X-Post: The Freerider Problem

[Borodog]

Crossposted from Poly-ticks.

I'm so sick of seeing this "Freerider Problem" BS. There is no "Freerider Problem" in the free market. There can only be free rider problems under state collectivized action. Take for example, "national defense."

National defense does not suffer from any freerider issue, because there is no freerider issue. "Freeriders" are a red herring.

Imagine that my neighborhood is being terrorized by a mugger. I'm out jogging one night and the mugger attempts to attack me. But I know that a mugger is afoot, so I have forearmed myself ahead of time and am ready. I can defend myself from the mugger and shoot him dead.

Except . . . that according to the crazy "positive externality" theory of people like Crazytarian, I won't arm myself or prepare, because I heard that Bob across the street has armed and prepared himself. Why, I'll just freeride. Furthermore, I couldn't possibly defend myself from the mugger because of all that positive externality I'm handing out for free to the rest of the community! Heaven forbid I defend myself if it happens to help someone else! The result of course, of this ridiculous logic, is that I get mugged, which is exactly what the statist needs to happen to justify taking half my property every year so that they can "protect" me.

The fact that there are positive externalities is meaningless. Anything and everything can have positive (and negative) externalities. What matters are the incentives, and the direction and magnitude of the incentives is determined by who receives the primary benefit of your actions and the goods and services that you purchase. If I receive the primary benefits of the goods and services that I want, I am incentivized to buy them. If I like rosebushes, I will plant rosebushes, regardless of whether my neighbor who also likes rosebushes gets to look at mine for free. If I don't want to be mugged, I will arm myself and defend myself, regardless of whether or not this helps anyone else.

Where "freeriders" ARE a real problem is under collectivism, i.e. socialism. Under a scenario like the one that prevailed amongst the original British colonies in America, for example, where all the produce of every member of the community went into a common store to be doled out equally, each member does NOT receive the primary benefit of any increased labor, hence there is no incentive to work harder or produce more. In fact, since he does not receive the full DETRIMENT of working less, he is incentivized to do that, too, as is everyone. Hence most of the Plymouth and Jamestown colonies starved, even in the midst of plenty. Until of course, their experiment in socialism was replaced with an experiment in private property, where each family got to keep what they produced. And the colonies flourished.

National defense is the same. Microsoft purchases Invasion Insurance, for example, because it looks like Mexico is brewing up an invasion, and Microsoft has plenty to lose, regardless of the fact that Microsoft might be inadvertantly protecting Starbucks across the street. And Starbucks does the same. In fact, Microsoft and Starbucks both positively WANT these positive externalities of defense! Why? Because they don't want their customers to be killed!

[DCopper04]

I agree with this post, but don't you think it's a little naive to say that there would NEVER be any sort of freerider problem in the free market? I feel like no matter what economic system is in place, there will always be some form of a freerider problem.

Example: There is a ten story office building. I own the business on the first floor, you own the business on the second floor, and there are 8 other businesses owned by 8 other people on the other floors. You, along with the other 8 owners, decide to purchase protection from the local fire department for your respective floors. I decide it's not worth it to purchase that protection for my floor.

Now, if my floor catches on fire, you and the other 8 owners are pretty much screwed, since your business is useless if there is a fire blazing 10 feet below it.

I know that my incentive to purchase fire protection for my floor is greater than your incentive to purchase it for my floor. But I would assert that your incentive plus the incentives for the other 8 owners would add up to be greater than my incentive.

That could create a freerider problem.

[tolbiny]

While there may be exaples of the freerider problem this isn't one of them. There is no reason to purchase a floor of a building unless the others already owning the other floors have an agreement in place to pay for fire protection. It is an easy add on to the terms of sale and the "externality" can be easily avoided.

[DCopper04]

What if I just recently moved into the first floor, and the other floors' agreements with the fire department don't expire for another 6 months?

EDIT: Even if we were all starting our businesses at the same time, just because I decided not to purchase the fire protection doesn't mean the other floors wouldn't. The 9 other floors might decide that it is still a +EV decision to pay for the cost of their floor, plus 1/9 of the cost of my floor.

Either way, if you don't like my example, just replace it with another one in which other people's combined incentive is greater than one person's individual incentive.

[Ayn Rand]

The free rider problem exists, but is easily solved in most cases. Especially in your example. Why would anyone sell one floor without requiring fire insurance? Or why are there even multiple owners of the building?

Find an example that *can't* be solved.

[bkholdem]

[ QUOTE ]
I agree with this post, but don't you think it's a little naive to say that there would NEVER be any sort of freerider problem in the free market? I feel like no matter what economic system is in place, there will always be some form of a freerider problem.

Example: There is a ten story office building. I own the business on the first floor, you own the business on the second floor, and there are 8 other businesses owned by 8 other people on the other floors. You, along with the other 8 owners, decide to purchase protection from the local fire department for your respective floors. I decide it's not worth it to purchase that protection for my floor.

Now, if my floor catches on fire, you and the other 8 owners are pretty much screwed, since your business is useless if there is a fire blazing 10 feet below it.

I know that my incentive to purchase fire protection for my floor is greater than your incentive to purchase it for my floor. But I would assert that your incentive plus the incentives for the other 8 owners would add up to be greater than my incentive.

That could create a freerider problem.

[/ QUOTE ]

Selfishness will not disappear. Neither will selflessness.

What price would the rent be in top 7 floors of a building where the 1st floor does not pay for fire insurance, say in comparison to the rent of the top 7 floors of a building where the 1st floor does pay for fire insurance?

Would not the building owner pay for fire insurance for his building or somehow build it into the price of rent?

[surftheiop]

What about this,a group of houses and restraunts are built near a very marshy area. The mosquitos become terrible and the fear of West Nile sets in. A few people decide as a group that an organization should be formed to buy a mosquito spraying helicopter. Whats stopping me from not contributing but still recieving the benefiet of having less mosquitos?

[bkholdem]

[ QUOTE ]
What about this,a group of houses and restraunts are built near a very marshy area. The mosquitos become terrible and the fear of West Nile sets in. A few people decide as a group that an organization should be formed to buy a mosquito spraying helicopter. Whats stopping me from not contributing but still recieving the benefiet of having less mosquitos?

[/ QUOTE ]

I frequently read the 'ac' threads. I have considered myself a libertarian for at least 10 years. In the 'ac' threads I often say "I'm not ac myself" or something.

Now on to the point....

IF THESE ARE THE TYPES OF PROBELMS PEOPLE SEE WITH AC'ISM AND THESE ARE THE REASONS PEOPLE ARE CAUTIOUS ABOUT BELIEVING IN AC'ISM...WELL THEY MUST HAVE A PRETTY GOOD DARN MODEL OF EXISTING. COUNT ME IN!

[hmkpoker]

[ QUOTE ]
What about this,a group of houses and restraunts are built near a very marshy area. The mosquitos become terrible and the fear of West Nile sets in. A few people decide as a group that an organization should be formed to buy a mosquito spraying helicopter. Whats stopping me from not contributing but still recieving the benefiet of having less mosquitos?

[/ QUOTE ]

Not wanting to look like a total douchebag in the midst of your local setting, for one.

[surftheiop]

I never said this is a reason not to go AC..... it is however an example of someone who could "freeride" which the OP said is imposible, im just saying that freeriding would be posible in market situation

[bkholdem]

[ QUOTE ]
I never said this is a reason not to go AC..... it is however an example of someone who could "freeride" which the OP said is imposible, im just saying that freeriding would be posible in market situation

[/ QUOTE ]

Me and a group of 10 people went out to dinner, one dude kicked in a buck less for a tip...damn there is a big freerider problem. ... i need a governement agency to organize all future dinners i participate in.

[surftheiop]

where have i said the government needs to step in? Im just arguing that freeriding is posible, you just gave me another example, thanks for your help.

[bkholdem]

[ QUOTE ]
where have i said the government needs to step in? Im just arguing that freeriding is posible, you just gave me another example, thanks for your help.

[/ QUOTE ]

Your quite welcome. Please continue to provide additional examples. I find them enlightening.

[hmkpoker]

[ QUOTE ]
I never said this is a reason not to go AC..... it is however an example of someone who could "freeride" which the OP said is imposible, im just saying that freeriding would be posible in market situation

[/ QUOTE ]

It's not impossible. It happens all the time. Some people freeride the online porn market by going to every site and looking at the sample galleries. However, the only people who are going to freeride are the ones who wouldn't bother using the service if it HAD to be paid for.

Remember that kid back in high school/college who loved to mooch off people's pot, or asked people to blow the smoke in his face? He's not going to spend money for his own.

[FortunaMaximus]

[ QUOTE ]
[ QUOTE ]
What about this,a group of houses and restraunts are built near a very marshy area. The mosquitos become terrible and the fear of West Nile sets in. A few people decide as a group that an organization should be formed to buy a mosquito spraying helicopter. Whats stopping me from not contributing but still recieving the benefiet of having less mosquitos?

[/ QUOTE ]

Not wanting to look like a total douchebag in the midst of your local setting, for one.

[/ QUOTE ]

Valid point. So your image and reputation has value in AC?

[bkholdem]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
What about this,a group of houses and restraunts are built near a very marshy area. The mosquitos become terrible and the fear of West Nile sets in. A few people decide as a group that an organization should be formed to buy a mosquito spraying helicopter. Whats stopping me from not contributing but still recieving the benefiet of having less mosquitos?

[/ QUOTE ]

Not wanting to look like a total douchebag in the midst of your local setting, for one.

[/ QUOTE ]

Valid point. So your image and reputation has value in AC?

[/ QUOTE ]

Why would it not? If image and reputaion have value to you and me, and you and me are alive in an AC world, would we still not value those things?

[FortunaMaximus]

No, it's a good thing, and should have intristically MORE value in a better system.

[bkholdem]

[ QUOTE ]
No, it's a good thing, and should have intristically MORE value in a better system.

[/ QUOTE ]

What do you mean by saying 'no' and then agreeing with me?

[madnak]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
What about this,a group of houses and restraunts are built near a very marshy area. The mosquitos become terrible and the fear of West Nile sets in. A few people decide as a group that an organization should be formed to buy a mosquito spraying helicopter. Whats stopping me from not contributing but still recieving the benefiet of having less mosquitos?

[/ QUOTE ]

Not wanting to look like a total douchebag in the midst of your local setting, for one.

[/ QUOTE ]

Valid point. So your image and reputation has value in AC?

[/ QUOTE ]

No, image and reputation have value to human beings, and are therefore relevant in AC.

[hmkpoker]

[ QUOTE ]
No, it's a good thing, and should have intristically MORE value in a better system.

[/ QUOTE ]

I disagree. Image and reputation are highly overrated, especially in our society.

[FortunaMaximus]

[ QUOTE ]
[ QUOTE ]
No, it's a good thing, and should have intristically MORE value in a better system.

[/ QUOTE ]

I disagree. Image and reputation are highly overrated, especially in our society.

[/ QUOTE ]

Perceptual value and real value. In a better system, the value that those two unavoidable societal traits are regarded should have more value in relation to their actual benefits rather than their perceived value.

More of a meritocracy, less of a demagogue's society.

Hollywood's overvalued, but they have value. They're great entertainment. They ain't changing the world though, but they have a great medium for spreading messages that are easily digestible, and symbols that the audience has typecast on and off screen as having iconic value.

Scientology would have fallen flat and been swept under the rug a long time ago as just another cult, its resurgence can be strongly attributed to two people: Cruise and Travolta. In that regard, they're little different than early Christianity. Hubbard wasn't a great writer compared to some in his field, but he was able to recognize emerging talents with fragile egos and build their self-images by "curing" their problems.

Cure a follower, you've got an adherent for life. Cure a messiah... And you've got a religion.

Before I digress, if AC is to be meritocratic, it cannot discount those two factors. Image and reputation, no matter how hollow, will carry the message farther than rationality will.

"It's ok, I know how to make ten look like a thousand!"

[Rduke55]

I'm locking this thread because the majority of posts are coming from people that also post in politics. And it's getting fine traffic over there.

I'll be doing this for cross-posts that fit these criteria in the future.