Why would people invest less except because they want to invest less? I realize you probably have some model involving coordination failure here and I don’t know what it is.
EDIT: to explain my confusion better: A village that makes sure its residents have the ability to leave easily whenever they want (e.g. by providing them with a payment when they move out) seems good to me, whereas a village that makes sure its residents have a hard time leaving (e.g. by forcing them to pay almost all their life savings upon entry, which get converted to “village bucks” only useful within the village) seems very yikes to me. I think this is partially because the first has a natural mechanism that ensures that residents stay only as long as the arrangement is working for them, whereas the second has gone out of its way to break the natural mechanism. I don’t actually expect the first village to have huge problems with people exiting; people will still form social bonds and have property in the village that makes it more convenient to stay, as long as the village is providing value.
I don’t think the first village is a strict improvement, but it seems far better, and I have similar intuitions about marriage.
It makes sense that exit costs would help in a centipede game. What is a resource created in marriage that is disproportionately held by one party at a time and has value outside the marriage? My first thought was finances, but sharing finances doesn’t require exit costs.
I was mostly thinking of one partner investing in the other’s human capital, e.g. by paying for their education, or taking on housework so the other can focus on career. Though this discussion is changing my mind—I no longer think it’s such a strong argument.
Why would people invest less except because they want to invest less? I realize you probably have some model involving coordination failure here and I don’t know what it is.
EDIT: to explain my confusion better: A village that makes sure its residents have the ability to leave easily whenever they want (e.g. by providing them with a payment when they move out) seems good to me, whereas a village that makes sure its residents have a hard time leaving (e.g. by forcing them to pay almost all their life savings upon entry, which get converted to “village bucks” only useful within the village) seems very yikes to me. I think this is partially because the first has a natural mechanism that ensures that residents stay only as long as the arrangement is working for them, whereas the second has gone out of its way to break the natural mechanism. I don’t actually expect the first village to have huge problems with people exiting; people will still form social bonds and have property in the village that makes it more convenient to stay, as long as the village is providing value.
I don’t think the first village is a strict improvement, but it seems far better, and I have similar intuitions about marriage.
My intuition about marriage is more like the centipede game, where preventing exit makes both players better off. Does that make sense?
It makes sense that exit costs would help in a centipede game. What is a resource created in marriage that is disproportionately held by one party at a time and has value outside the marriage? My first thought was finances, but sharing finances doesn’t require exit costs.
I was mostly thinking of one partner investing in the other’s human capital, e.g. by paying for their education, or taking on housework so the other can focus on career. Though this discussion is changing my mind—I no longer think it’s such a strong argument.