Except if one strictly restricts the concept of externality to effects that trespass upon other people’s property, it encompasses so many phenomena that it is meaningless. This is not an unknown problem in economics. Welfare economist E.J. Mishan noted that technically, “an awareness of what is happening to others” is an externality (Introduction to Normative Economics, 1981, p. 135—emphasis in original). James Buchanan suggested a solution: the only effects that count as externalities are those that infringe on the individual rights defined by the constitutional (or social) contract (The Limits of Liberty, p. 124).
Trigger warning: What follows would be as valid if one replaced “man” with “woman” and vice-versa, or even used only “man” or only “woman,” but at the cost of some statistical relevance. My goal here is not to take a stance on any specific case, where circumstances and the nature of the alleged act matter. We do know instances–the famous Duke University lacrosse case was one–where false accusations were made. I am interested in the economics of false sexual accusations. From this viewpoint, at least three points are worth making.
If, in our externality story, we extend the concept of property to include somebody’s liberty or (more controversially) reputation, then a woman who falsely accuses a man of sexual interference produces a negative externality for all those who have really been raped. When false or opportunistic accusations are suspected or become known, the real victims are less likely to be believed.
When a woman falsely accuses a man of sexual interference, incentives may generate another sort of negative externality—this one against all men. If any man is fair game for a sexual interference accusation, then a deep-pocketed or government employer, especially when filling a publicly-visible job, has an incentive to hire a woman instead of a man.
It is true, on the other hand, that if a bona fide accusation is ignored, a negative externality is transferred to future real victims. The balancing of externalities was partly made by the legal principle that it is better to let a guilty person escape justice than to condemn an innocent. This principle incorporates a salutary fear of government power.
READER COMMENTS
Mark Z
Sep 25 2018 at 3:07am
“If any man is fair game for a sexual interference accusation, then a deep-pocketed or government employer, especially when filling a publicly-visible job, has an incentive to hire a woman instead of a man.”
Alternatively, if a woman is more likely to file a lawsuit against her employer for sexual harassment than a man is (and I suspect, even if the rate of sexual harassment by and against each sex were the same, men would still probably complain and sue at a lower rate), they may have an incentive to hire fewer women.
Pierre Lemieux
Sep 25 2018 at 11:09am
Good point. Women would be hired at high-level, visible positions (where they are less likely to be accused), and men at low-level ones (where they are less likely to accuse).
Hazel Meade
Sep 27 2018 at 12:38pm
Alternatively, one could avoid hiring men that are more likely to be accused of sexual harassment. I.e. observe people’s character and behavior and professionalism towards women, and don’t hire men that don’t treat female colleagues with respect.
Mark Z
Sep 27 2018 at 2:09pm
I expect that’s difficult to discern from an interview. And even the most discriminating interview process applied to men won’t mitigate the cost of those lawsuits that are frivolous, which probably become more common the more sympathetic and credulous judges and juries get toward plaintiffs.
Daniel Kian Mc Kiernan
Sep 26 2018 at 8:11pm
Although most of the attention paid to “The Problem of Social Cost” by Ronald Harry Coase has focussed upon what has come to be called “the Coase Theorem”, Coase’s original point, which the Theorem was intended to exhibit clearly, was that the concept of externality cannot properly be understood outside a framework of rights.
In any case, while there are very different, yet useful ways to understand the more fundamental differences that underlie the differences of political ideologies, one of these ways is the attitude towards incentives. The political left tends either to disregard them altogether or to insist that incentives should be designed for creatures very different from real human beings. The political right tends to imagine a world of brutes, and to want incentives structured accordingly. Classical liberals do not “fall somewhere in-between”; rather, they attend to actual human nature, except in-so-far as they make simplifications analogous to the frictionless bodies of physical theory, which allow us to examine major effects on the way to developing still more realistic models.
In the case of
#MeTo
, and of the similar theorizing that led to the trials and convictions for rape of men later perfectly exonerated (by the development of DNA technology and so forth), the left has responded with indignation to attempts to draw attention to what behavior will result from real people operating within the system of incentives being instituted.Comments are closed.