An introduction to the second special issue commemorating works of James Andreoni, Theodore Bergstrom, Larry Blume, and Hal Varian
- Publisher:
- Wiley
- Publication Type:
- Journal Article
- Citation:
- Journal of Public Economic Theory, 2020, 22, (2), pp. 279-284
- Issue Date:
- 2020-04-01
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| 2020 JPET Introduction[28].pdf | Published version | 248.93 kB |
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This special issue, and Issue 5, Volume 21, of the Journal of Public Economic Theory commemorate 30 years since the publication of three path‐breaking contributions to public economic theory and to economics more generally: Bergstrom, Blume, and Varian's “On the private provision of public goods” (Bergstrom, Blume & Varian, 1986), well known in public economics as “BBV”, and Andreoni's “Why free ride? Strategies and learning in public goods experiments” (Andreoni, 1988a) and “Privately provided public goods in a large economy: The limits of altruism” (Andreoni, 1988b). The voluntary contributions game model of BBV played a major role in the beginnings of game theory as a central part of the concepts and techniques of public economic theory. The two papers by Andreoni led the way in the introduction of behavioral public economics and heralded the important area that it has become. Issue 5, Volume 21 of JPET began with a survey of James Andreoni's two papers and their impact. This issue begins with a survey of some of the research arising from BBV.
One of the very central results of public economics, due to Warr (1983) and extended by Bergstrom, Blume, and Varian (1986) to a voluntary contributions game, is that the total level of contributions to provision of a public good is unaffected by any reallocation of income among contributing consumers that leaves the set of contributors unchanged. The elegant, yet simple, model of BBV assumes quasi‐linear preferences and one private good; providing it does not change the set of contributors, a transfer of income among contributing consumers induces those receiving income to raise their contributions to the public good, and that this increase is exactly offset by a reduction in contributions of those losing income; that is such transfers are neutral. The exact offset is a consequence of the individual rationality conditions for Nash equilibrium of the voluntary contributions game. Unlike the contribution of Warr, BBV's arguments rest on first principles.
In their contribution to this special issue, Faias, Moreno‐García, and Myles (2020) discuss some of the extensions and applications of the BBV model. The BBV analysis has been extended to models with multiple private and public goods, largely with the aim of relaxing conditions of BBV and identifying the effects of these relaxations on the BBV conclusions. For example, will neutrality of redistributions of endowment be unchanged in the presence of multiple public or private goods? The effects of changes in prices are one of the crucial aspects. While Munoz‐Herrera and Nikiforakis (2019) provide an extensive review of experimental investigations arising from the BBV model and the two works of Andreoni (and also other questions concerning voluntary contributions to public good provision) the analysis of Faias et al. (2020) focuses on some the theoretical questions arising from BBV. To give you some idea of the importance of BBV's paper, just in Volume 20, Issue 5 we note contributions by Allouch and King (2019), Barbieri and Malueg (2019), and Munoz‐Herrera and Nikiforakis (2019), which all cite BBV and, in this issue, Buchholz and Liu (2020). In JPET alone, in recent years there have been numerous contributions to understanding voluntary contributions to public good provision.1
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