Economics Questions

Re: The free rider "problem"?

gravyten577 — Mon, 28 Jan 2013 20:54:15 GMT

If an enemy army is approaching even the most miserly business men/women would start donating to local militas just to protect their own interests. Thats kind of how I look at it. The greater the percieved threat of invasion the more donations will come in while if no one was expecting invasion very few donations would come in.

Re: The free rider "problem"?

dude6935 — Mon, 28 Jan 2013 20:47:48 GMT

^this. Free riding is not harm.

Re: The free rider "problem"?

Bogart — Mon, 28 Jan 2013 20:07:01 GMT

The "Free Rider Problem" is a condition not a problem. People get "Free Rides" all the time. The entire human experience is one giant free ride. My life is greatly enhanced by Newton, Socrates and the like. And the free or even mostly free marketplace handles this condition rationally through preferences. Individuals trade on the free market and if they want something bad enough then they will pay for it regardless of who gets to free ride on that good or services. For example, a mall owner will purchase security services to prevent shoplifting and customers will free ride on those services to get protection from theft and assault as well.

It is government that uses propaganda to turn this condition into a problem and in its usual fashion it amplifies the problem. For example, most income taxes are paid by the highest earners. So all government service recipients, including those recieving anti-Social in-Security since 2010, are free riders on the wealthiest Americans.

Re: The free rider "problem"?

idol — Mon, 28 Jan 2013 03:00:21 GMT

Prime:

z1235:

How is the existence of your neighbor (vs. him not being there)

But he is there, and it tends to piss people off. That is why they form a government. If he were not there, and 100% of the people paid for the service, the result would be the same as if the government forced everyone to pay via taxation. That is why I am agnostic to the minarchy vs anarchy debate.

The solution is to make the public good a private good. One way to do this is by having an insurance policy that has a payout to those who actually pay for the defense in the event of an aggression.

Re: The free rider "problem"?

z1235 — Mon, 28 Jan 2013 01:20:19 GMT

Prime, how does him being there take money out of your kids' college fund? You're paying $200/month for your insurance/defense contract now and you'd be paying the same if he wasn't there, too. How does your neighbor's existence make anything more expensive for you?

Re: The free rider "problem"?

Prime — Sun, 27 Jan 2013 23:40:43 GMT

z1235:

How is the existence of your neighbor (vs. him not being there)

But he is there, and it tends to piss people off. That is why they form a government. If he were not there, and 100% of the people paid for the service, the result would be the same as if the government forced everyone to pay via taxation. That is why I am agnostic to the minarchy vs anarchy debate.

Re: The free rider "problem"?

z1235 — Sun, 27 Jan 2013 23:24:12 GMT

Prime:

The problem is that the paying customer is subsidizing the unpaying customer. If a defense firm has $1000 in fixed expenses, it is desirable to have that divided up between as many paying customers as possible. The more customers, the cheaper it is per customer, obviously. As a paying customer, how can I force that leach next door to pay up? After all, his refusal is taking money out of my kids' college fund, yet he reaps the benefits all the same. Enter government taxation.

How is the existence of your neighbor (vs. him not being there) making it more expensive for you to procure security/defense for yourself and your family? How is he taking money out of you kid's college fund?

Re: The free rider "problem"?

Prime — Sun, 27 Jan 2013 22:53:07 GMT

The problem is that the paying customer is subsidizing the unpaying customer. If a defense firm has $1000 in fixed expenses, it is desirable to have that divided up between as many paying customers as possible. The more customers, the cheaper it is per customer, obviously. As a paying customer, how can I force that leach next door to pay up? After all, his refusal is taking money out of my kids' college fund, yet he reaps the benefits all the same. Enter government taxation.

Re: The free rider "problem"?

Evilsceptic — Sun, 27 Jan 2013 22:51:42 GMT

The free rider problem is when an individual is able to "free ride" on the work of others and therefore avoid paying for a good or service and is at the centre of discussions of externalities and public goods. For example, if A does something (getting vaccinated, going to school, playing the viola) that creates benefits B then B is "free riding". In neoclassical welfare economics, this basically means that the good is being "underproduced" because A isn't thinking of the entire benefit of his consuming the good. The solution is to subsidise goods which have external benefits and tax goods which have external costs and therefore internalise the benefit.

It also applies to public goods - when a good is both non-excludable (just what is sounds like, A can't exclude B from consuming the good once it is produced) and non-rivalrous (once the good is produced by A, B can consume the good without reducing A's benefit).

Re: The free rider "problem"?

HabbaBabba — Sun, 27 Jan 2013 21:44:55 GMT

I think that goddamn constitution is to blame. Anything mentioned is a right, so I get it for 'free'. How dare you charge me. Basically idiocracy, circular logic.

Taxes are unnecesary.

But taxes build roads.

But without taxes you could build more roads with the money you keep.

But the government needs that money for taxes...

The free rider "problem"?

hashem — Sun, 27 Jan 2013 21:07:12 GMT

What's the "problem"? And how is government advanced as a solution when a huge chunk of society "benefits" from government "services" while not paying taxes? Doesn't crowdfunding (which taxation is an example of) remove the "problem", undermining yet another fundamental argument for government?

EDIT: crowdfunding, not crowdsourcing.