Solving the "Problem" of Free Riding
With the almost constant statist apologetics we hear from many government and academic economists, writes Ben O'Neill, it is hard to believe that the discipline of economics was once a thorn in the side of the state and its political elite. So commonplace are fallacious economic arguments advocating state control that it sometimes seems that refutation of all of these arguments has become a case of cutting the heads off the Hydra — a tiring and fruitless endeavor.
But if economics is to become an instrument of freedom and prosperity instead of an instrument of statism, then there are certain fundamental fallacies that must be continually challenged and discredited. Chief among these is the persistent non sequitur from externality to coercion — that is, the bogus conclusion that coercion is a proper means to solve problems involving economic externalities. FULL ARTICLE
Comments (42)
The beekeeper situation is also complicated by the fact that the bees are not just pollinating the neighbours flowers. They are there to extract the nectar from those flowers, a side effect of which is that they convey the "benefit" of pollination as is the purpose of the nectar being there in the first place. The beekeeper in placing his/her hives near the neighbour's land is actually in the process of collecting nectar owned by the neighbour using the device of a domesticated insect and then selling that nectar in the form of honey for his own exclusive benefit. Unless he has obtained the consent of the neighbour this might be considered an act of theft. In this context, the pollination effect may or may not be considered a compensating outcome, although the question of consent remains. If the neighbour is himself wanting to use his own bees to collect the nectar then he may rightfully consider that the beekeeper has taken away something of actual value.
Published: November 13, 2007 10:21 AM
Most arguments for public goods are logical fallacies, interwoven with myriads of contradictions. It does not follow from the fact that one provides a benefit that one must coerce another into paying for it, when that other never wanted the 'benefit' to begin with.
Published: November 13, 2007 11:13 AM
If they're so fallacious, and yet so durable, then should they be psychoanalyzed?
Published: November 13, 2007 12:18 PM
This article makes good points, but yet, it doesn't seem to make a very strong or persuasive argument for mainstream people. I know Austrian economics talks a lot about subjective value, but why should mainstream people assume that actions not voluntary taken already represent a "better" situtation, or that government interference necessarily results in something other than pareto efficiency? Those are the very points that need to be argued, and not merely 'suggested' to mainstream economists.
Published: November 13, 2007 12:27 PM
Ben O'Neill is mostly correct. However, suppose for a moment that the beekeeper's lot and the adjoining lots are all owned by one enterprise. Were the management of the enterprise to decide on increasing honey production and support the cost by allocating funds from the budgets of the managers from the adjoining lots, they are perfectly entitled to do so. Further, they may be correct that such transfers maximize the profitability of the enterprise, even if some lot managers get, to use O'Neill's vernacular, 'screwed.'
If the burden is too high, the managers of the other 'non-beekeeping' lots have alternatives, such as requesting transfer to other lots or abandoning their lot by leaving the firm.
Government 'owns,' and enforces by coercion or violence, the right to tax property and spend as it sees fit. Leaseholders (aka property owners) are either satisfied with the tax arrangements set up by their landlord (aka government) or they leave the property to others who are satisfied and willing to pay the tax 'rent.'
While transfer of payments for an externality like pollination is likely established for political, rather than economic, reasons, and likely inefficient as well, it is perfectly within the the rights of government, as 'owner' of the properties to set such transfers.
Further, the fact that there are other 'bidders' for the adjoining lots who are willing to pay the pollination tax only suggests that the pollination tax, as well as other taxes, may be set too low.
The only real criticism we might have is that the government/owner doesn't charge even higher pollination taxes by, say, auctioning off the property to the bidder willing to pay the highest pollination taxes for the lot. Such an auction would at least recoup to the government/owner the market tax rate for such property.
Published: November 13, 2007 12:38 PM
Government is such an emotional subject that I think it's better to change the venue and talk about something less electrifying, maybe housing covenants, for example.
Suppose a housing edition has a crime problem and all but one of the homeowners decides to pool resources and hire some security guards. The one who held out receives the benefit of the added security without paying for it. Isn't that somewhat close to stealing?
Published: November 13, 2007 12:39 PM
If all but one of the residents agrees to pay for security, the one hold-out does get some benefit for free. Of course, the other residents could direct the security guard to stop a thief breaking into any house but the non-paying customer.
But is the non-payer stealing? No, he is not taking someone's property or goods by force. He is not forcing the other residents to provide anything. Nevertheless, ordinary people are outraged by the situation and use the power of government to stop him from non-participation.
But those citizens using government force to tax their neighbor are the ones who are stealing. They are taking property from someone against his will by force. They may not like the fact that he won't pay for security, but by forcing him to pay, they are becoming the very thieves he needs protection from.
Isn't that an ironic example? Everyone agrees to pay for security against thieves except one person. So his neighbors become thieves and take his property! If only people could recognize their utter hypocrisy and admit they have become what they despise.
Published: November 13, 2007 12:55 PM
"The only real criticism we might have is that the government/owner doesn't charge even higher pollination taxes by, say, auctioning off the property to the bidder willing to pay the highest pollination taxes for the lot. Such an auction would at least recoup to the government/owner the market tax rate for such property."
The implicit assumption being the government rightfully owns its subjects' property... but last time I checked most countries are not communist.
David, I agree. In fact, why don't these people just call themselves the mafia and come out with it?
Michael, when mainstream economists actually begin to argue for the implicit assumptions in their arguments rather than assuming their truth, then it will be worthwhile debating them. Until then, they are assuming normative propositions and acting as though they were positive.
Published: November 13, 2007 1:00 PM
Good article. I have found that the only free riders tend to be government supporters or business owners who are in league with the government. They get the free or discounted ride on the backs of the citizens who benefit very little from what ever projects are being done in the name of a public good.
Published: November 13, 2007 1:10 PM
Does anyone know if the mises institute is working on an economics book to be authored/edited by Dr. Paul, to be released by Christmas? I got an email from an RP supporter telling me that this was on the works and I would like to get some confirmation from the folks here at LVM.
Published: November 13, 2007 1:19 PM
I think we need to emphasize a point that Ben just touched on in a footnote and that Steven mentioned as well. That is, even to characterize the commonly used beekeeper scenario as an example of a free rider situation is inaccurate. Look at what's actually going on. Sure, the neighbors get all their flowers, trees, and garden plants pollinated at no overt charge. But the bees have an unrestricted right of trespass over all the neighbors' properties, and they harvest a raw material feedstock, nectar, which is used in a bio-manufacturing process, the hive, to produce a salable good, honey, for the beekeeper, also with no overt charge. So who is really the free rider? NOBODY! What we really have here is a tacit barter transaction. The worst thing we can say is that no-one is sufficiently dissatisfied to want to change things. In all probability everyone is quite happy with the arrangement, if in fact they bother to think about it at all.
I believe if we take a critical look at other supposed examples of the free rider problem, we will find the same thing: a concoted situation couched in misleading terms, a story half told in order to support a preconceived conclusion. This is a common thread in most (all?) economic fallacies. Statist politicians and economists come up with sophisticated, fallacious arguments for state intervention to solve so-called problems, yet the real examples of those problems, whether they be externalities, monopolies, or anything else, primarily exist as a result of state intervention.
Published: November 13, 2007 1:33 PM
Mr. O'Neill,
You might consider applying your powers of argument which we see here to the concept and the programs of SOCIAL ENGINEERING presently afflicting the world.
Published: November 13, 2007 1:46 PM
Social engineering is a massive topic, but I agree, it is something I'd like to see more analysis on.
Published: November 13, 2007 1:52 PM
Anthony, do you agree that government: 1) 'owns' an unalienable power to tax property (including a pollination tax), 2) displace occupants who do not pay that tax and, 3) replace them with occupants who will? If so, then wouldn't the government's most rational economic decision be to replace the former occupants with new occupants who will pay the highest tax? That is to say, have 'tax competition.' V Harris
Published: November 13, 2007 2:08 PM
IMHO, the "free rider" problem is a good thing. It's natures way of getting people of like interests to reach out to each other... to compromise on like goals.
For example, when the government forces everybody to pay for education, then it also forces everybody not to care because it's somebody else's problem. But without it, you would then have parents organizing into teaching groups. Now education is not just a learning activity, but a social activity that is part of the culture.
Same thing with roads. Most people want a nice road out in front of their house, or to commute on. But when the government forces it, then instead of organizing into coops, or seeking out funding for private investment, all that effort instead gets focused into getting the government to pound people.
It reminds me of a recent law in SF to outlaw plastic bags. Where were the customers petitioning the grocery stores? where were the community groups going out and picking up plastic litter?
Published: November 13, 2007 2:09 PM
When it comes to social engineering...
Hayek's The Counter-Revolution of Science recently made available for free here
http://mises.org/books/counterrevolution.pdf
nuff said
Published: November 13, 2007 2:14 PM
Ben O’Neill is absolutely correct about external benefits not being a valid justification for the provision of any good or service by a tax-funded government monopoly. There is an important distinction that must be made between a free rider and a thief.
If I am the passive recipient of a benefit that arises exclusively from the productive activity of another person and not from any trespass or expropriation on my part, then I should not be required to pay that person for those benefits I received unless I had contractually agreed to pay for them. And if he can’t find an economical way to exclude me from receiving those benefits, then that’s his problem, not mine.
Published: November 13, 2007 2:30 PM
Mises's position on preferences is quite intuitive and should be palatable even to a mainstream economist: people demonstrate their true preferences ("pursuit of happiness") by their voluntary actions, not by following someone else's dictate.
On the other hand, even if a mainstream economist believes that his valuation of other people's happiness is somehow superior to their own perception, he still has some fundamental flaws in the "free-rider" theory:
- Let's imagine a "horrible" world in which rich people are forced to pay for protection of their vast possessions (because they have so much to loose if they don't pay for such defense), while some poor folks residing around their property lines enjoy a free benefit of such protection... In this imaginary world, rich people who depend on roads to transport their multi-billion $ worth of goods are forced to invest in roads by the nature of their business, while some common worker just derives their benefit for free (or just for some market-formed toll, in cases where no common-law easement would apply)...
What's really the problem with such world? People derive benefits of other people's fortune all the time. If we argue opposite, should we start charging people for enjoying the view of New York City's skyline (someone else's investment)? Fighting positive externalities seems more difficult to defend than actually advocating the "free-ride" as a beauty of true capitalism.
Published: November 13, 2007 3:43 PM
To a greater or lesser extent we are all free riders. Every productive act by every other person benefits me, however slightly. Since being a free rider is always a matter of degree, by what criteria could any particular case be considered to have provided "excessive" free benefits?
Published: November 13, 2007 4:26 PM
I was listening to NPR yesterday, the "Fresh Air" show had some bogus "economics writer" on, http://www.npr.org/templates/story/story.php?storyId=16217374 telling them that Greenspan failed by not being interventionist enough, that that's what caused the "sub-prime crisis", that it was greed on the part of fund managers that have been causing the business cycle. It is so very, very hard to listen to NPR any more. The more I read of real economics, the less anything "economic" in the mass media even chances a glancing blow to reality.
My Ron Paul T-shirts finally arrived. Ah, I'm a walking billboard.
Published: November 13, 2007 5:06 PM
"Anthony, do you agree that government: 1) 'owns' an unalienable power to tax property (including a pollination tax),"
They claim to. So yes, it is rational to do all as you said (if of course the government could calculate like a firm could), but the problem is, of course, that this ownership is not justified at all.
In general, if you want to produce something and realize that you cannot exclude others from it, and go ahead anyway, that is your problem.
Published: November 13, 2007 6:09 PM
I think Austrians who deny the existence or problem of free riders and public goods do Austrian economists a large disservice. Clearly, those things exist (we are all currently free-riding on the invention of packet-switched networks).
It does not follow from this, however, that government is the best solution to the free rider problem. It is up to entrepreneurs to figure out how to capture the most value possible from all goods, both public and private.
Published: November 13, 2007 6:41 PM
I enjoyed the free rider article and discussion, but a similar article and discussion on negative externalities would be enlightening, since, of coures, such are also important rationales given for state intervention of one type or another.
Published: November 13, 2007 7:06 PM
G, it is a matter of consistency. Hoppe's paper cited in the article shows the many odd contradictions and vagaries involved in the realm of public goods. A lot of neoclassical economics is swamped with nonsense, but this area is particularly bad. It is true that some goods have certain characteristics pertaining to public goods, but which these are is by no means fixed.
Published: November 13, 2007 7:37 PM
While true that government generally does not properly price for goods and services, at least with respect to taxes, government could properly price taxes by raising (or lowering) them to a point which the market will bear. This is just as a private firm would do.
Occupants who then continue to pay those taxes apparently value their right to 'own' that lot more than they dislike the burden to pay.
The other half of the transaction is the payment of revenue by the 'firm' to the beekeeper. This is the part that is most problematic to address. Suffice it to say that the private firm has the right to make that decision -- as does government.
Charge rent (taxes) at market rates and allocate resources as management (government officials) choose.
Published: November 13, 2007 7:50 PM
I think I understand what you mean now. The thing is, that is not usually the reason for which economists deploy 'public goods' arguments. The entire notion is evoked to justify coerced provision of the goods based on certain characteristics of theirs. It's not merely a pricing strategy.
Published: November 13, 2007 8:28 PM
Good effort, Ben.
However, it's puzzle that you make no reference to and seem unaware of the literature discussing the "fable of the bees" - originally raised by J. E. Meade in 1952 (in "External Economies and Diseconomies in a Competitive Situation”, Economic Journal 62 (1)), and subsequently famously debunked by Steven Cheung in his 1973 investigation of the beekeeping industry itself ("The Fable of the Bees: An Economic Investigation", Journal of Law and Economics, Vol. 16, No. 1. (Apr., 1973), pp. 11-33).
http://links.jstor.org/sici?sici=0022-2186%28197304%2916%3A1%3C11%3ATFOTBA%3E2.0.CO%3B2-T
Allow me to quote a precis provided in Cato summary of supposed "market failures":
"Steven N.S. Cheung examined the relationship between apple growers and beekeepers in Washington State .... Rather than market failure, he found that contractual arrangements between farmers and beekeepers have long been routine in the United States so that the supposed failure did not exist. This system of contractual relations between beekeepers and farmers is so
well developed, in fact, that while written contracts (sometimes so simple as to be recorded on postcards) are used to secure an initial arrangement among the parties, oral agreements are standard for subsequent relations. The various pieces of evidence lead Cheung to conclude, contrary to Meade’s story, that “the allocation of hives and nectar flows approximates that of a smoothly functioning market” in which resources are efficiently allocated. Even though he development of a market between beekeepers and tree owners would seem to be difficult, because of transactions costs involved in restricting the benefits of bees to those tree owners who pay, the existence of cultural norms defining acceptable behavior, and low monitoring and enforcement costs, voluntary arrangements are allowed to proceed.http://www.cato.org/pubs/regulation/regv23n2/zerbe.pdf
A more recent assessment of the US government's entanglement in providing assistance to beekeepers is here: "The Fable of the Bees Revisited: Causes and Consequences of the U.S. Honey Program", M. Muth, R. Rucker, W. Thurman & C. Chuang, Journal of Law and Economics, Vol. 46, 2003, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=582382.
I note that your discussion is limited to positive externalities or so-called "public goods" and does not consider whether the state can play any legitimate role with respect to negative externalities or what that role should be.
Sincerely,
TT
Published: November 13, 2007 10:29 PM
Bees?
What about "stealing" music?(irony quotes)
Published: November 14, 2007 12:58 AM
I note that your discussion is limited to positive externalities or so-called "public goods" and does not consider whether the state can play any legitimate role with respect to negative externalities or what that role should be.
TT, maybe you did not get the point of the article, but the author suggests implicitly that the concept of "externality" is dubious and otherwise irrelevant for economics, because of the inability to precisely define the concept (an "externality" stems from a subjective valuation and not an objective variable). Please see: http://mises.org/story/1360 and http://mises.org/pdf/asc/2003/asc9simpson.pdf
From the second link, the absurdity of the concept:
There are other problems with the "concept" externality. The term is suppose to identify and help one understand some significant phenomenon, as any term that is important to an academic field should. However, upon closer inspection, it turns out the term identifies a phenomenon that is so widely prevalent, and so insignificant, that it is meaningless and implies many absurdities. For example, when an individual buys a unit of any good (such as a loaf of bread), this has a negative external effect because now this unit of the good is no longer available for others to purchase and this makes it harder for others to obtain the good. The implication is that people who purchase a good should be forced to pay all other individuals who consume, or might consume, the good to compensate those individuals for making the good harder to obtain. Clearly, this is absurd.
The opposite would occur if individuals refrained from purchasing a good and demand for it decreased because of this. Here, the individuals that refrained from purchasing the good would call for payments from buyers that had an easier time obtaining the good.
The absurdity continues. What about, for example, when a person dresses nicely for a job interview? This has a negative external effect. When a person is well dressed for an interview he makes it harder for other people to get the job. This is a cost imposed on them for which they are not compensated. The same can be said about being
intelligent and articulate. Should those who are well dressed, intelligent, and articulate be forced to pay the sloppy, ignorant, and incoherent? Clearly not. But this is the conclusion one would come to if he attempted to consistently apply the "concept" externality.
The operative word here is "CONSISTENTLY". Those that tout the concept "externality" do so as expediency dictates and not consistently, because of the inherent dubiousness of the concept and also due to simple, unabridged hypocrisy.
Published: November 14, 2007 1:13 AM
My understanding is that real world beekeepers have resolved a problem academic economists have debated for decades, on purely theoretical grounds, without bothering to actually investigate what real beekeepers do.
The whole story reminds me of Bertrand Russell's quip:
"Aristotle maintained that women have fewer teeth than men; although he was twice married, it never occurred to him to verify this statement by examining his wives' mouths."
One economist Steven Cheung actually bothered to see what orchardists and beekeepers in Washington state were up to. He found an active market in the placement of hives. Where the honey yield is greatest the beekeepers were found to pay an "apiary rent" for the right to place their hives on the orchardist's land. Where honey yields are low, the situation is reversed, and the orchardists pay beekeepers a "pollination fee". The market works to bring these externalities into private economic calculation, regardless of theoretical mumbo jumbo.
Steven Cheung detailed the story in "The Fable of the Bee: An Economic Investigation" in 'The Journal of Law & Economics' volume 16, April 1973, page 23.
I should buzz off now!
Published: November 14, 2007 2:50 AM
Cheung's Fable of the paper can be read on-line in PDF format . See here.
Published: November 14, 2007 2:57 AM
Wow, I think this is the biggest response I have ever had from an article. It looks like I have opened up a real can of worms with the beekeeping example.
As with any real life example, there are a lot of questions that could be raised in a beekeeper situation depending on the context and details of the problem. There could be questions of positive externalities, negative externalities or even violations of property rights depending upon who does what with the bees, where they go, what they do, and so on. There may also be positive externalities to the beekeeper from the neighbours, as highlighted in footnote 4.
I have dealt in my paper only with the question of positive externalities, not because other questions are unimportant, but just because I wanted to confine the scope of my article to a single economic problem. There is certainly room to expand on the analysis by looking at negative externalities and other aspects of the problem.
TokyoTom: I must admit, I was not aware of this literature on beekeeping. Thanks for bringing it to my attention. However, I think the quotes you give are arguing on the basis of a false premise. Namely, that the absence of entrepreneurial action demonstrates a ‘market failure’. Meade’s assertion that a coercive solution is more efficient is false. Cheung’s empirical investigation is excellent, however, he seems to accept the false premise that the absence of contractual arrangements would have been a ‘market failure’. I would say that if there is no entrepreneurial action, then this is evidence of the absence of any arrangement that is a Pareto improvement on the status quo.
Fransisco Torres: I’m afraid I disagree with your interpretation of my paper - I did not mean to suggest (implicitly or otherwise) that the concept of externality is dubious or irrelevant for economics. It is perfectly relevant for the purposes of identifying potential opportunities for Pareto gains. What I did say is that the identification of potential Pareto gains via economic analysis must ultimately be tested against the revealed preferences of the people involved, rather than imposed coercively in opposition to their revealed preferences. To be clear, the quotation marks in paragraph 4 of my paper were not intended as smear quotes; they were only intended to explain the terminology to non-economists. The quotation marks in paragraph 7 were intended to highlight the fact that the “problem” identified in the free rider problem is only an alleged opportunity loss, not damage to another person.
Finally, I think the point made by John Reed is crucial: that all human action involves externalities. The consequence of this observation is that the problem of externalities is of wide scope, and the non sequitur from externality to coercion, if applied consistently, is a principle that must eventually lead to totalitarian rule.
Cheers,
Ben.
Published: November 14, 2007 5:09 AM
"I believe if we take a critical look at other supposed examples of the free rider problem, we will find the same thing: a concoted situation couched in misleading terms, a story half told in order to support a preconceived conclusion. This is a common thread in most (all?) economic fallacies. Statist politicians and economists come up with sophisticated, fallacious arguments for state intervention to solve so-called problems, yet the real examples of those problems, whether they be externalities, monopolies, or anything else, primarily exist as a result of state intervention."
-Ken Zahringer
and: "Finally, I think the point made by John Reed is crucial: that all human action involves externalities. The consequence of this observation is that the problem of externalities is of wide scope, and the non sequitur from externality to coercion, if applied consistently, is a principle that must eventually lead to totalitarian rule."
-Ben O'Neill
I'd think the combination of the, above, two ideas would make a needed book- worth far more than "Freak", and it's ilk.
As a +, it would probably join "What ever happened to Penny Candy?" as a staple to the, growing, home-schooling market..
Published: November 14, 2007 7:35 AM
I can't help but feel that the free rider problem has been misidentified.
I would not regard the beneficiaries of uinintended positive externalities as free riders by any stretch of the imagination.
the beekeeper who cultivates bees to sell honey or wax is pursuing his own goals and prooviding value to consumers of honey and wax. Bully for them. The extent that neighbouring farmers gain the spinoff benefit of pollination is neither here nor there as far as he or his customers are concerned. It doesn't cost them anything and hence that pollination benefit is irrelevant to their interests.
But this does not mean that free riders are not a problem. Free riding IS a problem when some consumers get to capture the SAME kind of benefit that other consumers pay for. If some people manage to take free honey while other consumers have to pay for it, there you have a genuine free rider problem, and I think we all agree that that is indistinguishable from theft.
Now, the Austrolibertarian utopia aside, in a constrained institutional context where a range of public goods are in fact funded by taxpayers and made available to the public at large ( whatrever ones ideological views on the right and wrong of that sort of regime), to the extent that some people use these public goods but do not contribute to the costs of providing them , there can be said to exist a free rider problem. (Let me sort the ideology from the equitability point here: I myself would much prefer to have a completely free emarket with full recognition of property rights and a complete absence of coercion and no taxation, but the world I live in doesnt work like that - and to the extent that I do use and benefit from the goods that my particular governmental oppressors have deemed to be 'public', I recognise that the taxes I am forced to pay are a form of payment for my enjoyment of those benefits, and I can't help resenting the legions of people who dont similarly pay, even as they use them. Ideologically, I would love to be able to refuse to pay tax and simultaneously refuse to use any of the public goods available to me, but I cant live like a hermit and I drive my car on public roads every day, so this leaves me with an ethical quandry I cant resolve unilaterally).
Granted, in a bona fide free market, there is no room for the very concept of a public good, and in that context, the sort of free rider described in the previous paragraph will have much less space to exist. I suppose that a sort of free rider could still exist in so far as people who co-operate to fund non-exclusive benefits to be enjoyed among themselves find the fruits of their efforts being used for free by others who had no part in their production. But in this case, to the extent that this does not reduce or dilute the benefits enjoyed by those who produced and funded it, where is the problem? Its an extra bonus that doesn't cost anybody anything!
which brings me to a rather different definition of a free rider: Its not someone who enjoys poisitive externalities emanating from the economic activities of others. The free rider problem simply boils down to rent-seekers, always and everywhere. And that means that the ultimate free rider is: Government!
Published: November 14, 2007 7:38 AM
I think we all agree that that is indistinguishable from theft.
No, we do not all agree. It is only theft if the recipient obtained the good in question with the intent of depriving the owner of possession of that good.
Some supposed free-rider public goods are not rivalrous, so when the recipient obtains a good without paying, he is depriving no one of anything.
Furthermore, there can be no criminal intent or even a criminal act when the good is provided to him without his even doing even doing anything.
Published: November 14, 2007 8:19 AM
Thanks for the article. It was an interesting read.
However, there's one thing I'd like to note. If there's indeed a free rider problem, you cannot rely on revealed preferences. They are just as dubious as any stated preferences. When confronted with a free rider problem, people acting economically have an incentive to lie.
For example, as an apple farmer, I might state that I'm not interested in bees because I'm absolutely satisfied with the "natural" amount of bees around my cottage. The article assumes this to be a revealed preference but it's not because there's no incentive to reveal my true preference. I might as well speculate that all my neighbors will pay for more bees and I can free ride.
Of course, the bee example still works in reality due to extra conditions such as social pressure: Other apples farmer might assume that I lie and thus punish me with other means (for example, by not invinting me and my wife for social activities, anymore).
In other words, it's an illusion that rational people are complying without additional incentives (such as peer pressure). And even non-rational people will probably suspect the other to exploit the common efforts and be rather emotional about it.
So, one may consider the government's actions as extended ways of creating incentives that small social communites would create, too. And we may ask what's better: A government that uses a public discussion and votes to get to a decision or a social mechanism that may also end up in lynching other people?
Published: November 14, 2007 11:35 AM
Where is the actual article?
Published: November 14, 2007 12:02 PM
http://mises.org/story/2769
Published: November 14, 2007 12:29 PM
As an Australian Austrian, I am sad to say that the Liberal Party must not pay any attention to Ben, we are in the middle of an election campaign were the Liberals are neck and neck with the Labor party (one of whom will be the next government) in the race to provide ever more outrageous benefits from the government.
The whole thing is out of control.
Published: November 14, 2007 4:46 PM
Don't forget too that in the sort of highly interdependent society that is promoted by the free market (due to the advancement of specialization of labor), there are many non-coercive ways to encourage people not to be free riders. People who are paying for whatever the free rider is not paying for may find it in their interest to boycott the free rider, and to encourage others to do the same. Various social pressures can be used to make the freeloader see the error of his ways.
Published: November 14, 2007 8:30 PM
Be, I agree with you, John Reed, Francisco and others that all human action involves externalities and that this recognition does not in itself justify coercive government involvement.
As human activities involve matters of preference it is extremely difficult to value externalities, government is not particularly well-placed to make caluculations and, as government itself involves significant externalities and rent-seeking, government involvement would necessarily involve significant costs (that may easily surpass the purported "gains" from applying measures that would reduce the externality). Libertarians rightfully oppose government intervention on moral grounds as well.
As externalities present opportunities for gains, it is quite possible that entrepreneurs or communities may deveop common/private law approaches that reap these gains by internalizing some of the externalities, as in the actual case of beekeepers noted by Stephen Cheng, especially if various social mechanisms can be brought to bear that reduce transaction costs, increase trust and cooperation and reduce free riders, as Larry Ruane notes (and much discussed by Bruce Yandle and Elinor Ostrom). But such results are by no means guaranteed, and it is easy to find cases where externalities were unresolved, with significant effect.
Yes, if the approach of using government to "correct" every externality were to be applied consistently, this may very well imply totalitarian rule - but this is hardly an eventuality that is even remotely likely. Totalitarian rule has rather been motivated by theft rather than intentions to fix the market economy, and politicians, pressure groups and voters have no interest in destroying the goose that lays the golden eggs, no one has the time or energy to engage in the endeavor of closing every externality - which most can see would be silly, fruitless and counterproductive.
Rather, the question of governmental involvement is really one at the margins. I think Austrians have great arguments about the costs of government action, as well as the possibility and merits of private cooperative action. However, in some cases the use of government tools might well provide gains at relatively low cost, and even Mises indicated that the use of government may be legitimate, as I have noted here:
http://mises.com/blogs/tokyotom/archive/2007/10/16/sophmoric-optimism.aspx
http://mises.com/blogs/tokyotom/archive/2007/10/12/draft.aspx
TT
Published: November 15, 2007 2:44 AM
I think that any argument to stop "Free Riding" is based upon envy and/or government propaganda. There is rational argument against free riders and they will always be there.
The biggest free riders are government contractors that have government force others who do not receive any services or money to pay for their work. Of course the biggest free rider is the public education system that rakes in hundreds of billions from people without school age children and forces at gun point people who pay other schools to teach their children to pay for other peoples children.
Besides, people free ride all the time. Ben Roethlisberger studies film of Payton Manning for self improvement and Manning receives ZERO money for this. I use my friends cook books to produce receipes that I did not pay for. Free Riding again!!!!! I put leaves in my friends yard for his service to pickup, free riding again.
Published: November 15, 2007 8:49 AM