Daniel D. answered • 07/26/23
International AP Economics teacher
The Free Rider problem relates to the topic of Public Goods. The textbook definition of public goods means any good or service that is non-rival and non-excludable in consumption.
Question to clarify “rival”: Does my consumption of a good affect your consumption of the same good?
Examples of rival vs non-rival consumption:
- Pizza is rival. If we order a pizza together, the number of slices I eat reduces the number of slices you can eat. There are only so many slices and each one I take means one less for you. (So lets share equally, no pineapple)
- TV broadcasts are non-rival. If I watch the Monday Night NFL game on TV, it does not affect or limit your ability to watch the same game on your TV.
Question to clarify "excludability": Is it possible to prevent someone from using or benefiting from something?
Examples of excludability vs. non-excludability:
- Airplanes are excludable. You need to purchase a ticket to be allowed on a flight. If you don’t have a ticket, you will be excluded from the flight.
- National defense is non-excludable. Everyone inside a country benefits from national defense. Even people in prison. There is no way to exclude anyone inside the country from benefiting from this public service. Other common examples of non-excludable goods include lighthouses, fireworks displays, and public roads.
The Free Rider problem exists for all public goods, all goods that are both non-rival and non-excludable. The problem being that since there is no way to exclude anyone from using and benefiting from public goods, there will inevitably be people who benefit from these goods without paying for them. Regardless of their legal immigration status, anyone who does not pay taxes and benefits from public goods is considered to be getting a "free ride", and therefore they are part of the free-rider problem.
