6. Traditional Communities

Couples without children may be categorized as new communities because they are usually connected by strong wills. However, children and parents are connected by chance and thus should be categorized as traditional communities.

New communities such as NPOs and NGOs, on the other hand, are often well defined by laws.

It is usually more difficult than in new communities, where relationships are more formal and formal rules to induce cooperation are more easily introduced thanks to the strong wills and laws that bind the members.

Normal goods are goods whose demand increases with the increase in disposable income.

The definition of Pareto efficiency (c.f. footnote 2 in Chap. 2) will be satisfied by fixing the utility of an individual and maximizing the utility of the other individual under the resource constraint.

The numerator represents the increase in utility due to a small increase in public goods G, while the denominator represents the increase in utility due to a small increase in private goods \(x_i\). Thus, if we divide the former by the latter we can calculate the quantity of private goods \(x_i\) we need to achieve the increase in utility caused by additional public goods G.

The result may be well-explained if we consider that individuals think that they made their contribution to public goods through tax payment, thus reducing their private provision.

See Warr (1982) and Bergstrom et al. (1986) for more details and discussions.

Although we omit the proof, we recommend readers who are interested in the theoretical researches to try solving a proof based on Fig. 6.2.

Some analyses show that whether crowding-out effects or crowding-in effects occur depends on how governments provide public goods. See, for example, Rege (2004).

See, for example, Rose-Ackerman (1986), Khanna and Sandler (2000), Payne (2001) and Heutel (2009).

However, this is not the unique Pareto efficient allocation. For example, \((g^{**}_1, x^{**}_1, g^{**}_2, x^{**}_2) = (2, 1, 1, 2)\) is an allocation that satisfies the conditions \(x_1 + x_2 =3\) and \(G \equiv g_1 + g_2 = 3\). There are infinite Pareto efficient resource allocations.

In Sect. 6.3.4 below we depict a model of evolutionary games in which the long-run relationship is not necessary to prevent selfish behavior.

See Sect. 2.​3.​2 for “iriaichi.

In Japanese local communities, the “punishment system based on the norm” was established and used to induce cooperative behavior. The “voluntary punishment” discussed here has also been frequently used. With the weakening traditional local communities, the society may have to rely on the voluntary punishment of some people to discourage socially undesirable actions. However, the arguments here suggest that such voluntary punishment may be disappearing as rational individuals find it costly to impose. As the last resort, the Japanese society may have to use the legal process more. However, recently there seem to be some social attempts at applauding and admiring socially desirable actions such as volunteering and social contributions. If voluntary praise for desirable actions is more effective than punishment for undesirable ones, and if the cost of praising others is lower than that of punishing others, society may succeed in expelling socially undesirable actions. Such a mechanism may be effective in the new communities as we discuss in the next section.