In recent years, the term “Free-Rider” has been popping up all over the place in all manner of social sciences.
Free-Rider, or the Free-Rider Problem, isn’t a bunch of motorcyclists robbing banks but an economic failure occurring when people benefit from public goods without contributing to their generation.
Now all of that sounds complicated, but it’s really just freeloading with extra steps. Think of your Netflix account your best friend pays for. You’re free-loading off them, but it doesn’t affect them negatively.
Free-riding, on the other hand, is as negative as you can get. It’s essentially the act of leeching off of public goods. Which is great, but exactly what is a public good? A public good is a good that is both non-rivalrous and non-excludable.
What Exactly Is Free-Riding?
Alright, you may say, “I still have no idea what you’re talking about”. So let’s dig a layer deeper. A good is non-rivalrous when using it does not prevent others from using it as well.
Rolling with Netflix, a single account can have five individual profiles, meaning five separate people can use a single account to match their individual tastes.
Let’s say the account owner, Bob, makes a fifth friend, Mr B, and Mr B wants in on Netflix. Suddenly, there are six people and five profiles. Something has to give. Someone gets kicked out or has to share with Mr B.
Because more than five people can’t use a single Netflix account without a burden, a Netflix account is not non-rivalrous.
Something non-rivalrous is a starless night sky; one person gazing at the sky doesn’t prevent another from doing the same (and who wouldn’t want to stare at the sky for hours and hours? No? Just me?).
A non-excludable good is on the other extreme. Instead of whether a good can sustain being used by many, it’s about whether a good can be used by many. A good is non-excludable when certain individuals or a group of individuals can’t be excluded from using them.
For example, a public road. Nobody can “restrict” another person from walking on the same road they’re on [except the infinite cars during rush hour (but nobody gets past those)] and is, therefore, non-excludable.
Keeping the Netflix train going, a Netflix account isn’t non-excludable due to the existence of a password. All they have to do to exclude people is not reveal the password.
So a public good is a good that’s both non-excludable and non-rivalrous. So what’s something that is both?
The simplest example I can think of is a street light. Even in developing countries, where there’s a road, there’s almost always a street light. And they’re essentially omnipresent in developed countries. You can literally see them from space; that’s how many there are.
You can’t stop someone from using a streetlight. Nor does it get dimmer the more people use it. Non-rivalrous, non-excludable. Public good.
They’re powered by the electric grid, which in turn is funded by tax dollars. In this case, free-riding would be enjoying the benefits of streetlights without funding them through taxes.
“If this person isn’t paying taxes, why should I?” In essence, the Free-Rider Problem is the ouroboros of an ignorant conformity and dramatic negligence.
Free-Riding The Air
There are plenty of examples of economic free-riding on even larger scales, but I want to show you one that’s a little different, and the simplest of them all—Air or, to be precise, quality of air.
Air is non-rivalrous. Billions breathe it every day. It’s non-excludable (you can stop people from breathing air, but that’s called murder).
I hear you, “Air has nothing to do with the economy! It’s air!” and right you are because I’m not strictly talking about economic free-riding here. Rather, I’m saying we humans are free-riding off of Earth.
Environmentally destructive human activities, such as deforestation, serve to trap greenhouse gases in our atmosphere, essentially turning Earth into a microwave. Only, we don’t taste as good as a burrito.
When we cut trees down, oxygen loses sources of replenishment, lowering its non-rivalrousness. The more polluted the air gets, the more conditions like asthma spread, lowering its non-excludability.
One of the major obstacles against us is excessive free-riding. No country wants to incur a loss while investing in slowing climate change.
As economist Jean Tirole puts it: “‘My country first’ is a big slogan in almost every country nowadays. That’s a difficulty. We all want others to do the job.”
And he’s right. Why should, say, Germany invest in sustainable development when in the short term, they’d simply be bleeding green money? None of this would be an issue if every single country chipped in what they could towards battling climate change.
Pretentious as it sounds, there really is no other solution to the corner humanity has written itself into. Teamwork makes the dream work. This team just happens to be five hundred million miles long.
What have we learned today? Humanity is doomed, and Netflix accounts are tight.
See you next week!