Tuesday, February 2, 2010

Someone's Trashing Your Blog. WWRCD?

What would Ronald Coase Do? 

This is a great piece on the Coase Theorem, from Steve Levitt. Rather than lifting a large chunk of text, I'll wait while you read and come back.

I'm patient.

Okay, you are back, great.  Basic idea: someone's action produces a negative externality, (fancy term for sparks that might harm the farm while a train goes about it's business running down the tracks.)  Coase says arbitrarily assigning property rights does not impact the efficient outcome.  Remember: Economics examines efficient allocation of scarce resources, not fairness or morality.

Now, suppose someone is disrupting a blog (note: just learned about this one too!) with comments neither she nor the audience to whom she caters appreciates.  In fact, assume the particular comments harm her valued readers so that they may leave the community.  Can we find an efficient solution that solves this dispute? 
The Commentator functions like the train in Coase's original example: he drives through the field that is the blog, throwing sparks in the form of comments few like, (but he must expect someone does, otherwise he wouldn't add them.)  This destroys value for the Blogger, Coase's farmer, who busies herself producing an open field to grow ideas and discussion.

But wait, it's not so easy.  The Coase Theorem assumes two agents: the farmer and the train.  We have at least four parties with theoretical property rights.  Along with the Blogger and Commentator, we must add: first, the Followers, or the blogger's preferred audience who create the preferred community by their presence and commentary as followers of the blog, and second, the Flippers, the subset of followers who value the community more highly as a result of what the Commentator says.  To the Flippers, who probably exist, the Commentator does not produce a negative externality.

With four parties, well defined transfer payments to reach an optimal solution don't exist, as far as I know.

What's my suggestion for the Blogger?  Theory may be ugly, but the solution seems simple: 24x7 real time comment moderation.  Low cost service provider get's you there, and free speech takes a small hit. The Blogger may be brazen, but that doesn't mean she has to have U.S. Government standards on free speech.

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