This is not really a solution though, because it’s not incentive compatible. There’s nothing to ensure that the extortionist will spend the money on providing the desired goods, and attempts at creating such incentives must ultimately fail for the same underlying reasons as the original problem. (This is of course assuming no excludability—if a club owner can ban some members from her club and invite others to join for a fee, she is incented to manage the club to the members’ benefit, for standard Coasian reasons!)
It’s a solution for the extortionist, and that’s who is experiencing free riding as a problem.
Threatening your housemates that you’ll replace them if they don’t pony up for painting or threatening jail if a resident doesn’t pay taxes could be done by bad actors (and IMO often is), but that’s only a difference in purpose, not in activity. Extortion is, by it’s very nature, incentive-compatible with collecting revenue: its only aim is to provide incentive for the freeloaders to pay.
This is not really a solution though, because it’s not incentive compatible. There’s nothing to ensure that the extortionist will spend the money on providing the desired goods, and attempts at creating such incentives must ultimately fail for the same underlying reasons as the original problem. (This is of course assuming no excludability—if a club owner can ban some members from her club and invite others to join for a fee, she is incented to manage the club to the members’ benefit, for standard Coasian reasons!)
It’s a solution for the extortionist, and that’s who is experiencing free riding as a problem.
Threatening your housemates that you’ll replace them if they don’t pony up for painting or threatening jail if a resident doesn’t pay taxes could be done by bad actors (and IMO often is), but that’s only a difference in purpose, not in activity. Extortion is, by it’s very nature, incentive-compatible with collecting revenue: its only aim is to provide incentive for the freeloaders to pay.