What Is the Free Rider Problem?
Free riders strain a shared resource by using it or overusing it without paying their fair share or anything at all.
Communities of any size can have free riders. A municipal council may discuss whether to charge suburban commuters for road and sidewalk maintenance or police and fire protection. Public radio and broadcast stations use airtime to solicit donations from non-donors.
Know the Free Rider Problem
Economics has the free rider dilemma. This is an example of a market failure. Inefficient distribution of goods or services happens when people do not pay their fair share of costs or use more than their fair share of common resources.
Free riding hinders conventional free-market production and consumption of commodities and services. Free riders have little desire to contribute to a communal resource since they may profit from it without contributing. As a result, the resource producer is underpaid. Without subsidies, the shared resource won’t exist.
The Free Rider Issue
The free rider dilemma in economics only happens under particular conditions:
- When everyone has limitless resource use.
- When no one can restrict consumption.
- Someone must generate and maintain the resource. Someone has to build and maintain it because it’s a swimming pool.
Economists say no company would provide products or services freely under these conditions—business retreats when free riders loom. A governmental agency must supply the shared resource using taxpayer cash or not.
As an economic issue, the problem arises when everyone may use a resource in endless numbers, but someone must generate and maintain it.
To their credit, some people in every community will pay their fair amount. Strong trust, reciprocity, and communal obligation make them eager to pay their fair share.
A free, shared resource might cause the free rider dilemma like air. Many residents will support voluntary pollution rules that encourage carbon-based fuel reduction. Some will refuse to modify their behaviors. All inhabitants, even free riders, will gain if enough obey the requirements and air quality improves.
The Solution to Free Riding
Communities with free-riding issues might attempt numerous options.
- Taxes subsidize public services to solve the problem. Fair cost-sharing is possible because taxes are proportional to income.
- Communities might charge dues to operate public resources as private or club resources, ensuring everyone contributes.
- Everyone can pay a little charge in communities. This will prevent overconsumption and may encourage altruism. Thus, many may prefer contributing a little to a resource they utilize.
- Traditional free markets collapse when people ride for free.
- Trouble arises when some community members don’t pay their fair share for a common resource.
- Failure to participate renders producing the resource uneconomical.