Club Goods Research Articles

Reconceptualising burdens – NATO centres of excellence: club goods, informal institutions, and partner contributions

ABSTRACT Research on NATO burden sharing comprises dozens of works. Since the end of the cold war, NATO adapted, enlarged, and institutionally complexified its mandates and area of operations. Yet, burden sharing research rarely accounts for such aspects given the political and scholarly focus on NATO’s target of 2% of GDP on military spending since the 2000s. This research merges rational institutionalism with collective action models on club goods production to study NATO Centres of Excellence. These 30 institutions are externally funded, independently run, and address the collective strategic problems associated with Alliance Transformation using informal arrangements, the Memorandum of Understanding. The contents of those agreements are compared using rational institutional design theory. This article offers original data reconceptualising the NATO burdens partners undertake beyond military expenditures using COE participation and hosting while offering a framework for a future examination of how the COE institutional agreements manage strategic problems (i.e. enforcement, allocation, uncertainty, etc.) with expanded data.

Information economies with taste diversity and bounded attention spans

We consider an economy with a countably infinite number of consumers and pure public information goods. Each of these differentiated products is produced by a single monopoly firm that enters the market if it can cover costs. Thus, the product space is endogenous. We assume that the population of agents has diverse tastes, but bounded attention spans for content. We show that this implies that at all Pareto efficient allocations, all agents consume a finite number of public goods, and that each public good is consumed by a finite number of agents. In effect, these two taste assumptions turn pure public goods into what amount to club goods, despite the lack of rivalry in consumption or crowding of any type. Unfortunately, the equilibrium outcomes of Tiebout-like competition between public good providers do not satisfy the First Welfare Theorem. Even non-anonymous Lindahlian price systems are not sufficient to signal all profit opportunities to firms. We conclude that information markets are likely to be inefficient, and there will always remain opportunities for economic profits in an information economy.

Will the European Green Deal enhance Europe’s security towards Russia? A political economy perspective

The European Green Deal is a set of policy initiatives set by the European Commission with the aim of making the European Union climate neutral in 2050. The Deal is credited with many virtues by its proponents, and in particular that it would reduce geopolitical disputes with Europe’s main supplier of energy, Russia. The nascent literature on energy transition is primarily focused on its economic costs and benefits, and on its contribution to energy security; but it has so far left unaddressed the question of the transition’s military consequences. To address that question, our paper adopts a political economy perspective by looking at how a sizeable drop in the energy revenue, which would result from the successful implementation of the Deal, is likely to affect the intraelite competition underway in Russia. We model that competition by means of a Tullock contest in which the energy revenue may be allocated by the sole winner to the provision of private goods or of club goods. We show that the Deal would favour the currently ruling elite group’s efforts at winning the contest. Given that this elite would thus control energy revenue and would spend it on military investments intended at maintaining it in power, the Deal could have adverse security consequences for Europe. The paper concludes by underlining the importance for the Deal’s success to factor in its unintended geopolitical consequences.

Martial races as clubs? The institutional logic of the martial race system of British India

Military institutions can be seen as a solution to a type of principal-agent problem, in which a government principal contracts with a military agent to produce violence on their behalf. Absent extensive monitoring, low effort should be expected from the military agent. This should especially be the case for a mercenary force which cannot rely on patriotism or ideology. Yet the mercenary army of the British-ruled India consistently produced high and dedicated performance. In this paper, I argue that the otherwise curious institution of recruiting predominantly from the so-called ‘martial races’ helps to explain this puzzle. Drawing on Iannaccone’s club goods model, I argue that the martial race recruitment system represented an effective solution to the principal-agent problem by allowing the British to benefit from a repeat business arrangement with a small number of ethno-religious groups whose costly in-group prohibitions and poor outside options helped both to screen out potential shirkers and deter poor performance on the battlefield.

Big data as a source of market power of digital platforms

Big data is widely used by digital platforms in multi-sided markets, which are often considered monopolistic. Big data is analyzed as a potential source of market power of digital platforms, and its characteristics as an economic resource are considered. Arguments for classifying certain categories of big data (for example, historical data) as club goods are specified. The use of big data by digital platforms has already become the object of antitrust proceedings. Based on the analysis of those cases, as well as the review of scientific literature, the relationship between the market power of digital platforms and their use of big data is examined. Firstly, big data can be used by platforms while implementing the strategy of price discrimination. Secondly, the usage of big data creates barriers to entry for new platforms, which are caused by the lack of access to data and increased spending on hardware, software and hiring personnel. Finally, big data can be used by digital platforms to exert market power on adjacent markets and create discriminatory conditions. Based on this research, recommendations for antimonopoly regulation of digital platforms in Russia are provided. Several structural alternatives to antimonopoly regulation of big data are considered: the requirements for anonymized big data disclosure; the creation of a big data market; the partial restrictions on generating and using big data in certain ways (similar to the new regulation in the EU).

On Fairness and Size of Coalitions in Economies with Club Goods

On Fairness and Size of Coalitions in Economies with Club Goods

Building a Panopticon Through Nodal Governance: Mass Surveillance and Plural Policing in China’s COVID-19 Lockdown

At one time monitoring over 900 million people, China’s health code system is arguably the most controversial invention of the pandemic. This study explores how the system emerged and its implications for security governance in urban communities. By analysing 9,533 social media posts published during three key weeks, the study revealed that early pandemic responses in China were heavily shaped by private nodes, such as estate management companies, private security guards and homeowners. Homeowners’ demands for extra security clashed with migrants’ and tenants’ demands for mobility. The health code system was presented as a ‘solution’ to these conflicts. The findings of this study highlight the limitations of consumer-driven pluralisation in policing. Such pluralisation offered limited opportunities for democratisation. Instead, the radical pursuit of ‘club goods’ by consumer-denizens reinforced existing inequalities. Entrenched inequalities tempted marginalised social groups to accept ‘indiscriminate’ surveillance, which paved the way for a neo-panopticon. The study also warns against the alliance of state nodes and big-tech companies. Through collaboration, these powerful players can replace political dynamics in the community with data-driven modulation, thus destroying the foundation of nodal governance.

Competitive equilibria and robust efficiency with club goods

The paper studies the club equilibria in a setting where individuals not only trade private goods but can choose to become members of a finite number of clubs, where each club is defined by the external characteristics of its members and the activity in which the club is engaged. The main objective of the paper is to characterize the club equilibria in terms of robustly efficient states. In other words, we attempt to provide a characterization of club equilibria using the veto power of the grand coalition, i.e., rather than considering the blocking power of infinitely many coalitions as in the case of core allocations, we only take the coalition comprising all agents and study its blocking power in a group of economies obtained by slightly modifying agents’ initial endowments.

Environmental agreements as clubs: Evidence from a new dataset of trade provisions

Creating intergovernmental environmental clubs is a prominent policy proposal for addressing global environmental problems. According to their proponents, environmental clubs provide an incentive to join them and accept their environmental obligations by generating exclusive “club goods” for their members. Yet, the existing literature considers environmental clubs as a theoretical idea that still has to be put into practice. This article asks whether, in fact, the numerous international environmental agreements (IEAs) containing trade-related provisions provide club goods to their parties. It does so by investigating the effects of these provisions on trade flows among parties compared to flows with non-parties. We introduce an original dataset on 48 types of trade provisions in 2,097 IEAs that we make available with the publication of this article. Based on this new data and a panel of worldwide bilateral trade flows, we find evidence that existing IEAs and their trade-liberalizing content are associated with increased trade among their parties relative to trade with non-parties. We conclude from this finding that systems of IEAs provide club goods to their parties. Uncovering the existence of environmental clubs has significant methodological and policy implications. It is an important first step for future research on the actual effectiveness of clubs in attracting participation and raising environmental standards.

Financial markets as a public good

Aim: In this paper, it is argued that in complex financial systems private goods, important for the creation of a market, have to be considered in a multiple of differing property rights structures necessary for the functioning of the system. This may lead to high transaction costs and adverse incentives for different players, threatening the sustainability of the system. The aim of the article is to create and explore a framework for assessing fragilities and threats to the sustainability of financial markets, using a property rights approach. This may be a useful background for development of policy to increase the sustainability of financial markets. Conclusions/findings: It is argued that while financial services have features of a private good for which markets exist, the infrastructure and organizational structures have features of a club good. These are characterized by problems of congestion and depreciation due to its overuse. The question is addressed to what extent the public good features are of the “weakest-link” kind, where fragilities may lead a potential collapse. Implications of the research: The complex financial system should be prevented from getting too many features of an open access regime, while making it a self-strengthening system where failures have learning effects. This may require the increase of different types of buffers and limits to the size of the players in the financial system. Otherwise, any action that is thought to lead to an improvement, is likely to lead to have the opposite effect. Keywords: financial markets, complexity, public goods, club goods, property rights, sustainability JEL: D23, E42, G1, G2,

Ensuring Public Access to Green Spaces in Urban Densification: The Role of Planning and Property Rights

Implementing densification while ensuring green space accessibility is a crucial planning challenge. The powerful role of private for-profit actors densification projects mean that green spaces are at risk of being co-opted by private interests and transformed into club goods. Using a new-institutionalist approach, we analyse the implementation of densification and urban greening based on two case-studies in Switzerland and the Netherlands. We ask what planning strategies are successful in ensuring public access to green spaces in private-led densification. To counteract club formation, planners need to restrict property rights, actively monitor implementation of planning objectives, and ensure an open physical design.

Optimum financial areas: Retooling the governance of global finance

AbstractThis article analyses the political economy of financial stability under conditions of deep cross‐border market integration, adapting the ‘joint products’ approach of Broz among others. Many argue that financial stability is a public good; we propose that it is inherently excludable and that particular conditions must obtain to ensure it is non‐diminishable for all. The difficulties of providing financial stability arise because of the ‘club goods’ nature of monetary and financial systems. We then propose six institutional preconditions that can stabilise a financial market that is integrated across multiple regulatory jurisdictions. We use case studies of Great Britain, the US and Canada to show how national governments have dealt with these political economy dilemmas to stumble towards similar arrangements to stabilise domestic financial market integration. Three criteria relate to the ‘technical substructure’ of markets, while three others focus on macro‐prudential considerations. Together they constitute necessary and sufficient conditions for the provision of financial stability. These criteria generate political economy obstacles both individually and as an interdependent package but can mitigate the costly dynamics of financial market disintegration in times of crisis. We argue that these criteria can be applied across national boundaries as well as across regulatory jurisdictions within them.

Club Goods, Club Decisions and Social Welfare

Club goods are a variety of public goods. They are consumed by individuals with homogeneous preferences who are voluntarily associated in clubs. Club members derive mutual benefit from the collective consumption of club goods, which improves their well-being and therefore enhances social welfare to a certain extent. The private initiative underpins the creation of the classic clubs. Later, the state adopted and implemented club decisions in order to increase the efficiency in the supply and collective consumption of certain private and divisible public goods. Examples of state-regulated clubs are maintaining cleanliness in settlements, supply and consumption of utilities, maintaining the national road network with vignettes and tolls, and others that are analyzed in the paper. The development of digital communications has led to the emergence of thousands of online club formations, including a global one. The final conclusion: with private or government initiatives club activities are expanded, and consumers of club goods grow in number, which in turn increases the level of social welfare.

The importance of contingently public goods

The importance of contingently public goods

The evolution of universal cooperation.

Humans work together in groups to tackle shared problems and contribute to local club goods that benefit other group members. Whereas benefits from club goods remain group bound, groups are often nested in overarching collectives that face shared problems like pandemics or climate change. Such challenges require individuals to cooperate across group boundaries, raising the question how cooperation can transcend beyond confined groups. Here, we show how frequent intergroup interactions allow groups to transition from group-bound to universal cooperation. With frequent intergroup interactions, reciprocity of cooperative acts permeates group boundaries and enables the evolution of universal cooperation. As soon as intergroup interactions take place frequently, people start to selectively reward cooperation aimed at benefitting everyone, irrespective of their group membership. Simulations further show that it becomes more difficult to overcome group-bound cooperation when populations are fragmented into many small groups. Our findings reveal important prerequisites for the evolution of universal cooperation.

The Open Society and Its Complexities

<i>The Open Society and Its Complexities</i>

Pay for the Privilege: Does a Global Club Good Opportunity Ruin Local Public Good Provision?

Pay for the Privilege: Does a Global Club Good Opportunity Ruin Local Public Good Provision?

Join the Club: Club Goods, Residential Development, and Transportation

A good and sustainable city requires compatibility between the various functions and services that it provides its residents. This study examined the relations between the development of new residential neighborhoods and transportation infrastructure by applying Tiebout’s model of club goods. Thus, we introduced the spatial dimension into the theory of club goods by referring to neighborhoods as clubs and their residents as the club’s members, who make location decisions. Specifically, we explored how residents behave spatially in response to the problematic transportation infrastructure of the neighborhoods. That is, to consider the socioeconomic implications of inadequate transportation infrastructure, we used data from newly developed neighborhoods in Israel to examine the extent to which an increase in traffic congestion can reduce a neighborhood’s size. Our findings show a negative correlation between increases in travel time and the number of housing transactions undertaken in a given neighborhood, thus confirming Tiebout’s assumption that people vote with their feet: When traffic congestion increases, residents prefer to leave the neighborhood and move, in all likelihood, to a place with less congestion. The paper also discusses the results with respect to the social consequences of these trends and warns against the expected socioeconomic consequences, namely that those who can afford to do so will leave in favor of a club with better conditions. The key lessons derived from this study of the Israeli experience are considered relevant to many other countries experiencing similar situations.

Inviting all humanity to an elite club? Understanding tensions in UNESCO’s global heritage regimes through the lens of a typology of goods

ABSTRACT This paper aims to reflect on heritage diplomacy by analysing the nature of tensions in Global Heritage Regimes (GHRs) built around the World Heritage Convention and the Intangible Heritage Convention. Combining regime theory with Ostroms’ typology of goods, we claim that the process of transforming the abstract idea of ‘Heritage of Humanity’ (HoH) into an outcome in the form of a heritage list needs to mobilise heritage as diplomacy and also is the result of heritage as diplomacy. At the same time, the transformation generates tension based on the experienced delusion of (1) the expectations built upon the inclusive idea of the ‘Heritage of Humanity’ (public good) and (2) the exclusive character of heritage lists (club goods). We claim that this ‘Inclusion-Exclusion Tension’ (IET) is an inherent element of global heritage regime design and as such needs to be managed through diplomatic efforts.

Commoning and publicizing

Public goods have been neglected, if not outright rejected, by the anti-capitalist literature, which favors “commons.” This article argues that equal attention should be given to commons and to public goods—both are essential to social reproduction. Their difference is not one of nature, but of status; it results from the way they are managed and distributed. I offer some conceptual clarifications in the literature on commons, public goods, club goods and private goods, and argue for an approach that looks at the status of goods. This opens up room for examining two ways struggles for social goods are and may be waged: commoning and publicizing. While commoning practices require organization at the community level, publicizing practices make claims on the state as a provider of public goods.