Question

Give an example of a free rider.

Short answer

A free rider is someone who uses a public good, like a city park, without paying taxes for its upkeep.

Step-by-step solution

Identify the Concept

First, understand the concept of a 'free rider.' A free rider is someone who benefits from resources, goods, or services without paying for the cost of the benefit or contributing to its provision. This is a common issue in public goods where consumption is non-excludable and non-rivalrous.

Contextualize With a Public Good

Think of a public good such as a city park. The park is maintained by the city using taxpayer funds. Since the park is open to all and it's difficult to exclude individuals from using it, it serves as a common example in discussing the free rider problem.

Illustrate with an Example

Imagine a scenario where citizens of a city do not pay taxes yet visit the city park. Although these individuals enjoy the benefits of the park, they do not contribute to its maintenance, thus acting as free riders since they benefit without bearing the cost.

Key concepts

Public Goods

Public goods are special types of goods characterized by two main features: non-excludability and non-rivalry. This means that it's difficult, if not impossible, to exclude anyone from using the good once it's provided, and one person's use of the good does not reduce its availability to others. Imagine a city park, which is a perfect example of a public good. The park is open for enjoyment by everyone, regardless of whether they have directly paid for its maintenance. This is why parks are maintained using public funds sourced from taxes. If the park were a private good, its use would require payment for access, and its usage could easily be limited to paying customers only.

Public goods present a unique challenge in economics because of the free rider problem. Once available, these goods can be accessed by anyone, including those who do not contribute to their production or maintenance. Hence, funding and maintaining public goods often rely on collective action, like government intervention and taxation.

Economics Education

Economics education is crucial for understanding how different types of goods and services are produced, distributed, and consumed. It explains concepts such as public goods, free rider problem, and the role of government and policy in managing these issues. Learning about economics helps individuals and policymakers make informed decisions about resource allocation and understand the implications of those decisions on society.

For example, understanding the nature of public goods enables us to appreciate why certain goods and services, like national defense or public roads, are provided by the government. An education in economics can also highlight the importance of addressing the free rider problem to ensure that public goods do not suffer from underfunding and neglect.

Grasping these economic concepts can lead to better civic engagement and policy-making, ultimately contributing to more efficient and fair distribution of resources in society.

Non-Excludable Resources

Non-excludable resources are a defining characteristic of public goods. Once these resources are available, it's not feasible to prevent people from accessing them, regardless of their contribution towards their provision. Examples include clean air, street lighting, and national defense. These resources can be enjoyed by anyone, and it's often challenging to charge individuals directly for their use.

Imagine street lighting in a neighborhood; everyone benefits from it as it deters crime and makes navigation safer at night, yet it's practically impossible to exclude anyone from its benefits if they choose not to pay. This non-excludability leads to the free rider problem, where some individuals enjoy the benefits of these resources without paying for their provision.

Addressing non-excludability requires innovative policy solutions, such as taxation or public funding, to ensure that non-excludable resources are adequately maintained and available for everyone to use.