my doing X . When it comes to mere liberties, interference is not a violation. You can violate rights, but you cannot violate liberties

This essay considers whether acts of altruism can be rational. Rational choice, according to the standard instrumentalist model, consists of maximizing one's utility, or more precisely, maximizing one's utility subject to a budget constraint. We seek the point of highest utility lying within our limited means. The term ‘utility’ could mean a number of different things, but in recent times utility has usually been interpreted as preference satisfaction . To have a preference is to care , to want one alternative more than another