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Freedom - Why? A Mechanism Design Approach

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  • Grüner, Hans Peter

Abstract

According to standard mechanism design theory, the individual (freedom-) right not to accept a mechanism limits a planner's ability to achieve socially desirable (ex-post efficient or welfare maximizing) outcomes. This raises the question why and when individuals should be granted freedom rights at all. This paper studies under which conditions incentive problems on the design level justify the use of participation constraints. Depending on the environment, granting personal freedom rights may yield higher expected welfare than leaving the choice of a direct revelation mechanism to a random planner or to the electorate. The paper formalizes Hayek's conceptions of personal freedom and private sphere, and it permits the analysis of case sensitive optimal allocations of freedom rights. Two applications are studied in detail: mandatory vaccination and freedom of speech.

Suggested Citation

  • Grüner, Hans Peter, 2023. "Freedom - Why? A Mechanism Design Approach," CEPR Discussion Papers 18281, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18281
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    More about this item

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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