There is a close parallel between asking whether decisions are made at the center or near the edge, on the one hand, and if decisions are made by following prescriptive rules or if instead they are left to individual discretion. In class yesterday I said that economists as a group are biased in favor of decentralized decision making. The argument is that a person near the edge has information about local context that the center doesn't have, so the person at the edge can make a decision that better fits the circumstance.
But there is a counter argument that you should be aware of, that says rules are better when decision makers can quite possibly exert a negative externality on others but ignore that in making their own decision. A novel example of such a negative externality is given in this essay by Atul Gawande, On Washing Hands. (You can access the full text of this article if you are on the campus network. The Library has licensed access for you. If you are at home, use the CITES VPN to attain access.) This piece made quite a stir when it first appeared. It turns out that in hospitals doctors actually make patients sick by passing along the infection one patient has and giving it to another patient, though this happens invisibly so it is difficult to pinpoint who the culprit is. Hand washing stops the spread of infection from happening. The rule is that doctors are supposed to wash their hand each time they examine a patient. But many bypass the rule - their time is scarce, hand washing is inconvenient, and too much hand washing can irritate the skin. The piece discusses ways to get better compliance with the rule.
On more familiar territory, the negative externality argument presumably justifies why there are laws against speeding and drunk driving.
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