Free-riders have long been used as an argument for why a state is necessary when it comes to so-called public goods. But perhaps free-riders should rather be viewed as safety valves against state overreach.
The Free-Rider and the State
According to neo-classical economics, public (collective) goods such as defense, the judiciary, and infrastructure cannot be produced optimally by the free market. Since these goods are available to everyone and no one can be excluded from enjoying them, rational individuals will be incentivized to free ride—use without paying. They will act as free-riders and let others foot the bill. The consequence is “market failure,” meaning that public goods are either underproduced or not produced at all.
Historically, the solution has often been the state’s monopoly on the use of physical force. Through mandatory taxation, everyone is forced to contribute. The lighthouse is an example frequently used in socio-economic literature. Once a lighthouse is built, all ships can benefit from it, but who will pay for its construction and operation? The argument is that this does not happen voluntarily, and therefore, a state is needed. The same applies to defense. Few will contribute enough to a defense force voluntarily, yet they benefit from it once it exists. This is the rationale behind paying taxes for defense.
The State’s Solution to Free-Riders Is a Contradiction
If the premises behind the free-rider problem were absolute, the state itself would be an impossibility. State theory assumes that humans in a state of nature are too selfish and short-sighted to cooperate voluntarily on collective solutions. But a state does not emerge in a vacuum. It is built, staffed, and governed by people too. If human nature is fundamentally cynical and selfish, why should we believe that the individuals occupying the state’s positions of power will act in the public interest? On the contrary, history shows that politicians and bureaucrats have strong self-interests in expanding their own budgets, mandates, and control over the population.
The fact that humans throughout history have organized themselves into resistance movements and risked their lives in rebellions against tyrannical states is a testimony against the theory of humans as fundamental free-riders when it comes to public goods. A rebellion is a collective good involving immense personal risk for the individual, where the potential reward (freedom) benefits everyone including those who sat quietly. Yet, people still rebel.
The False Premise of the Rational Human
The greatest flaw of state theory is that it builds upon a cynical view of the human being as an isolated, selfish, and rational entity (Homo economicus) who must be forced to cooperate on public goods. Modern evolutionary biology and anthropology show, by contrast, that humans are an ultra-social species. For hundreds of thousands of years, our ancestors’ survival depended on an innate capacity for voluntary cooperation, collective problem-solving, and sharing with both acquaintances and strangers long before the first state ever existed. Through extensive empirical research, Nobel laureate Elinor Ostrom documented that local communities worldwide are fully capable of managing common-pool resources and solving collective challenges without overarching state regulation. She demonstrated that humans naturally develop intricate systems of trust, reciprocity, and social sanctions against free-riders.
The survival of this cynical view of human nature for so long in political science and economics is primarily due to a methodological weakness. To run economic simulations, build data models, and solve differential equations, economists rely on simplifying reality. The concept of Homo economicus was not created because it describes real people, but because a purely calculating, rational robot is the only actor predictable enough to fit into a mathematical data model.
When using simulation models that have stripped away humanity’s capacity for voluntary cooperation and sense of fairness, the mathematical result is always the same: society collapses into free-rider problems unless an external power intervenes. By confusing these data models with the real world, technocrats and politicians have created a false oversimplification. They have designed a society based on coercion, legitimized by mathematical models that have defined away human goodness and volunteerism. There are no constants in human action, which undermines mathematical models of human interaction, as Ludwig von Mises demonstrated.
The Free-Rider as Quality Control
When collective solutions must be found through voluntarism, the dynamics change fundamentally. Without a monopoly on violence to back them up, planners cannot send the police to confiscate your money. Projects must be funded through argumentation, persuasion, and utility assessments.
In such a society, the threat of people withdrawing their support by choosing to become free-riders functions as a continuous form of quality control. If those leading the collective project become corrupt, wasteful, or move outside their original mandate, contributors will stop giving. This dynamic forces transparency, efficiency, and humility. It also forces an acceptance of dissent. If a project is so poor or controversial that most people will not support it voluntarily, perhaps it should not be carried out at all.
When the state takes over and monopolizes collective solutions, these decentralized and voluntary control mechanisms are short-circuited. Since the state collects its funds through coercion (taxes), financing is disconnected from the quality of the service. The option to protest by withholding resources is criminalized as tax evasion.
Consequently, the natural brake against the state going too far disappears. History clearly shows that institutional checks and balances around the state—such as the separation of powers, constitutions, and periodic elections—at best only slow down state growth temporarily. Often, they function instead as tools that legitimize a gradual acceleration of state coercion. Through technological mass surveillance, fine-grained regulation of daily life, and what political scientist Robert Higgs calls the “ratchet effect”—where the state expands its powers during crises and never fully relinquishes them—modern democracies today exercise a level of control over the individual that historical tyrants could only dream of.
A New Approach to Collective Problems
The fear of the free-rider has blinded us to a far greater danger. By eliminating the choice to opt out, we have dismantled the most effective barrier against corruption and tyranny.
Without the state’s monopoly on violence, collective problems and opportunities must be resolved through innovative, voluntary structures. This can occur through privatization and clear property rights (which solves the tragedy of the commons), through social norms and reputation in decentralized networks, or through modern technology like smart, conditional contracts where funds are only released if a critical majority contributes voluntarily.
The vulnerability of voluntarism to free-riders is not a fatal weakness that must be eradicated with the state’s apparatus of force. It is the price we pay for freedom, and it is the most vital mechanism for keeping power in check. When the state monopolizes these tasks through its monopoly on violence, it triggers what economists and psychologists call a crowding-out effect. External pressure and state coercion undermine and replace an individual’s intrinsic, moral motivation to contribute voluntarily. By outsourcing responsibility to an impersonal bureaucracy, people’s moral instinct is numbed. We stop feeling a personal responsibility for our fellow human beings because the state picks up the tab via the tax bill anyway. The state institutionalizes the free-rider problem by destroying the social mechanisms that hold real communities together. Paradoxically, the state’s solution to the free-rider problem has made us more like Homo economicus, thereby creating a vicious cycle for further state activism.
Conclusion
We do not need a state to solve the problems of public goods. Humans possess potential for voluntary cooperation when resolving collective issues. We are not the unrealistic “people” as postulated by economists’ data models. Yet, it is these very models that are used to justify why the free-rider problem regarding public goods must be solved by the state. This is perhaps the primary reason for the massive growth of the state in modern times. On the contrary, given our innate nature, free-riders serve as a quality control mechanism for the management of public goods.
The frequently-used theoretical example of the lighthouse falling victim to the free-rider problem turns out to be incorrect. Historical investigations reveal that lighthouses initially emerged through voluntary cooperation without state participation. Ships paid a lighthouse fee when they docked at port. Those who did not pay were not allowed to dock.
