Revealed Preference during the Blizzard of 09

I used to think that drawing conclusions about people before meeting them was taboo. A persons actions do not really present an accurate picture without knowing of their initial intentions. My view was challenged after I read Blink by Malcolm Gladwell which analyzes the art of thinking fast. My view was also challenged when learning about the free rider problem and revealed preference. These phenomena can be seen on a daily basis within ourselves, our community, and the global economy.

Recently I encountered both these phenomena during the largest snowstorm that DC has seen in over ten years. After the storm passed there was a massive effort to dig the city out from this record snowfall. On the municipal level the DC government has been the epitome of inefficiency when it comes to inclement weather. Residents view this with disdain but it is in the cities best interest on the grounds of efficiency. DC doesn't accumulate the amount of snow on a yearly basis that warrants more equipment. But my interests do not lie there, they reside on the micro-level (i.e the individual and collective communities).

My own neighborhood did a satisfactory job in cleaning the sidewalks in a coordinated fashion while other neighborhoods such as the Foggy Bottom area and Georgetown were markedly slow at cleaning their sidewalks. Does this say anything about the residents of my neighborhood compared to those in Foggy Bottom? Its hard to say. Looking at the individual level does it say anything about a person who does not dig out side walk or car for days on end? There could be a variety of reasons from not investing in a snow shovel, having back problems, or even being plain lazy. Economics is the science of incentives and peoples behavior in the face of these incentives and it is through revealed preference that we can theorize peoples demand for certain goods. Can you conclude that a person who shovels his driveway during or right after the storm values the ability to leave his home more than someone who waits two days after? Probably, by clearing his sidewalk he is signaling to other that he prefers the continuation of his daily routines (e.g going to work or going out for any other activities) as opposed to delaying his routine schedule.

Does that mean that we can conclude that the residents in my neighborhood prefer to return to the status quo more than the residents of Foggy Bottom? Of course not, there are other factors at play but they may be signaling their preferences to some extent. Its hard to put a quantitative measure on this but it is in my belief that someone who doesn't dig out their car or driveway for over three days prefers to either stay at home or not use his car.

Another interesting phenomena that I saw on was that of the free rider problem. Their where blocks that had people that did a less than satisfactory job of cleaning their sidewalks as opposed to their neighbors. There where chains of residents whose uncleaned sidewalks divided clear paths. This stems from a unique Nash Equilibrium in which the presence of a free rider precludes neighbors from cleaning their yards. A simple example of the free rider problem is the group of peers who collaborate on their homework assignment, knowing that it needs to be done there will be someone who will not do their fair share knowing that everyone has an incentive to get it finished. That person receives a benefit without incurring any of the cost. This problem has two obvious solutions, allow it or have this person kicked out. But it is obvious that you cannot kick someone out their home for that reason.

Are we then doomed to suffer this equilibrium? No, a third solution to this market failure has both a public and private sector solution. You can use the Pigouvian method of taxing or subsidizing behavior or through private sector companies that draft contracts. The latter method solved this same free rider problem in New York's Times Square which was once the center of massive street pollution from weary street vendors stuck in the aforementioned equilibrium. Should we use one of these methods to solve this problem? Probably not, the costs in this case do not outweigh the benefits, and in a society that does not take kindly to tax hikes or unnecessary government spending it is not likely to be plausible.