Tuesday, September 13, 2005

Superfunding, Part 1

[Cross-posted on The Agitator.]

A recent re-watching of the movie The Incredibles – and a conversation with my Agoraphilia co-blogger Tom W. Bell – got me pondering the economics of superheroes. Specifically, how should superhero services be funded? At the beginning of the movie, it appears the government has been hiring, or at least subsidizing, heroes to protect the public. Would such funding be justified on economic grounds?

As an alternative, superheroes could fund themselves with payments from potential victims. If you wanted superhero protection, you could subscribe to your local Justice League’s protection program. The difficulty with this model is that superheroes seem to possess the key features of a public good, at least in some of their capacities. Two aspects of superhero service tend to make it non-excludable. First, if heroes regularly save anonymous victims – say, by protecting little old ladies from purse-snatchers – they cannot effectively deny services to non-payers. Heroes could try to exclude them by, say, demanding proof of a Justice League subscription. But by the time the checking’s done, the crime could be over – the victim already victimized and the villain long gone. When time is of the essence, asking for advance proof of payment just isn’t feasible. Second, superheroes may provide non-excludable benefits simply by apprehending non-discriminating villains. When Leather-Wing finally takes out the Jester, all of the Jester’s potential future victims are better off, whether or not they contributed to Leather-Wing’s hero training. These two factors mean that potential victims have an incentive to free-ride, since they’ll be protected whether they’ve paid or not.

The other key feature of a public good is non-rivalry: the cost of providing the service to one more person is effectively zero. Now, for protection of specific individuals and households, superhero services are rivalrous: it takes more superheroes (or superhero time) to protect a larger population. But the protection of geographic areas – e.g., stopping Galactor from dropping a meteor on Megalopolis – is indeed non-rivalrous. It costs the same (in time, effort, etc.) to save Megalopolis whether its population is 5 million or 10. In this respect, superhero services are much like the levees that were supposed to protect New Orleans.

So at least some superhero services are public goods. Does it follow that government support is required? Not necessarily. Despite the simplistic claims of some econ textbooks, public goods can be provided privately. Some heroes will be heroes out of the goodness of their hearts; indeed, altruistic heroes dominate the comic-book genre. And some heroes may have low enough opportunity cost of their time and effort that even a meager level of voluntary funding would be sufficient. The real question isn’t whether superhero services will be provided at all (in a universe where they are possible), but whether enough of them will be provided. At the margin, there could be some potential heroes whose total benefit to the public would be great enough to justify the sacrifice, but who choose to live normal lives because they bear all the burdens while garnering almost none of the benefits. These marginal superheroes could be coaxed into donning the spandex by a large enough public subsidy.

Maybe superheroes could be supported by charitable donations. Red Cross Man might get all the funding he needs. Unlike the Justice League subscription model, the RCM model harnesses widespread altruism: even if the heroes themselves aren’t especially altruistic, they can be funded via the contributions of a generally altruistic public. But like any model that relies heavily on altruism, the charity model can by stymied by free riders. Selfish people can game the system by refusing to make contributions while still experiencing the benefits.

Or maybe superheroes could be covered as a kind of marketing expense. Just as broadcast television (which has both features of a public good) is funded by advertising revenue, Wal-Mart Woman could fight the good fight for peace, justice, and always low prices. And that’s no joke. Companies will do a lot to burnish their public image and gain the attention of consumers.

Still, we cannot blithely assume private sector will provide superhero services at the efficient level. Altruistic and marketing motives might have no particular correlation with the actual need for superhero services. To make a strong case against public funding of superheroes, we need to consider the potential for government failure. To be continued!


Blar said...

An important question is how it is being decided how superheros allocate their services. Once the roster of superheroes is set, how how is it determined what each superhero does? How does the information about the people's needs get organized in a way that can efficiently direct the superheroes' actions? Are the people who are paying to put food on Superman's plate distorting his activities for their benefit, at the expense of efficiency? These problems arise for any of the funding arrangements that you describe - government contracts, individual subscriptions, individual donations, corporate sponsorships, or even an independent superhero with an alternative income stream. Corporate sponsorship, for instance, would create problems because the best publicity-generating actions may not line up all that closely with the most do-gooding actions. A lone superhero, even if a perfect altruist, would face serious informational difficulties in the absence of anything resembling a price mechanism. And so on.

There is another issue in determining the supply of superheroes. The risk is that people with super powers might turn villainous if they don't get good superhero work (Syndrome, you'll recall, first attempted to enter the superhero business). This problem is partially self-correcting, because it creates a demand for further superhero work, so if it is at all common it would tend to lead to an equilibrium with a certain amount of supervillainy and a certain number of superheroes. Call it super blackmail if you like, but the government might therefore be justified in providing employment (and respect) to superheroes beyond the amount needed.

Since villains do create demand for superheroes, there is also a risk of collusion between the two groups, especially if superheroes tend to respond to external incentives. If they were self-interested individuals being paid through a subscription model, super"heroes" could draw large protection fees as long as they kept enough villains around to keep the people scared. (Reminds me of certain governments that receive handouts from America as long as they convince us that they are fighting against local terrorists.)

One other small addition to your comments on superheroes being a public good. Superheroes also give potential victims an incentive to free-ride by deterring non-discriminating villains who know that they will be in trouble if the person they victimize happen to have superhero protection.

Will S. said...

Bruce Wayne, being the heir to the Wayne fortune, is able to fund his superhero lifestyle on his own. Other superheros will work normal jobs under the guise of their secret identities thus funding such lifestyle.

Glen said...

Spiderman is partly incentivised via a bundling/tying arrangement much like the way broadcast TV is funded. If he weren't out fighting bad guys he wouldn't make money selling super action photos to the Bugle.

I highly recommend renting the John Ritter movie _Hero At Large_; it deals with the corruptibility and practicality of being a superhero in modern-day New York.

Glen Whitman said...

Blar -- great points all.

Will -- yes, self-funding is a possibility, but not generally an efficient one. What if a superhero produces greater value fighting crime than flipping burgers? Then any time he spends flipping burgers is a waste. If he were properly compensated for the value he created by fighting crime, then he would quit the burger-flipping job and devote himself to fighting crime full-time.

TtP Staff said...

This is hysterical. And brilliant.

Blar said...

Glen (Whitman), that's why I support a living wage for superheroing. Someone who is out saving the world (or even just the city) shouldn't have to hold down a second job in order to pay the bills. It's not right, and it's not economically efficient.

The rare exception is the superhero for whom the second job is really a part of the superheroing, such as someone for whom it is extremely important to maintain an alternate identity.