The position of the individual under law, whether this be formal or informal, is comparable to that present in any “publicness” interaction so long as law itself qualifies under this rubric. In the absence of effective enforcement, external or internal, persons are always motivated to violate the standards laid down. This is true quite independently of a person’s preferences with respect to the appropriateness or the inappropriateness of the standards themselves, considered as rational collective institutions generally applied or as viable and widely shared ethical norms. Even the person who places the highest benefit-cost ratio, in total or at the margin, on the extension of behavioral constraints through law may be motivated, in his private, personal capacity, to violate these constraints. He is, as noted several times, in a position akin to that of the potential free rider with ordinary public goods. Economists have adduced the free-rider dilemma to explain the failure of voluntaristic, market-like institutions to supply jointly consumed goods efficiently. A more directly relevant application explains the necessity of coercion in the instruments of taxation. Individuals may not voluntarily pay taxes even if their private-personal benefits from public spending exceed their nominal tax liabilities. Consider the person who has explicitly been party to the putative public-goods contract in which his assigned share of tax is matched against expected public-goods benefits. Suppose that he succeeds in evading his assigned tax obligation; this has the effect of reducing the total revenues available for providing-purchasing the jointly consumed good, the benefits from which are shared by other members of the collectivity.11 In evading his tax obligation, which is economically rational for the individual, he creates a “public bad.” The person in question imposes an external diseconomy on all others in the sharing group, all potential beneficiaries of the jointly consumed good or service financed from tax revenues.
This is, of course, nothing more than the converse of the “public good” that is created by law-abiding. Failure to produce “public bad” is equivalent to the creation of “public good.” And the failure to provide “public good” is equivalent to the production of “public bad.” The choice between constructions here depends largely on the purpose to be served by analysis and on the relevance to real-world problems. If, as in traditional public-goods theory, the purpose is to explain why market institutions fail and why governmental action may be necessary, attention should be paid to the “public good” that collective action might generate. Much the same applies to explaining the requirement that law be established collectively. If, by contrast, the purpose is one of trying to explain why long-established institutions of “law and order” break down without effective enforcement, it is best to change the focus of analysis and to concentrate on individual behavior in generating “public bads,” despite the basic equivalence in the underlying models.
There are, of course, many important modern applications of the theory of public bads, notably those which are introduced in analyses of environmental quality. The treatment of law violation in this section is, in almost all respects, identical to that which could be, and has been, applied to explain pollution in basic behavioral terms. To pollute the air or the water or to despoil the natural environment is to create “public bad.” To violate established law, whether this be codified or present in prevailing ethical norms, is formally the same. The whole discussion might be subsumed under the general rubric of environmental quality if we are willing to recognize that the sociobehavioral environment is as important for the quality of personal life as the natural environment. The analysis becomes a theory of behavioral pollution.
Why does an individual pollute? Why does the Los Angeles motorist add his bit to the already smog-laden atmosphere? Why does the family on a picnic dump its litter in the park? If the behavioral bases for pollution in such familiar cases are well understood, the extension to the less familiar terrain of law and order becomes straightforward. The individual pollutes, he creates public bad, because it is in his private, personal interest to do so. In creating public bad, the individual is creating or producing private good. It is through no malevolence or evil intent that the Los Angeles motorist adds to smog. He is not deliberately imposing external harm on others; his behavior produces this harm only as a by-product of his straightforward utility maximization, given the choices that confront him. The individual may recognize full well that there is a conflict between his behavior as a private decision-maker and that behavior which, if generalized to all persons, would produce results more desirable to him. But, in his private capacity through which he must act, there may be no means for the individual to influence the behavior of others, at least directly. Hence, it remains rational for the individual to do the best that he can under the circumstances. And since this is simultaneously true for all persons in the interaction, the aggregate result is pollution, deterioration in environmental quality, a result that may be desired by no one.
The interaction need not reach what we might call full pollution equilibrium, in which each and every participant behaves strictly as directed by narrowly defined self-interest. Saints may continue to exist in every social group. And if ethical standards influence the behavior of some individuals and groups in the community, these may limit their own actions while others are allowed to create the public bads of pollution. If the two sets of actors are heterogeneous, and if the polluting groups remain within certain critical size limits, an equilibrium of sorts may be reached with widely divergent behavior patterns. Even here, however, the situation may be far from optimal, even to those who are the polluters. Despite the possibilities for such a quasi-equilibrium, once pollution on the part of some members of the social group becomes the observable and predictable response pattern, the forces at work tend to  shift the system toward some full pollution equilibrium. This conclusion holds even if all parties recognize that they would have been better off had the erosion process never commenced. In the sequence of events, however, each party may have acted rationally, given the choice situations that were presented to him.
As of any moment in time, at any status quo, the socio-behavioral environment embodies some explicit adherence to ethical standards, some implicit obedience to informal rules stemming from custom and tradition, some obedience to formal law simply because it is law, some obedience to law that is due to effective enforcement and punishment expectations. These motivations may be mixed within the behavior pattern of a single person, and they may vary over persons in their relative weighting. From such a status quo, suppose that one person shifts his behavior pattern, and specifically that he departs from that behavior which would reflect acceptance of something like a Kantian generalization principle. He pollutes; he imposes an external diseconomy on all others in the community. By changing his behavior, the single person has modified the environment, he has changed the conditions of choice for others.
Consider a single example, that of auto theft. Suppose that one person who previously refrained from theft changes his behavior and becomes a thief. The precise object of his theft is, of course, under the ownership of a single party, and in this sense the external diseconomy is not general. But in making the behavioral change, which is presumably in his own private interest, the thief imposes diseconomy on all persons in society, over and above the directed harm to the owner of the automobile. Policing services must be increased if the same degree of order is to be maintained; these must be financed from general taxes. Private protection against theft must be increased, and this involves investment by all persons, and not only by those who have their property stolen. Insurance rates go up for everyone who owns an automobile. The predictability under which a person may own and operate an automobile is reduced. The quality of the sociobehavioral environment is reduced by the behavioral pollution that theft represents.
Although it is familiar in a sense, this example may be partially misleading because theft is normally forbidden explicitly in formal law, and enforcement and punishment institutions do exist. The behavioral pollution instanced here can occur only because of some failure of these institutions to accomplish  their objectives. That things are not nearly so simple, even here, will become apparent in the discussion of Chapter 8. The pollution of the sociobehavioral environment may, however, be illustrated readily with other examples.
Consider the situation in the orderly anarchy that was the university community in the late 1950s. Although there may have been a few notable exceptions, most university communities were then characterized by relatively pure standards of free expression. Almost any student or faculty group could invite almost any speaker on almost any subject in the assurance that the event would be allowed to take place without disruption. The intellectual environment of the university embodied free expression, and expectations were made on the basis of this fact. In the 1960s, much was changed, and much more than has yet been realized. Certain individuals and groups, acting in accordance with their own privately dictated norms which may or may not have been based on some ultimate ethical values, chose deliberately to preselect speakers and topics of discussion, and to disrupt meetings by speakers and on topics that were beyond the limits. This sort of behavior cannot be generalized to all members of the university community without rapid degeneration into something akin to the pollution equilibrium previously noted. In the 1970s, the student or faculty group that considers extending an invitation to a visiting speaker must make some predictions about potential acceptability to dissident elements. Can anyone seriously dispute the statement that the quality of the intellectual environment was lower in 1970 than it was in 1960? And, once commenced, how can erosion be stopped? How can behavioral standards which allowed the university community to remain an ordered anarchy for so long be recovered once they are lost?
Source: James M. Buchanan, The Collected Works of James M. Buchanan, vol. 7 (The Limits of Liberty: Between Anarchy and Leviathan)