I live in Northwest Washington, D.C., but one need not reside in the nation’s capital to sympathize with the experience I have endured several times at the intersection of Florida Avenue, 18th Street, and U Street. The six-way intersection is convoluted enough, but it is made even more hectic by several take-out restaurants, a mini-mart, and a check-cashing concern on its southeast corner. Invariably, some driver–a person who, based on my non-scientific sample, is almost always a man–adds to the mess by temporarily turning the intersection into his private parking lot.

He double-parks in front of one of the restaurants and puts on his flashers. Smoking a cigarette, he disappears inside while talking on his cell phone so loudly he disturbs the sit-down customers. Traffic outside is bottling up behind his obstructing vehicle when another driver inadvertently brushes the double-parked car’s bumper, setting off its alarm and waking a midnight-shift worker in her nearby apartment. Eventually, the man exits with his Styrofoam takeout box, flicks his cigarette butt to the curb, and drives away.

Grabbing lunch is hardly a capital crime, and even double-parking is barely a traffic misdemeanor. The man’s behavior is inconsiderate at best, rude at worst. But clearly he is a public nuisance. Through actions both direct and indirect, he has created a series of small but not insignificant “public bads”–or “negative externalities,” as economists call them–the costs of which, by definition, are borne by the people around him. Specifically, our “public baddie” has created the following externalities: traffic congestion that ripples in all directions for several blocks; sidewalk litter from his cigarette butt; second-hand smoke inhaled by restaurant customers; noise pollution from his phone chatter inside the restaurant and car alarm outside it; ozone depletion from the CFC-laden Styrofoam box destined for the local landfill; and, yes, even space junk, in the form of the satellite carrying his cellular transmission which, when obsolete, will remain in orbit, colliding with other trash presently circling the planet.

What happens next? Most likely, nothing. Drivers may lean on their horns. Diners may cast scornful looks. The poor woman in bed will probably pull the pillow over her head in disgust. Inaction is perfectly rational because the costs of doing something–anything–exceed any potential benefits. As innumerable scholars in the social sciences have demonstrated, such collective action dilemmas are timeless features of every human society. The public paralysis these dilemmas create is precisely what emboldened our public baddie to disregard everyone in the first place.

But that is changing. As expressed in the popularity of certain public officials, such as New York’s Mayor Michael Bloomberg, and by the passage of relevant referenda or new laws, voters are using the electoral process to express their demand for solutions to public bads. Some are rather obvious, minor, or widely agreed upon, such as anti-littering laws; other responses are more controversial, like highway surveillance cameras to catch speeders. Somewhere in between is the growing number of restrictions or punitive taxes (the so-called “sin taxes”) on a variety of individual behaviors deemed harmful to the general public or some significant portion of it. States as politically diverse as Maryland, Montana, Tennessee, and New Mexico are among 18 that have passed some version of clean-indoor-air laws restricting smoking in public places. Call it the coming era of the public-bads government, analogous to the public-goods government that dominated policymaking in the twentieth century.

Because a public good, like national defense, is both something from which citizens cannot be excluded and their consumption of which cannot deplete, there is little incentive for individual citizens to contribute to its provision. In pure market situations, they therefore tend to be under-produced, which is why, during the last century, governments increasingly stepped in to provide them. Conversely, in the absence of government, markets tend to overproduce public bads. Pollution, in all its forms, is the classical example: Because pollution’s diffuse costs and its sources may be difficult to detect, few individuals will be motivated or empowered to take action to limit the behavior of “public baddies.”

Public-goods governance certainly had its moment. From Teddy Roosevelt’s conservation efforts to Harry Truman’s Cold War national security apparatus, from Franklin Roosevelt’s Works Progress Administration to Dwight Eisenhower’s Interstate Highway System, the provision of public goods was a hallmark of American policymaking during most of the twentieth century. The Great Society was, in many ways, a turning point, as it added to public-goods provision the first serious efforts at public-bads control, particularly environmental regulations (it also included a large number of redistributive private-goods programs, such as Medicaid). Today, however, a new frontier of public policy, characterized by the mitigation of public bads, has emerged. Governments have shifted their attention away from building highways and redistributing wealth to protecting us from harming one another, in ways large and small. More than ever, governments supervise and referee a variety of interpersonal behaviors and public transactions that were once governed solely by the self-restraint of personal courtesy and social mores. Put more simply, where once governments concerned themselves with creating public goods and redistributing private goods to help citizens out, today they are increasingly involved in trying to keep us out of one another’s way.

In fact, the increased public demand for reducing negative externalities–in the types of policies enacted, the variation in policies across states or across time, and the ingenuity of solutions devised–is altering the role of government and the public’s understanding of that role. Because the regulation of public bads invariably defines or constrains how citizens interact with one another, this greater encroachment of modern governments is changing the public sphere. Highway signs not only encourage us to phone in suspicious, potentially terrorist-related behaviors, but Megan’s Law–inspired alerts ask us to report potential kidnapping activities during those crucial early hours when such heinous crimes are most easily thwarted.

In a democratic system, we should expect that the prevention of public bads, like the provision of public goods or benefit programs, will become entrenched as politicians determine which efforts the electorate favors. Just as the maintenance of the national highway system or the distribution of Medicare benefits are today untouchable national programs, it is easy to imagine a day (if it’s not already here) when onerous anti-smoking legislation is equally hard to scale back, regardless of arguments that may arise against it. Arguments about regulating public bads stand to dominate our politics in the twenty-first century much as arguments over public goods did in the twentieth. It is therefore incumbent on policy thinkers to begin to consider what principles guide public-bads legislation. They should address (at least) four questions: How do we determine the point at which the government must step in to correct for a public bad? What is the proper level of government to address that bad? What types of government solutions are best suited for reducing public bads? And how do we weigh civil liberties against the benefits of reducing public bads?

The Causes and Types of Public Bads

Underlying the emergence of public-bads policymaking is rapid population growth, and in particular increases in population density. No longer do a majority of Americans live, as they did only a century ago, in towns of 500 or fewer people. Small, kin-centered communities living in close proximity are better able to avoid the destructive collective-action problems that plague modern, sprawling, semi-anonymous nations. As a powerful form of social sanction, scorn works best when individuals anticipate the possibility of repeat interaction. In a rural, nineteenth-century town where neighbors knew one another by name and face, acting discourteously in public settings was socially costly. Though conservatives and liberals may argue about whether deviancy has been defined downward, the fact is that we live in a more congested, more mobile, and therefore more anonymous society than ever. And there is no going back.

For the modern and mobile nation-state, the problem of anonymity takes on almost unfathomable proportions. As evolutionary biologist and geographer Jared Diamond points out in his Pulitzer Prize–winning book Guns, Germs and Steel, the math is both daunting and ineluctable: “[R]elationships within a band of 20 people involve only 190 two-person interactions (20 people times 19 divided by two), but a band of 2,000 would have 1,999,000 dyads.” For a medium-sized city of 200,000 people, the number of unique dyads approaches two billion. In short, as populations grow geometrically, the difficulty of solving collective action problems like the overproduction of public bads increases exponentially. We are a nation of strangers, and public baddies exploit this reality.

Not all public bads, or the public baddies who create them, are the same. The cigarette smoke from a fellow partygoer is hardly comparable with the construction firm that creates several months’ worth of loud noises during the demolition of an old apartment building and construction of its replacement. This distinction is not just a matter of degree, but also of the dynamics of public decisions themselves. Political scientist Michael Munger classifies public decisions based on two dimensions: the number of individuals who contribute to the creation of the public bad (the bad’s “collectiveness”), and the number affected by those bads (its “publicness”). To extend the Munger typology, a third dimension might be added to capture the degree to which a public bad is relatively temporary or permanent in its effects. A cell phone conversation by an audience member attending a performance of Hamlet is a temporary annoyance that dissipates and does no real, permanent harm to anyone; carbon dioxide emissions, on the other hand, can have permanent and potentially fatal consequences. Public bads can thus be classified based on (a) the number of public baddies; (b) the scope of impact of the bads they create; and (c) the degree of permanency of the damage caused.

Consider the public bads related to automobiles. In terms of the number of producers, almost every American drives or uses a car at some point and thus contributes to noise pollution on major thorough fares and highways, but only a small subset of motorists menace others with aggressive driving maneuvers. With regards to scope, motorists who double-park or “block the box” at intersections cause local gridlocks, whereas uninsured drivers create risks that all other drivers must absorb through higher insurance premiums for uninsured motorist coverage. In terms of permanence, a massive traffic accident on an interstate creates the temporary economic inefficiencies caused by resulting major delays, whereas most worn out automobile tires end up clogging the nation’s landfills and refuse piles. An example of a narrow, temporary bad produced by a few is double-parking, the delays for which are limited to surrounding vehicles and disappear once the offending double-parker moves. At the other extreme, a widespread, permanent bad created by many is something like global warming, the human and industrial contributors to which are countless and the potential long-term effects of which are considerable and potentially irreversible. These category differences can–indeed, should–elicit differing responses from citizens and their governments. Moreover, if we have met the enemy and it is ourselves, so too must the solutions come from us collectively, whether or not and to whichever degree governments are involved.

Why Government Action Is Needed

In 1991, Ronald Coase won the Nobel prize for economics with a groundbreaking paper he wrote more than three decades earlier on the subject of transaction costs and social contracts. Coase’s Theorem essentially posits that, in the absence of transaction costs, there is no need for government assignment of property rights because individual parties can voluntarily negotiate or contract these rights. Though often cited by economic and political conservatives to validate calls for limited government, the rub in Coase’s Theorem are those pesky transaction costs, which are often unavoidable in public life–and particularly when a contracted relationship simply does not or cannot exist. A farmer can contract with the owner of the neighboring field for grazing rights, but the suburban homeowner cannot send a bill to the neighbor whose unmowed, unkempt lawn is driving local property values down. At the most rudimentary level, the public court system provides a latent governmental solution to the transaction costs which arise naturally from disputes over property rights: Citizens living together or adjacent to one another in an urban condominium or a suburban residential community can, for example, negotiate the arrangements of their shared space by forging contracts that prescribe or proscribe certain behaviors and, when disagreements inevitably arise, they can adjudicate their disputes in court.

That said, what Coase’s Theorem cannot account for are the informal contracts between and among persons going about their daily lives in close proximity in densely crowded, modern societies. A person who talks during the key part of a film at a movie theater or cuts off other drivers with an aggressive maneuver on the highway has no contractual relationship with those he or she has harmed; indeed, it’s impossible to imagine a situation in which a preexisting, enforceable private contract between these parties could exist. And since the type of “rights” at issue in such situations are often not literal, physical properties but rather loosely defined commodities that are difficult to contract legally, even if there were no transactional costs, the government would still need to provide some semblance of order to resolve the disputes we create for each other as a natural occurrence of modern life.

Asking the question in a different way, how much and what parts of the public sphere do we need to regulate?

At its most abstract level, what individuals in modern societies need–if not crave–is something that our premodern ancestors often enjoyed in surplus: space and silence. University of Chicago English Professor Mark Slouka, who wrote an award-winning article for Harper’s a few years ago on our loss of quiet places and moments, commented in an interview on the encroachments of mass society:

You know, the cell phones now are interrupting private space, what used to be in private is migrating into the public world, so that when you’re standing in the supermarket, you get to overhear private conversations on peoples’ cell phones; when you stop in traffic, you get to hear other peoples’ radios which clash with your radios. When you’re sitting in a restaurant you get to watch the TV over the bar or listen to the radio, which is clashing with the conversation that you’re having with the person you’re having dinner with. This is part of our landscape now, definitely part of the industrialized world, the sort of the First World. Again, I’m not sure that’s to our benefit–in fact, I’m convinced it’s not–yet it seems to be the way we’re going and that’s interesting. I think it’s a kind of subtle takeover of our psychic space, and that there will be a price to pay.

Of course, space and silence are commodities for which robust markets exist. The rich can buy larger and more remote homes, hire a variety of staff to perform chores that free up time and space, and travel in ways that reduce the inconvenient hurly-burly of interacting with their fellow citizens. The separate lines for boarding planes, the private skyboxes for watching sporting events and concerts, the remote vacation spots–these extravagances are priced to accommodate the demand for psychic buffer zones in a world where physical space and aural quiet are becoming rare. One of the great luxuries of wealth today is luxury itself: the ability to eliminate or at least severely reduce the harm and nuisance caused by a world full of public baddies, which is often the same as saying a world full of fellow citizens less wealthy or connected than oneself.

But, at least in democracies, those who cannot purchase spatial or aural relief may seek solutions through the political process. Consequently, we can expect that responsive and responsible governments will continue to dedicate more time and greater resources toward regulating public bads. As Munger has argued, however, government involvement is not without its tradeoffs: “The chief problem faced by people who would design political institutions is … to make government powerful enough to be able to control ‘private-coercive’ actions such as pollution, theft, or violence, without endowing it with so much power, or placing so many decisions under government control, that individual freedoms are lost to ‘collective-coercive’ rules and regulations.” In other words, regulating public bads is not without trade-offs. In the same way that twentieth-century public-goods policymaking was predicated on new debates over the role of the states, so too today must we reconsider the nature of government before we can design effective and fair public-bads legislation.

Tradeoffs of Public Bads Management

As governments change in response to the need for public-bads management, four important questions arise. For which types of public bads do government solutions work, and when might market incentives or public awareness campaigns suffice? What are the federalist implications of state-national solutions, particularly when top-down mandates are involved? Should governments use the prosecution and penalizing of public baddies to generate revenues? And, finally, how can public-bads management be properly balanced against encroachments on civil liberties?

Public-Private Tradeoffs

Just as a major fault line in twentieth-century politics lay at the question of what public goods the market should provide and which ones the government should assume responsibility for, in the twenty-first century a similar line will run along the question of which bads the market can control and which ones the government must alleviate or even ignore.

We can already see this divide emerging in the debate over pollution controls. Pollution credits and other market incentives have been proposed as an alternative to outright prohibition of certain forms of pollution. The whole notion of “cap and trade,” a fashionable solution in global warming debates today, is a perfect example. Like many market-based solutions, the assumption is that the pricing mechanism will inevitably achieve an ideal equilibrium without any help from interfering governments. Market incentives are likely to work best in situations where other inherent market failures, like oligopolistic production or informational asymmetries, are absent. For example, some waste products of little use to a homeowner–broken water heaters or lawn clippings–have a secondary market value to scrap operators, who sell the discarded items for parts and make mulch for lawn refuse. A nice, natural market thus emerges. The homeowner is happy to dispose of these waste products for free, and the junkyard owners willingly accept them.

By contrast, consider the problem of individuals dumping used motor oil from their automobiles in their backyard. The contamination of groundwater sources from such dumping is difficult to discourage because, absent a secondary market for small quantities of used oil or an easy, environmentally friendly means of disposal, individuals know they face little risk of being caught digging a hole in their yard or some nearby woods to dump the oil. What some states did to solve this problem was require drive-through oil change companies and other service stations that perform oil changes to accept used oil from citizens at no charge, as a condition of their operating license. Without a value for recycled oil, service stations and individuals who change their own oil would have been unlikely to develop a relationship absent the use of government coercion.

Beyond coercion, governments can also intervene through public awareness campaigns that seek to engender wholesale changes in individual behaviors. On the environmental front, the iconic image of the crying Native American confronting a polluted land still retains persuasive power 30 years after it was first unveiled. More recently, the anti-smoking “Truth” advertising campaign, sponsored by the American Legacy Foundation, has been particularly memorable and effective in stigmatizing cigarettes. Though both campaigns were led by private organizations, governments can and do require radio and TV stations to run free public service messages as a condition of their broadcast licenses. By lending its strong hand, government can fulfill the public’s wishes to combat public bads while refraining from exercising its coercive powers.

Federalism

Because public-goods provisions yield positive externalities, it is easy to determine which level of government is best fit to deliver them; and, more to the point, nobody complains when a neighbor’s actions are beneficial. In contrast, because public bads are negative externalities, the failure to respect borders and boundaries compels collective action. Therefore, a central question in their regulation is at which level of government they should be regulated.

On one extreme, local ordinances are sufficient for, say, public
decency standards regulated by noise curfews, the time at which bars
and restaurants must close or stop serving alcohol, or the zoning rules
for locating adult bookstores. Because standards differ from community
to community–what constitutes “loud” in a small rural town can and
should vary from the definition for a large and crowded metropolis–such
matters are best left to local citizens and officials. When
externalities spill across political boundaries, however, such as toxic
substances dumped into rivers or the air, intergovernmental cooperation
becomes necessary. States within a region will naturally form
air-quality compacts because the externality is shared by neighboring
states and so, too, must be the burden of solving it. (Northeastern
states have agreed to carbon-reduction goals, for example.) On other
issues, jurisdictions cooperate, coordinate, or share information in
ways they had not before, such as the interface of state criminal
databases accessible to law enforcement officials nationwide.

Some public bads demand international solutions. Putting aside the
partisan bickering about whether terrorism can be treated like any
other criminal issue, terrorist networks are public bads that menace a
community just like a gang of local thugs–the difference, though hardly
insignificant, is a matter of methods and scale. The externalities of
insecurity and fear they create are the same as the local gang’s,
except the affected communities run into the billions of persons rather
than thousands. The international efforts to monitor the activities and
financial transactions of terrorist networks that existed before
September 11, 2001, have since been augmented. Cooperation on an
international scale to fight terrorism is here to stay. In the same
vein, global concerns about the environment generally and climate
change specifically may best be understood as another example of the
public’s desire to see government focus on reducing bads. Like the
fight against terrorism, the fight against environmental degradation
will require well-coordinated, multinational efforts if it is to be
effective. And the fight against polluters is indeed a
fight–oppositional by nature and further solidifying government’s new
role as a chief preventive against bad behavior.

Fiscal Impacts

The landmark tobacco settlements showed that public-bads governance has the potential to serve as a significant new
revenue stream. What’s most remarkable about the tobacco cases is that
the states used the burden associated with rising public health costs
to justify their standing to sue for damages as plaintiffs. This is a
fundamental leap from citizens, individually or in class action suits,
suing for punitive or compensatory damages they recoup directly. The
critical threshold crossed here is that the class action is undertaken
on behalf of the taxpaying citizenry as a whole, which is seeking
restitution for healthcare costs borne unto them by the action of (some
of) their members or other entities. When governments seek to redress
grievance from public baddies, they are in effect saying that the drain
on their treasuries from externalities gives them standing to
recuperate their losses in court. Notice how quickly the fast-food
industry, worried about its contribution to rising obesity rates, began
to insulate itself from being a similar target for causing
obesity-related healthcare costs. (Of course, the Coase-like problem of
added transaction costs–most notably the often exorbitant monies spent
by all sides litigating such matters–does not evaporate.)

Governments could institute creative ways to penalize public-bads
behaviors financially–to reduce the frequency of their occurrence and
to develop valuable new revenue sources. A variety of parking and
traffic violation tickets already exist, but imagine if governments
required insurers to compensate the local community for the
inefficiencies caused by the traffic delays created when the motorists
they insured caused an accident. For one thing, drivers might pay
closer attention to their driving habits. After all, if a thousand cars
on a major interstate are delayed for an average of just six minutes
each, the fair-market value for 6,000 minutes (100 hours) is like
having to compensate the local government for the equivalent of 2.5
weeks’ pay at the rate of the average American worker. Governments, in
other words, could establish a broad system of new fiscal penalties on
those individuals and firms who cause demonstrable material damage to
others without explicitly committing a crime–even if “others” are
simply other taxpayers. On the flip side, governments could also
establish a new set of rewards for those who avoid causing damage to
others.

Civil Liberties

Governmental mitigation of public bads also runs the risk of trampling on individual liberties. Indeed, in some
situations, the very solution is to restrict individual liberties in
the interest of reducing externalities borne by the public at large.
For example, the justification for mandating that people wear seatbelts
or motorcycle helmets is that the cost of emergency services to care
for accident victims is redistributed to taxpayers broadly. Taken to
its logical extreme, however, governments could justify fining people
for running with scissors in their own homes as surely as they could
for driving without a seatbelt fastened because, in both cases, the
individual behavior translates into public-borne emergency costs
without compensation.

There are political risks to consider as well. Without properly
defining what constitutes damage, the narrow interests of elected
officials would probably become top priority. A Democrat in office
might go after companies for harming workers whose jobs move overseas;
a Republican might lock up ACLU leaders for intimidating Christians
from making open exhibitions of their religion. Furthermore, creating a
system based entirely on fiscal penalties could disproportionately harm
the poor. Many of the behaviors associated with public bads–smoking and
consuming unhealthy food, just to name a few–are indulged in by the
poor at least as frequently as they are by the rich, if not more so.
Without taking such matters into account, the inequality of access to
luxury that already exists would only be exacerbated, and a highly
regressive new tax would be created.

Any system of sticks and carrots, then, would have to reflect both a
fundamental, non-partisan public consensus about the kinds of behaviors
that should be included in the system and target those most able to
afford penalties. Fortunately, such a consensus already seems to have
emerged on the national level. While no mass movement exists to oppose
the phenomenon of space junk, the public’s antipathy to smoking and
environmental harm is well known. Focusing on what the public wants is
the job of any accountable democracy. Here, doing so could yield an
enormous revenue source–especially if firms that profit from public
damage could be held liable, similar to the example set by the tobacco
lawsuits.

Toward a Policy Calculus

These considerations point toward a comprehensive decision calculus.
In the case of a few baddies producing costs that affect a few, the
government’s role should be the most limited, perhaps refereeing
between private parties seeking either a Coase-like property rights
solution or remuneration for damages incurred by the aggrieved party or
parties. When there are a few baddies and many are affected, the
government should act and will generally have public support, such as
the small fraction of road-raging drivers menacing the many of us who
drive safely to protect ourselves, our families, and each other. In
cases like public smoking, the government also has to be careful not to
go too far in regulating social interaction on behalf of the many if it
threatens civil liberties.

Where the public-bads policymaking process gets more interesting and
complicated, both in terms of solutions devised and the political
controversies that may arise, is when the public baddies are many–when
the enemy we meet is us. None of us wants the environmental degradation
that stems from the carbon outputs of our vehicles, but how many of us
are truly prepared to bear the burden of significantly reducing gas
consumption, such as taking public transportation or paying more in
fuel taxes or for driving hybrid vehicles? Because it makes no sense to
ask citizens to unilaterally or voluntary change their consumption
behaviors, governmental action might be necessary to protect us from
the collective action dilemmas we create for ourselves. In general, we
can surmise that the political will to mitigate public bads tends to be
inversely related to the number of citizens contributing to the
production of that bad. Put another way, it will always be easier to
pass something like Megan’s Law than it would be to institute a
national carbon tax or mandatory vehicle fleet fuel-efficiency
standards, with examples like public smoking bans falling somewhere
between.

And if government will be challenged to compel us to regulate
ourselves in these situations, it may have an even harder time when
widespread public bads are created by many of us that affect just a
few. Poorer individuals, for example, tend to live in closer proximity
to loud, noisy, and detritus-strewn highways that would benefit from
regular cleaning and noise barriers, but the many of us who don’t live
in those areas may not want to spend the tax dollars to mitigate these
bads.

As they attempt to solve public-bads problems, politicians and
governments will have to balance the competing needs of affected
communities, taxpayers, and the baddies who create the negative
externalities. The mix of public and private solutions will vary from
case to case. The ingenuity applied to new solutions for problems, both
ongoing and emergent, may make some laws or regulations both more
effective and politically palatable. But whatever the solutions, the
era of public-bads management is here to stay.