Knowledge And Decisions

Under informal or noninstitutionalized decision-making processes, with neither the government nor the developer involved, the leaflet distributor would have no incentive to take account of the external costs imposed on people who prefer undisturbed coming and going to receiving his message. Even if a large majority of his potential audience preferred being left alone, as long as this desire was conveyed in civil terms, short of abuse or violence, it may receive little or no weight in the distributor’s own balancing of costs and benefits. The distribution would continue, regardless of how little benefit a handful of passers-by felt they received and however much annoyance the others might feel — and regardless of how mistaken the leaflet distributor might be about either of these things.

Formal economic institutions translate the pleasure or displeasure of tenants, shoppers, or other users of a private development into a higher or lower financial value for a given set of physical structures. The property owner, even if he lives elsewhere, or is personally indifferent about leaflets, has an incentive to produce whatever degree of privacy or tranquility is desired, as long as its cost of production to him does not exceed its value to those who want it, as revealed by their willingness to pay for it.²⁷ More importantly, those property owners who are mistaken as to the nature and magnitude of other people’s desires for privacy or tranquility find the value of their property less than anticipated, and therefore have an incentive to strengthen, loosen, or otherwise modify their rules of access.

Formal political institutions might reach similar results if constitutionally permitted. Such institutions could, in this case, take the form of a tenants or merchants association or an ordinary municipality. The problem with voting on an issue like this is that the vote of an individual who feels benefited to a minor extent counts the same as the vote of another individual who feels seriously harassed. By contrast, economic “voting” through the market reflects magnitudes of feelings as well as directions. Unfortunately, economic voting may also reflect substantial differences in income, but in general this effect is minimized by the variety of income levels on both sides of a given competition. Wealth distortions seem even less of a practical problem among tenants and shoppers in a given, privately owned development, which would tend to attract its own clientele, less socioeconomically diverse than the whole society. Economic decision-making processes also permit minority representation — in this case by transmitting the desires of whichever side is financially “outvoted” in a given development into a demand for other developments run by opposite rules. Such processes are not bound by the uniformity required of legislation nor by judicial concern for precedent. If a hundred developments adopt rule A, that in no way hinders the 101st development from adopting rule B to attract those economically “outvoted” elsewhere.

Judicial decision making on the substance of such issues loses many of the advantages of either economic or political institutions. Neither the initial court decision nor any subsequent modifications of it are the result of knowing the actual desires of the people involved, as distinguished from the parties in court. Nor, if those desires were known, would they provide any compelling incentive for the court to rule in accordance with them.

The balancing of costs and benefits includes not only tenants and shoppers with varying preferences but the leaflet distributors as well. The property owner’s legal right to exclude leaflet distributors as trespassers does not mean that he will in fact do so. They can purchase access, just as individual residential and business tenants do. The solicitors would have to pay enough to counterbalance any net reduction in the value of the property caused by its being less desired by existing and prospective tenants as a result of its reduced privacy or tranquility. Not only would leaflet distributors’ interests be weighed through the economic process against other people’s interests; there would be automatic incentives for them to modify the place, manner and frequency of their solicitations, so as to minimize the annoyance to others, and so minimize the price they would have to pay for access. Economic processes are not mere zero-sum games involving transfers of money among people. They are positive-sum decision-making processes for mutual accommodation.