Free Rider Essay Example

in the interest of the single producer to expand output if other producers hold back. The resulting "Tragedy of the Commons" is taken to be an example of "market failure" and, consequently, a basis for government intervention.

The "free rider problem" also arises in the case of the cartel. A group of competitive producers, for example, may be able to gain through collusion by restricting output and increasing price. The ability to collude, however, is undercut by the incentive each member has to "chisel" or free ride. Thus, government sanctions are sought to restrain free rider activity in the case of cartels in agriculture, labor unions, transportation, occupational licensure and other areas

Examples of Free Rider Problem

For example, a beekeeper may keep bees solely as a means of producing honey. However, an ancillary effect of this activity an externality is that the bees will pollinate flowers in surrounding properties, benefiting the owners of those properties at no cost to them. Nor is there any practical means by which the beekeeper can produce his honey without conferring this benefit on his neighbours. Thus, the "good" provided to surrounding property owners is non-excludable.

Observe that this situation involves no detriment to anyone, let alone any violation of rights. The beekeeper chooses to buy the bees because he expects to be better off by virtue of this action. Moreover, as an unintended consequence of his purchase, surrounding property owners also find themselves enjoying a benefit from the bees, at no cost to them. This may seem like a fortuitous event even something to be celebrated.

Lesson Learnt I (Content)

The problem

is not that anyone has aggressed against anyone else. It is not that anyone's rights have been violated. It is not even that anyone has suffered any detriment at all. Rather, it is a problem only when compared to what might have been done instead a problem of allegedly inefficient underproduction of the good in question. In other words, the problem is that, if not for the non-excludability of the good, things could potentially have been even better.

Lesson Learnt II (Soft Skills)

From the documentary project that we have done, we have learned the skills of organizing task that need to be done in group. It also increases the level of teamwork among us in the team. Aside from that we have learned how to analyzed on some issue and make some conclusion about it. Align with our documentary title which is ‘Free Rider’, it has opened up our mind to see the real world problem that is happening around us. It makes us aware that how such a little problem created by society can give a big impact on the country and the government. For example is the free rider problem. It may be seen as a small problem by society but it can give negative effect to the productivity of our country. It can occur billion ringgit of losses and at the same time, paralizing the development of our nation.

Recommendations

Solutions to Free Rider Problem

In assessing arrangements to solve the "problem" of free riding, economists claim to be guided by the principle of Pareto efficiency. That is, they claim to put forward arrangements that will

make at least some people better off without any detriment to others, in terms of their own happiness. If they are serious about this efficiency criterion then any proposed arrangement must surely accord with the preferences of the people involved, as revealed through their actual behaviour. It follows that the ultimate test of any allegedly Pareto-efficient arrangement must surely be to convince all of the parties affected that they are better off or at least, no worse off under the proposed arrangement. Indeed, the consent and agreement of all parties must be regarded as the sine qua non of Pareto efficiency.

Unfortunately, this is not usually how economic analysis of these problems proceeds. Rather, such analysis is frequently conducted on the basis that the economist knows more about the preferences of the people involved in the situation than those people do themselves. In particular, dubious mathematical assumptions are often used to steamroll the implicitly revealed or even explicitly declared preferences of those actually taking the actions to prove, on the basis of a mathematical model, that they are really happier under the economist's desired arrangement, even if they may complain to the contrary.

Thus, although the problem of free riding does indeed identify situations that involve the potential for further gains, it most certainly does not follow that government provision of goods or other coercive arrangements will improve the situation. Those who advocate coercive arrangements to obtain Pareto efficiency gains are forced to ignore the revealed preferences of the people involved, and thereby commit a fundamental economic error. By arguing for coercion as a means of solving the problem of positive externalities, they

elevate the policy of forced payment for unsolicited goods to the status of an economic ideal. This is surely one of the most conspicuously tyrannical arguments in modern economics.

Recommendation on the Event

It is highly recommended that the Public Finance Documentary Awards is to be considered as a core event for the Bachelor of Administrative Science students. Aside from training the students to do the task in group, it also make the student learned about professionalism by properly organizing the project and the presentation. It also gave an early start for the AM228 students about how the corporate life is going to be. Another recommendation is the event should not be limited to Public Finance subject only, but it can also combined with other subject and the students can choose a broader types of topics or issue to be presented based on what they have learned in other subjects too. It may help the student to be more understand about what they have learned and how to apply it to the real world.

Conclusion

Market "failure" and "free rider" problems have traditionally been alleged to provide a basis for government intervention in a number of cases where real-world markets fail to conform to the norm of "perfect" competition. When the same perfect competition model is taken as the norm, the wide- spread use of government power to confer monopoly privileges to particular groups negates the effect of potentially beneficial free riders and itself causes market failure. The free rider who, in the absence of government sanctions, makes cartelization ineffective, has been almost totally neglected in welfare economics. However, this beneficial

free rider appears to be far more important from the standpoint of public policy than the widely dis- cussed free riders associated with public goods, common property resources, and other externalities.

It is ironic that the widely cited free rider justification for government intervention fails to recognize the role of the state in shackling the beneficial free rider. It is increasingly apparent that "government failure" is no less common than "market failure". That is, real-world governmental institutions never conform to an idealized polity any more than real-world markets conform to the "perfect market". Moreover, as Buchanan suggests, market and governmental alternatives must be examined as they are-warts and all. It is also important to recognize that government intervention not only results in non-market failure within the public sector, it also encourages private firms to protect their interests through methods which produce further distortions in the market." Government tax and regulatory measures, for example, stimulate the formation of cartels and trade associations in order to deal with agencies of government having power to influence these activities.