Rastamouse deals with market failure

Or, how Rastamouse made a bad ting (“thing”) good.

The good thing about having young nieces and nephews is that you’re kept up-to-date on the latest trends in kids’ TV. So today, I tuned into an episode of Rastamouse, Hot hot hot. And I was in for an economic treat.

In fact, a “tragedy of the commons” moment. You see, there was a problem in Mouseland. Misty Falls had dried up! President Wensley Dale’s taps had run dry. The orphan mice were getting really thirsty. In other words, demand was outstripping supply. Not to mention the potential negative externalities that might arise from a parched president. Dread (“not good”)!

Rastamouse and the rest of the Easy Crew set out to find out wagwan (“what’s going on”). They soon work out that there may be a connection between the drought and a new brand of Stylee’s ginger beer, which has been flying off the shelves.

So what does Rastamouse do? He corners Stylee at a reggae party, and gives him a talking-to. All ends well and everybody’s irie (“happy”).

A traditional economist might at this point roll their eyes. Rastamouse has completely failed to diagnose the problem, and is clearly unfamiliar with the works of Hardin and Coase. There is a missing market for water, which means the price of water (free) is completely unrelated to its social cost (thirsty orphan mice), and therefore Stylee was over-using the water from society’s point of view: his private costs were lower than the social costs. The thing to do would be to clearly define property rights, and encourage trade in water to take place. Assuming all works according to plan, the price of water should reflect its true cost, resulting in an efficient allocation of resources between Stylee’s ginger beer and President Wensley Dale.

But is that the optimal solution in Mouseland, where everybody cares about each other? In fact, it probably isn’t. Stylee felt pretty bad about stealing all the water, once he found out about the thirsty orphan mice, and declared that from now on, he would only use his fair share (“incorporate social costs into his private decision-making”). It all worked because Stylee, unlike Homo Economicus, clearly takes into account the utility of other mice in making decisions. So in fact, the problem was lack of information. Which was solved by a mouse with a bit of initiative and a skateboard, who was unemployed and had time on his hands to make a positive change to the place he lived in.

Maybe this is what David Cameron means by the “Big Society”.

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