Final answer:
The unlimited theory suggests that individuals act to maximize their own individual benefit. Rational behavior and the concept of the invisible hand explain how individuals make decisions that strategically maximize their well-being, sometimes leading to suboptimal provision of public goods.
Step-by-step explanation:
The unlimited theory suggests that individuals act to maximize their own individual benefit. This theory is based on the concept of rational behavior, where individuals make decisions that will strategically maximize their well-being. In the context of public goods, individuals may act in their own self-interest, which can sometimes lead to a suboptimal provision of public goods.
For example, if a public park is considered a public good that benefits everyone, individuals may prefer not to contribute to its maintenance or upkeep because they can still enjoy the benefits without incurring the costs. This can result in the park not receiving enough funding and not being well-maintained, which ultimately affects everyone's enjoyment of the park.
Although the unlimited theory emphasizes individual benefit maximization, it's important to note that broader social good can also emerge from individual actions. The metaphor of the invisible hand suggests that market forces and individual self-interest can lead to positive outcomes for society as a whole, even if individual actions primarily aim at personal gain.