What is the free rider problem, what are the examples of it, and possible solutions to it?
The free rider problem involves a situation where an individual or a group enjoy the benefit of something good without paying for it.
It’s common in our society today to see people take advantage of public resources and services without contributing to them. Well, no one can be prohibited from using these resources and services whether they paid for them or not.
A typical example of the free rider problem would be a park. Everyone gets to enjoy and have a fun time at the park just like those who contributed to building it.
What Is the Free Rider Problem?
The free rider problem is the burden where resources and services are used by people or groups who are not paying their fair share for it or not paying anything at all.
The free rider problem can happen in large or small communities. A city council in an urban area may argue about how to force suburban commuters to pay for the maintenance of its road and or the protection of its police.
Generally, the free rider problem is very common with public goods with non-excluded. For example, if the government reduce air pollution caused by greenhouse gasses, everyone will benefit from whether they contributed to it or not.
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When the Free Rider Problem Occurs
The free rider problem is an economic issue that occurs under certain circumstances;
- When everyone has access to consume an unlimited amount of a resource
- When nobody can limit anyone’s consumption
- When someone has to produce and at the same time maintain the resources.
Understanding the Free Rider Problem
The free rider problem is an economic issue that is regarded as an example of market failure. It’s an inefficient distribution of goods and services that occurs as a result of some people having free access to consume more than the amount they are supposed to.
Not paying a fair share for the shared resources or paying less or nothing for it.
Free Rider Problem Examples
The free rider problem examples are as follows.
Public Schools
Public schools are government-owned academic institutions where every child is welcome to learn. Children will be accepted into public schools regardless if their parents pay their fair share of the funding through property taxes or not.
The establishment of public schools allows people who don’t pay taxes to benefit from other taxpayers’ money by sending their kids to these schools.
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Resource Protection
Common resources like rivers, oceans, and fresh air all suffer from a situation called the “tragedy of the common” popularized by American ecologist Garret Hardin.
It’s a metaphoric label for a specific concept that is discussed in economics, ecology, as well as other sciences. The theory simply states that people will act in their self-interest and cause destruction to resources.
For example, if your community decides to stop overfishing in a local river and an individual living within the community assumes others will hardly fish at the river, so he doesn’t stop himself.
Using the Neighbour’s Wi-Fi
If by any means you were able to use your neighbour’s Wi-Fi by correctly guessing their password, you will be a free rider off their internet without using it.
This can also occur in a place of business. For example, people may use the Wi-Fi at a café just by parking outside and not going inside to buy a coffee.
National Defence
The military is responsible to protect the sovereignty of a nation, to protect territories belonging to that country at any cost. Only a few countries in the world do not have active military personnel.
Those who benefit from national defence may or may not have contributed by paying their taxes to support the military, but they are protected anyway.
Since some of us are living in countries where military service is not compulsory, we could be considered to be free ridding off the bravery of those in active service.
Community Watchers
Community watch programs protect and safeguard the neighbourhood. It offers a sense of protection and well-being to those participating.
Individuals who do not participate in the community watch benefit from the enhanced sense of safety.
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Tourism
Tourism over the years has grown the economy of many countries. It’s among the free rider examples when tourist benefit from a country’s infrastructure.
For example, a tourist visiting Paris will use the city’s free public services like parks, roads, sidewalks, and roads without contributing to the general tax revenue of the city.
Several cities across the world allow tourists to use these public services because they spend money and help create jobs in the cities they visit.
Street Lighting
This is something you cannot prevent the public to use whether they contributed for it or not.
People visiting a community with street lighting will benefit from it to find their way to whatever destination they are heading to. If the street lighting was set up by the funds of residents in that community, other people visiting or just driving or walking through that community will benefit from it.
Herd Immunity
Herd immunity is achieved when a large number of people are vaccinated against a disease, and others who are yet to be vaccinated are also protected.
In some cases, some people may decide not to get vaccinated, but they still benefit from the protection made available by others.
Lighthouses
Lighthouses are built to look out for vessels that need help. All sailors benefit from lighthouses whether they contributed to its construction or not.
All sailors will rely on a lighthouse in a time of need.
Beach Cleaning
We have seen volunteers sometimes gather on a beach to take out debris and trash. It’s a job done by volunteers and not the beachgoers.
During this voluntary cleaning, we don’t see the summer beachgoers participating. They benefit from this nonetheless, regardless of being a participant or not.
Possible Solutions to the Free Rider Problem
What are the possible solutions to the free rider problem?
Mandatory Contribution
The possible solution to the free rider problem is to ensure that individuals or groups who benefit from public resources or services pay their fair share.
This can be achieved by enforcing strict tax regimes to ensure that everyone contributes to the cost of production and upkeep.
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Private Public Services
The free rider problem can also be solved by privatizing the public good. Building parks or gardens that are only available to local residents is one way to solve the free rider problem.
Encourage Altruism
This means appealing to the public’s innate desire for what is right in society.
Enforcement
Enforcement might be the only solution left when voluntary contributions are not enough. This can only be achieved by enforcing certain laws as well as legal actions as a punishment for individuals or groups who do not pay their fair share.
Education
Another possible solution to the free rider problem is to raise awareness about the importance of supporting public goods. To achieve this, we need a communication strategy to reach out to small and large communities.
Conclusion
The free rider problem arises when an individual or a group take advantage of public resources and services without paying their fair share.
The free rider problem arises when everyone can consume an unlimited amount of resources. There are several examples of the free rider problem such as kids attending public school regardless if their parents are taxpayers or not.
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References
- Helpfulprofessor: 10 Free Rider Problem Examples
- Study.com: Free Rider Problem Overview & Examples | What is the Free Rider Problem?
- MasterClass: Free Rider Problem: Definition and Examples
- Economics helps: Free Rider Problem
- Investopedia: Free Rider Problem: Explanation, Causes, and Solutions
- JSTOR: Policy Reform and the Free-Rider Problem
