Social Dilemma- Free Rider Problem

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Vernhis Mata

Social Dilemma- Free Rider Problem

Social Dilemma occurs when individuals in a group are only out for their benefits or self interests regardless of the potential ruin of society in the long run because of individual’s tendency to pursue their own short term interest. There are two important types of social dilemmas tragedy of the commons & free- rider problem which will be the one discussed.

Free Rider problem is the tendency for people to refrain from contributing to the common goods when resources are available without requiring any personal cost.  So people don’t contribute because the resource is still available even if they contribute or not. The free rider problem mainly occurs with public goods. Public goods as stated in the video are non-rival and non-excludable goods or services. Non-rival where the consumption of one person doesn’t decrease someone else’s enjoyment of the good or service. Non-excludable you cannot prevent one person or another from using the good or service such as the ocean.

Examples of public goods that face the free rider problems are police, fire fighters, roads, national defense, fireworks, and other municipal or community services. Most of these public services are available to all even those who don’t even pay taxes. Also a person using one of the services doesn’t decrease the next person enjoyment of the service.  But public goods are usually misused or not taken care of because people don’t really take responsibility for them since it’s not really theirs.  In an effort to provide these services which we so much enjoy government have mandatory taxes. If taxes were voluntary we would most likely not have the funds to enjoy these services because we only think about our immediate benefits and interest.

Another example is a channel like PBS, most people who watch the channel dont really give any contribution because they feel like its always there regardless of their donation or not. But if everyone acted in the same way we would eventually loose the resource.

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48 Responses to Social Dilemma- Free Rider Problem

  1. Fan Fan Chen says:

    http://www.luxist.com/2011/03/08/bill-gates-gives-up-worlds-richest-man-status-for-philanthrop

    Free rider problem comes from individual self-interest and human greed. For example, some Multinational companies (MNEs) transfer their paper to the lowest tax rate country in order to avoid high tax payment (tax heaven issue). Their goal is seeking to maximum the profits by minimizing any expenses. Those companies just register the companies’ names without any employees in the foreign country, such as Ireland. The only one thing they need do is the paperwork transitions and then they can effectively low down their costs. Some even finds the particular ways to avoid paying for some part of taxes.

    Their behaviors are sort of free rider but increase the government’s pressure. Taxing is a tool to help government to build up the power and lately they can bring back the benefits to the society. Once governments are lack of treasure and declines their power, they may find ways to create new way to collect taxes. And then, which the social class is the majority to pay for those new taxes? I am afraid it may come from middle honor families. Once the majority of the middle class badly declines their purchasing power, it will directly/indirectly hurt the whole domestic market and micro economics in the end. But who will suffer the loss? The firms, that is general including those MNEs above do. In this situation, it looks like a bad circle and finally they have to pay for those “free or half-free lunch.”

    If we wanted to avoid the Phenomenon of free rider among firms, every businessman should put eyes into the future and takes the social responsibility. Once they succeed, they even do some Philanthropy and charity like what Bill Gates does. In return, the society will return him the social honor.

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