The global problem of free dinners

Imagine you, I and a random third person find ourselves the sole members of a dining club. This club has massive endowments and gets £3 million of income a year. It has two rules: we can spend the income on 3 dinners a year and any member can invite new members to join. 2/3 of members must agree for the rules to change.

                 What will happen?

                Well, perhaps you and I agree that we want more dinners. Together we vote to make it daily, which still £2,700 a day for dinner. And then we both invite a few friends, so that we can have massive dinner parties at fancy restaurants every day. Our lives have changed enormously.

                But the third person invites some friends too. And they invite some friends. After all, they’re all full members now too. Our 30-person dinner parties begin to happen at less and less fancy restaurants. I dig into the endowment to fund mine, and without that cost coming from the income, your expensive dinners and the dinners of all the other people are funded for a year or two.

                But they keep on inviting more friends. You start to tell everyone not to invite more friends to the club, but everyone hates you. It’s their right to invite friends: why should they be the last to the party, knowing only the person who invited them, when they could bring just a few more members and be the centre of their own little party? It’s your fault, for wanting expensive dinners and for voting to make this boon daily rather than thrice-annually. It’s my fault for digging into the endowment. You and I and our friends should stop enjoying dinners and our vast expenditure would stop. The endowment might even grow again and we’d have the full £3 million of income to spend on everyone. Soon enough there might be a pound or two for dinner for everyone!

                Does that feel a bit unfair? A bit silly? Of course you and I would vote to restrict membership as soon as we could. We’re not stupid enough to leave free money open to everyone. We’d want to limit the number of members because every new member reduces the income the rest of us enjoy. The problem is that having a friend join the club is a greater benefit a member than the loss of income is a problem. It matters to have your friends join you for dinner; you’ll happily have slightly less expensive food for that.

                So the incentive for everyone is to invite their own friends and not let anyone else invite theirs. As founding members, we inevitably get to enjoy expensive dinners while the club fills up, and we inevitably get to invite our friends, because there’s so much capacity at first. So later members will always be able to criticise us for having got our way and for not wanting to share what we enjoyed.

               

                If the situation sounds familiar, it’s because this is an extended metaphor. Welcome to the industrialized world. Industrialization allowed us to use the world’s resources much better than previously. We became rich, and industrialization spread. Now the whole world is consuming resources the same way and there are too many of us on the planet. But population control is not an option because everyone has the right to make their own family.

                Yet every new birth, with its claim to planetary resources, diminishes the claim of everyone else already alive. There’s an externality that no-one pays the price for. Everyone wants their own happy family, their own private party at the world’s expense, but it must be paid for somehow. Why not limit new members? When they’re only potential people, they’re not being harmed by being excluded from the club.

                True, all us new members, young people who haven’t yet had children, might find it unfair that we don’t get to do what our parents did. But that doesn’t mean that we should merrily carry on into oblivion.