smoking
... it has rarely been remarked that precisely because their activities have adjusted to the higher supply of public goods, richer economies may be more dependent on them and therefore more vulnerable to their destruction. This paper develops a formal model to capture this basic intuition, and to derive testable implications of this perspective on public goods dependency. Section 2 presents a model of two economies identical in every way except that one has solved the collective action problem in provision of public goods, which makes it richer directly but also indirectly by allowing production patterns to adjust to the public goods. Section 3 contemplates a catastrophe such as natural disaster or war which destroys public goods. The vulnerability of the two economies to this event is assessed, and it is shown that under certain conditions the richer economy will lose more in absolute and in relative terms. Section 4 concludes with a discussion of the implications of these findings. 2. Model Think of an island economy of farmers who have a choice between growing a food crop and a cash crop. The cash crop is grown because it can be exchanged for food and other goods by trade with the outside world. However, transporting the cash crop to the outside world is costly, especially if there are no modern port facilities. With a modern port the costs would fall, bringing increased net profit to producers. However, building the port requires up-front investment, which involves solving the collective action problem. If the economy manages to solve the collective action problem it can build the port, in which case it will adjust production to produci...