Tuesday, September 13, 2011

What is tolerance?

That is the emotion.
Is it ignoring something that bothers us?
Or is it thinking about it and then letting it go, saying “never mind

Or in theoretical terms, is it something called a decreasing increasing marginal disutility of a bad. We know what a good is - it is something that confers utility albeit with diminishing marginal returns. So a bad is something that increases our disutility. Tolerance is how quickly (or slowly) our marginal disutility increases, i.e. the second derivative is positive. A tolerant person is therefore someone whose second derivative of a bad is actually negative.

Some examples:
I’ve driven eight hours to get to my destination. Two miles from where I am supposed to be I encounter some heavy traffic. Every additional car or traffic light that goes against me increases my disutility. I am therefore intolerant. Alternatively, I say to myself, “I’ve already driven eight hours, what’s another couple of minutes.” Does this mean I am tolerant?

A hurricane just hit and we’ve lost power. After several days we get increasingly impatient and less tolerant. As more and more people get their power back except us (peer effects), each minute increases our disutility. Some greens move into our neighborhood. We don’t like those greens, but as more and more of them start moving in we become used to their presence. We are more tolerant.

But tolerance can also be tempered by constant exposure to hardship. Sometimes this is referred to as resilience. So we start off as being intolerant but exposure to lack of our creature comforts can harden some of us and at the same time make others less able to cope. Is this tolerance?

In economics, bads are the realm of public economics and analysis is usually confined to public bads, e.g. pollution, noise, etc. But the above examples are private bads. Is there any role for taxation/subsidy or regulation to increase the overall level of tolerance of a society? Should there be a role?

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