Hostname: page-component-586b7cd67f-t7czq Total loading time: 0 Render date: 2024-11-24T00:43:27.689Z Has data issue: false hasContentIssue false
  • English
  • Français

Private provision of public goods via crowdfunding§

Published online by Cambridge University Press:  02 May 2017

MAREK HUDIK  and
ROBERT CHOVANCULIAK
MAREK HUDIK*
Affiliation:
Xi'an Jiaotong–Liverpool University, Suzhou, China
ROBERT CHOVANCULIAK*
Affiliation:
Institute of Economic and Social Studies, Bratislava, Slovakia
*
*Email: marek.hudik@xjtlu.edu.cn
**Email: robert.chovanculiak@iness.sk
Get access Rights & Permissions [Opens in a new window]

Abstract

For various reasons, governments sometimes fail to provide public goods. Private provision of such goods might then be used if it succeeds in overcoming three main problems: high organization costs, the assurance problem, and the free-rider problem. We argue that technologies that enable crowdfunding – the method of funding projects by raising small amounts of money from a large number of people via the internet – have enabled these problems to be overcome more readily. Such technology has lowered organization costs and enabled the employment of more efficient mechanisms to reduce the assurance and free-rider problems. To illustrate these effects, we present two case studies of private provision of public goods via crowdfunding: police services in Rockridge in Oakland, California, and the Ukraine Army.

Type
Research Article
Information
Journal of Institutional Economics , Volume 14 , Issue 1 , February 2018 , pp. 23 - 44
Copyright
Copyright © Millennium Economics Ltd 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

§

We would like to thank Miguel Sanchez Villalba and two anonymous referees for their helpful comments and suggestions. Any mistakes are, of course, ours alone.

References

Agrawal, A., Catalini, C., and Goldfarb, A. (2014), ‘Some simple economics of crowdfunding’, Innovation Policy and the Economy, 14 (1): 63–97.Google Scholar
Andreoni, J. (1990), ‘Impure altruism and donations to public goods: a theory of warm-glow giving’, Economic Journal, 100 (401): 464–77.Google Scholar
Andreoni, J. (1998), ‘Toward a theory of charitable fund-raising’, Journal of Political Economy, 106 (6): 1186–213.Google Scholar
Andreoni, J. and Petrie, R. (2004), ‘Public goods experiments without confidentiality: a glimpse into fund-raising’, Journal of Public Economics, 88 (7–8): 1605–23.CrossRefGoogle Scholar
Antonelli, C. and Foray, D. (1992), ‘The economics of technological clubs’, Economics of Innovation and New Technology, 2 (1): 37–47.Google Scholar
Bagnoli, M. and Lipman, B. L. (1989), ‘Provision of public goods: fully implementing the core through private contributions’, Review of Economic Studies, 56 (4): 583–601.Google Scholar
Becker, G. S. (1974), ‘A theory of social interactions’, Journal of Political Economy, 82 (6): 1063–93.Google Scholar
Beito, D. T. and Smith, B. (1990), ‘The Formation of urban infrastructure through non-governmental planning: the private places of St. Louis, 1869–1920’, Journal of Urban History, 16 (3): 263–301.Google Scholar
Beito, D. T., Gordon, P., and Tabarrok, A. (eds) (2002), The Voluntary City: Choice, Community, and Civil Society, Ann Arbor, MI: University of Michigan Press.Google Scholar
Bergstrom, T., Blume, L., and Varian, H. (1986), ‘On the private provision of public goods’, Journal of Public Economics, 29 (1): 25–49.Google Scholar
Bessen, J. (2006), ‘Open source software: free provision of complex public goods’, in Bitzer, J. and Schröder, P. J. H. (eds), The Economics of Open Source Software Development, Amsterdam and Boston, MA: Elsevier, pp. 57–81.Google Scholar
Bitzer, J. and Schröder, P. J. H. (eds) (2006), The Economics of Open Source Software Development, Amsterdam and Boston, MA: Elsevier.Google Scholar
Bøg, M., Harmgart, H., Huck, S., and Jeffers, A. M. (2012), ‘Fundraising on the internet’, Kyklos, 65 (1): 18–30.Google Scholar
Bouncken, R. B., Komorek, M., and Kraus, S. (2015), ‘Crowdfunding: the current state of research’, International Business & Economics Research Journal, 14 (3): 407–16.Google Scholar
Bradford, C. S. (2012), ‘Crowdfunding and the Federal securities laws’, Columbia Business Law Review, 1: 1–150.Google Scholar
Buchanan, J. M. (1965), ‘An economic theory of clubs’, Economica, 32 (125): 1–14.Google Scholar
Burian, J. M. (2000), Modern Czech Theatre: Reflector and Conscience of a Nation, Iowa City, IA: University of Iowa Press.Google Scholar
Byrnes, J. E. K., Ranganathan, J., Walker, B. L. E., and Faulkes, Z. (2014), ‘To crowdfund research, scientists must build an audience for their work’, PLoS ONE, 9 (12): e110329.Google Scholar
Cadsby, C. B. and Maynes, E. (1999), ‘voluntary provision of threshold public goods with continuous contributions: experimental evidence’, Journal of Public Economics, 71 (1): 53–73.Google Scholar
Citizinvestor (n.d.) ‘About Citizinvestor’. http://www.citizinvestor.com/about (retrieved 8 January 2017).Google Scholar
Coase, R. H. (1974), ‘The lighthouse in economics’, Journal of Law & Economics, 17 (2): 357–76.Google Scholar
Corazzini, L., Cotton, C., and Valbonesi, P. (2015), ‘Donor coordination in project funding: evidence from a threshold public goods experiment’, Journal of Public Economics, 128: 16–29.Google Scholar
Cowen, T. (1992), ‘Public goods and externalities: old and new perspectives’, in Cowen, T. (ed.), Public Goods and Market Failures: A Critical Examinations, New Brunswick, NJ and London: Transaction Publishers, pp. 1–26.Google Scholar
Crosetto, P. and Regner, T. (2015), ‘Crowdfunding: determinants of success and funding dynamics’, Working Paper 2015-02, Grenoble Applied Economics Laboratory (GAEL).Google Scholar
Davies, R. (2014), Civic Crowdfunding: Participatory Communities or Frontier Entrepreneurs? Cambridge: MIT Master Thesis in Comparative Media Studies.Google Scholar
De Tocqueville, A. (1945), Democracy in America, New York, NY: Vintage Books.Google Scholar
East Bay Times (2014), ‘Oakland police overseer says department showing improvement in complying with reforms’, available at http://www.eastbaytimes.com/2014/04/28/report-oakland-police-overseer-says-department-showing-improvement-in-complying-with-reforms/ (retrieved 8 January 2017).Google Scholar
Fixler, P. E. and Poole, R. W. (1988), ‘Can police services be privatized?’, Annals of the American Academy of Political and Social Science, 498: 108–18.Google Scholar
Gerber, E. M. and Hui, J. (2013), ‘Crowdfunding: motivations and deterrents for participation’, ACM Transactions on Computer-Human Interactions, 20 (6): 1–34.Google Scholar
Glazer, A. and Konrad, K. A. (1996), ‘A signaling explanation for charity’, American Economic Review, 86 (4): 1019–28.Google Scholar
Grytsenko, O. and Harding, L. (2014), ‘Ukrainians crowdfund to raise cash for “people's drone” to help outgunned army’, The Guardian (29 June, 2014). Available at https://www.theguardian.com/world/2014/jun/29/outgunned-ukrainian-army-crowdfunding-people-drone (retrieved 8 January 2017).Google Scholar
Guiso, L., Sapineza, P., and Zingales, L. (2010), ‘Civic capital as the missing link’, Working Paper 15845, NBER.Google Scholar
Harbaugh, W. T. (1998), ‘What do donations buy? A model of philanthropy based on prestige and warm glow’, Journal of Public Economics, 67 (2): 269–84.Google Scholar
Hof, K. V. (1868), Dějiny Velkého Národního Divadla v Praze: Od Prvnich Počátkův Až Do Kladení Základního Kamena, Praha: Nákl. slavnostního výboru.Google Scholar
Holmström, B. (1999), ‘Managerial incentive problems: a dynamic perspective’, Review of Economic Studies, 66 (1): 169–82.Google Scholar
Indiegogo.com (2012), ‘Soulardarity streetlight campaign: bold beginnings’, available at https://www.indiegogo.com/projects/soulardarity-streetlight-campaign-bold-beginnings (retrieved 7 January 2017).Google Scholar
Indiegogo.com (2013), ‘Rob Ford Crackstarter’, available at https://www.indiegogo.com/projects/rob-ford-crackstarter#/ (retrieved 8 January 2017).Google Scholar
Indiegogo.com (n.d.), ‘Fundraiser closed! Tooth goal has been reached!’ Available at https://www.indiegogo.com/projects/fundraiser-closed-tooth-goal-has-been-reached#/ (retrieved 8 January 2017).Google Scholar
Isaac, R. M., Schmidtz, D., and Walker, J. M. (1989), ‘The assurance problem in a laboratory market’, Public Choice (1986–1998), 62 (3): 217.CrossRefGoogle Scholar
Kane, W. (2013), ‘More in Oakland relying on private security’, SFGATE, available at http://www.sfgate.com/crime/article/More-in-Oakland-relying-on-private-security-4815336.php#page-1 (retrieved 8 January 2017).Google Scholar
Kim, O. and Walker, M. (1984), ‘The free rider problem: experimental evidence’, Public Choice, 43 (1): 3–24.Google Scholar
Klein, D. B. (1990), ‘The voluntary provision of public goods? The Turnpike companies of early America’, Economic Inquiry, 28 (4): 788–812.Google Scholar
Kuan, J. (2001), ‘Open source software as consumer integration into production’, Working Paper, SSRN, available at https://ssrn.com/abstract=259648 (retrieved 8 January 2017).Google Scholar
Kuppuswamy, V. and Bayus, B. L. (2015), ‘Crowdfunding creative ideas: the dynamics of project backers in Kickstarter’, Working Paper, SSRN, available at https://ssrn.com/abstract=2234765 (retrieved 8 January 2017).Google Scholar
Lerner, J. and Tirole, J. (2002), ‘Some simple economics of open source’, Journal of Industrial Economics, 50 (2): 197–234.CrossRefGoogle Scholar
Lo, P. (2014), ‘In gentrifying neighborhoods, residents say private patrols keep them safe’, Al Jazeera America, available at http://america.aljazeera.com/articles/2014/5/30/oakland-private-securitypatrols.html (retrieved 8 January 2017).Google Scholar
Liu, P. and Fabbri, M. (2016), ‘Perceptual deterrence: the effects of unarmed private patrols on crime’, RILE-BACT Working Paper Series 2016/03.Google Scholar
Marks, M. and Croson, R. (1998), ‘Alternative rebate rules in the provision of a threshold public good: an experimental investigation’, Journal of Public Economics, 67 (2): 195–220.Google Scholar
Massolution (2015), 2015CF The Crowdfunding Industry Report, Massolution.com.Google Scholar
Mollick, E. (2014), ‘The dynamics of crowdfunding: an exploratory study’, Journal of Business Venturing, 29 (1): 1–16.Google Scholar
Neighborly (n.d.) ‘Invest in the places you live, work and play’, available at https://neighborly.com/ (retrieved 8 January 2017).Google Scholar
Nelson, R. R. and Sampat, B. N. (2001), ‘Making sense of institutions as a factor shaping economic performance’, Journal of Economic Behavior & Organization, 44 (1): 31–54.Google Scholar
Oliver, P. (1980), ‘Rewards and punishments as selective incentives for collective action: theoretical investigations’, American Journal of Sociology, 85 (6): 1356–75.CrossRefGoogle Scholar
Olson, M. (1971), The Logic of Collective Action: Public Goods and the Theory of Groups, Cambridge, MA: Harvard University Press.Google Scholar
Ostrom, E. (1990), Governing the Commons: The Evolution of Institutions for Collective Action, New York, NY: Cambridge University Press.Google Scholar
Ostrom, E. (2005), ‘Unlocking public entrepreneurship and public economies’, Discussion Paper 2005/01, EGDI, WIDER.Google Scholar
Palfrey, T. R. and Rosenthal, H. (1984), ‘Participation and the provision of discrete public goods: a strategic analysis’, Journal of Public Economics, 24 (2): 171–93.Google Scholar
Pazowski, P. and Czudec, W. (2014), ‘Economic prospects and conditions of crowdfunding’, in Human Capital without Borders. International Conference Management Knowledge and Learning 2014, Portoroz, pp. 1079–88.Google Scholar
People's Project.com (2015), ‘People's project auditor: I heard no one say “what you are doing is bullshit”’, available at http://www.peoplesproject.com/en/articles/people-project-auditor-i-heard-no-one-say-what-you-are-doing-is-bullshit/ (retrieved 8 January 2017).Google Scholar
People's Project.com (2016), ‘All news’, available at http://www.peoplesproject.com/en/news/ (retrieved 8 January 2017).Google Scholar
Poole, R. W. (1980), Cutting Back City Hall, New York, NY: Universe Books.Google Scholar
Romano, R. and Yildirim, H. (2001), ‘Why charities announce donations: a positive perspective’, Journal of Public Economics, 81 (3): 423–47.Google Scholar
Rondeau, D., Schulze, W. D., and Poe, G. L. (1999), ‘Voluntary revelation of the demand for public goods using a provision point mechanism’, Journal of Public Economics, 72 (3): 455–70.Google Scholar
Rondeau, D., Poe, G. L., and Schulze, W. D. (2005), ‘VCM or PPM? A comparison of the performance of two voluntary public goods mechanisms’, Journal of Public Economics, 89 (8): 1581–92.Google Scholar
Rose, S. K., Clark, J., Poe, G. L, Rondeau, D., and Schulze, W. D. (2002), ‘The private provision of public goods: tests of a provision point mechanism for funding green power programs’, Resource and Energy Economics, 24 (1–2): 131–55.Google Scholar
Safer Rockridge (2016), ‘Security patrols to continue in 2016’, Rockridge News, 31 (2): pp. 5, 13.Google Scholar
Safer Rockridge (n.d.), ‘FAQS’, available at http://saferrockridge.org/faqs#accordion-3 (retrieved 8 January 2017).Google Scholar
Samuelson, P. A. (1954), ‘The pure theory of public expenditure’, Review of Economics and Statistics, 36 (4): 387–9.Google Scholar
Samuelson, P. A. (1955), ‘Diagrammatic exposition of a theory of public expenditure’, Review of Economics and Statistics, 37 (4): 350–6.CrossRefGoogle Scholar
Schmidtz, D. (1987), ‘Contracts and public goods’, Harvard Journal of Law & Public Policy, 10: 475–503.Google Scholar
Sen, A. K. (1967), ‘Isolation, assurance and the social rate of discount’, Quarterly Journal of Economics, 81 (1): 112–24.Google Scholar
Tilt (n.d.), ‘Security patrol for Lower Rockridge North/West’, available at https://www.tilt.com/tilts/security-patrol-for-lower-rockridge-northwest/description (retrieved 8 January 2017).Google Scholar
Špalek, J. and Berná, Z. (2011), ‘Threshold effectiveness in contributing to the public goods: experiments involving Czech students’, Prague Economic Papers, 3: 250–67.Google Scholar
Steinberg, R. (1987), ‘Voluntary donations and public expenditures in a federalist system’, American Economic Review, 77 (1): 24–36.Google Scholar
Stiver, A., Barroca, L., Minocha, S., Richards, M., and Roberts, D. (2015), ‘Civic crowdfunding research: challenges, opportunities, and future agenda’, New Media & Society, 17 (2): 249–71.Google Scholar
Sugden, R. (1984), ‘Reciprocity: the supply of public goods through voluntary contributions’, Economic Journal, 94 (376): 772–87.Google Scholar
Tabarrok, A. (1998), ‘The private provision of public goods via dominant assurance contracts’, Public Choice, 96 (3–4): 345–62.Google Scholar
Thierer, A. D., Koopman, C., Hobson, A., and Kuiper, C. (2016), ‘How the Internet, the sharing economy, and reputational feedback mechanisms solve the “lemons problem”’, University of Miami Law Review, 70 (3): 830–78.Google Scholar
Ukrainian Philanthropists Forum (n.d.), ‘Національний рейтинг благодійників’, available at http://www.ufb.org.ua/poslugi/provedenya_ekspertyzy/rating.htm (retrieved 8 January 2017).Google Scholar
Wheat, R. E., Wang, Y., Byrnes, J. E., and Ranganathan, J. (2013), ‘Raising money for scientific research through crowdfunding’, Trends in Ecology & Evolution, 28 (2): 71–2.Google Scholar