When I said “cost” I did not explicitly mean monetary. The analysis could include psychic costs…
Their maximal profit is clearly to be a free rider AND not pay for it. Clearly it is possible to pay for a service and profit, but the most profitable option might still be free riding on other people’s contributions.
I’m considering the case where everyone really does want the service, but because of the distribution of property rights (namely that each man controls and is liable for his own actions), it is in each individuals rational self interest to try and be a free rider on the public good. I’m trying to demonstrate a way to get around this.
Right. Ostracism etc are going to be effective in practice I think. But a priori, it doesn’t hold up. I’m trying to show an a priori reason why the market would be able to solve pure public goods problems.
All the cases where public goods are provided through other organizational means are nice, but I want something really general. Its kind of like how poor people are sometimes benefitted by free market charity, but really you can also show that no matter what psychological dispositions market participants have, the result is going to be better for poor people.
Thanks Conza. I didn’t see your post for a while for some reason.
I had already looked at the first two sources you linked.
References some nebulous “entrepreneurial” solution to the free rider problem. This thread is trying to find out what that solution could be.
I have read hoppe in the past. Is his treatment of free riders different from the other authors? I do not want to read the same thing over again…
I have not read this extensively, but skimmed it for “free rider”. My basic response is that yes there are free rider problems in both the political and free markets, but in politics the free riders are fixed. It is not merely the fact that free riders exist on the free market, but that everyone can try to become one, which poses such great threats to the provision of public goods.
" Their maximal profit is clearly to be a free rider AND not pay for it."
It’s not a problem. It’s something he choses to do. Many here use the services of Mises.org but none of us contribute an equal amount to support it. It’s not a problem, it’s just how some things are structured in the market.
" I’m considering the case where everyone really does want the service, but because of the distribution of property rights (namely that each man controls and is liable for his own actions), it is in each individuals rational self interest to try and be a free rider on the public good. I’m trying to demonstrate a way to get around this."
You are dealing with a problem that is none-existent in my opinion The assertion that it is in each individual’s self interest to become a free rider in a purely voluntary society is groundless. There are literally hundreds, if not thousands of organizations that could not exist according to your assertion. Ambulance corps, Rescue, fire fighting in some places, charity work, etc…
If enough people make this choice, a pure public good may not be provided, as in the case of a meteor hitting the earth. Everyone wants a laser to be built, but no one wants to pay for it. Each individual calculates for himself that he will be best off if he doesn’t pay and everyone else pays. So everyone doesn’t pay and the earth gets destroyed. Or so we think… this thread is an attempt to show how even the worst case scenario can be avoided on the market.
I’m not saying you can’t provide a public good in practice. You are right there are many examples. But all of them overcame and ignored free riders, rather than including them. The presence of free riders COULD be problemmatic. I’m trying to find a way to get free riders to rationally want to pay costs.
That is false and serves to fully demonstrate the fallacy that is public goods theory and the free rider problem. The law of marginal utility makes this simple. This is how it works. The marginal product of not contributing is death and the marginal product of contributing is living. Therefore, everyone who values his life more than his wealth will not only pay, he will pay all of his wealth and also do everything else required to get it built, including rallying other people to pay and will do so regardless of how many other people pay. In summary, what you would be willing to contribute to the laser is equal to the value you place on your life, regardless of what anyone else may or may not theoretically do.
This 100% debunks the free rider problem. However, I will explain exactly where the public good thinking goes wrong. The first assumption is that a person bases his decisions on the theoretically possible alternatives for stopping the meteor. The second assumption is that risk is neutral. It follows that everyone will hold out to the final instant hoping for the alternative of someone else taking action and the meteor will hit Earth. Nobody was affected by risk assessment in the choice of what to do in the limited time between discovering the meteor and it hitting Earth.
As in the meteor scenario, it is theoretically possible for you to stumble on a briefcase with a million dollars. Yet your unwillingness to rely on the chance of this happening will cause you to seek employment anyway. Now assume away the risk of not finding the million dollar briefcase. You, and everyone else on Earth, will hold out until you starve to death- a metaphorical meteor of hunger.
“There is no way around the fact that when you are offered this deal, you are being asked to pay for something that might be provided anyway if you just shut your door. Because the free rider option is available to everyone, they’ll all try to take it, and defense will suffer.”
Well, maybe there are a lot of different ways to stop a war or build a laser. They’ll all provide a public good at varying cost… I just want to show that we can still provide one because we can solve the free rider problem. Whether its the most efficient is none of my concern.
Everyone wants to be a free rider GIVEN that the service will be provided. This is the key feature I exploit in the OP to provide a pure public good.
I did. He just kind of says “well maybe the public good isn’t entirely public and some costs might be born by individuals”. So like what if there’s a war and you don’t buy insurance and your house gets destroyed, you’re out of luck. Fine. But this does not handle a pure public good. Moreover the chances of you being harmed by a war decrease the more people who already contribute somehow, so if you live in a neighborhood that is 99% insured, chances are it will be very well defended and there’s no point in you also purchasing insurance…
So basically he did what all other authors I’ve read do, which is to claim that maybe there is some private, excludeable aspect to the public good. Which may be true, but I want to consider pure public goods.
The only reasons to think that it would be built are (a) it has been built before and (b) it is already being built. In other words, there is no reason to think that it would be built at the start of the scenario.
The whole point of the thread is to assume that the false free rider problem hypothesis is correct and attempt to solve it. Because it is false there is no need to solve it.
That is the maximal profit in the most ideal fantasy. Reality and fantasy are two different things. In reality the maximal profit may well involve you paying. You don’t profit at all from finding a million dollar briefcase if you starved to death. Real people do not act on the assumption that the most heavenly fantasy will occur. They act based on what they believe will probably happen. Profit is only profit if the profitable thing happens; A is only A if A exists.
Let me point out something that you have not yet realized from my reductio ad absurdum comparison between the meteor and briefcase scenarios. It is a common parlour trick to create a thesis and then apply it to hypothetical events that never have and probably never will occur. What this does is avoid immediately obvious falsification that might be provided by applying it to a real event. That is why the meteor scenario is the poster child of the free rider problem hypothesis. It’s a part of a greater irony that neo-classical proclaims the importance of empirical evidence and always fails by using anything but.
When the enterpreneur trying to solve the problem goes to the individual, the individual thinks: Hmm… if I turn him down, there’s a good chance the service will be provided anyway because he’s organizing etc. Every individual takes this option, the project fails because people didn’t coordinate who got to be free-riders and payers.
Yeah. And you can max your profit by benefitting from the public good AND not paying for it.
Well if I tried to consider common examples of public goods, they won’t be pure public goods and the conversation will be very boring. A meteor hitting the earth is about as close to a pure public good as I can think of…
Competition is never irrelevent in the market provision of goods.
I expected you to say that. That is a false psychological hypothesis. Everyone expects everyone else to think the same as he does, including second guessing everyone else, second guessing everyone else’s second guess of him and so on ad infinitum. You can only make a decision based on what you know. Thus, the infinitesimal regression is null and the decision will be left to what you do know, which is that you can minimize the chance of the meteor hitting Earth by contributing to the laser. That is how a real person thinks in the real world.
It doesn’t even matter whether any other human than the individual in question exists. Materially, whether the possible outcome includes other humans or any other phenomenon offering the possibility of a chance save is no matter.
I did not know whether you in particular would try using this, but I was aware of this phony psychology. If it is accurate, you can evidence it easily enough. Simply refer to a real case study with an equivalent set of options and consequences (including complete annihilation) where the hypothesized outcome happened. You should have such a thing before you believe it to begin with in the world of empiricism, after all.
You can find a briefcase with a million dollars. It means nothing.
That’s what they all say. I thought that the idea in an argument was to determine the accuracy of a proposition. I guess I’m just very boring like that.
It is irrelevant to bogus hypotheses about unreal things.
No. Each individual realizes that he cannot control the behaviour of other individuals, and whatever his choice the change in the final outcome will be small. There is no infinite regress.
Yes. Because if other people exist there’s a chance they could pay for the service before him..
See I would expect many public goods to be provided because imperfect solutions exist, such as ostracism and other options people have discussed. In fact I wouldn’t expect to find many public goods failures for the reasons I’ve outlined in the OP. Everyone in the market would have to be insanely stupid not to be able to make use of one of the solutions… I just want to be able to say, that even if all the imperfect solutions fail, you can still play the game my way and always win if players are rational.
The Probability of finding a briefcase is low. The probability that your contribution to the provision of the public good will make no difference is high.
I’m trying to block discussion of partially public goods because it will muddle the thread.
Organizing to provide goods and services, even public ones, are real things.
“See I would expect many public goods to be provided because imperfect solutions exist,”
All solutions are imperfect. I wouldn’t take this path if I were you.
Is there a way somehow to get all the drivers on the freeway to accelerate and brake at the same time as if each were part of one long train? Think about the incredible increase in efficiency in traffic.
The answer is that perhaps there can be such an innovative solution and perhaps the market will one day get us there. But according to you, that the market has not made such an innovation possible [yet] is a market failure. Any other solution to regulate traffic is imperfect???
And I hope you don’t tell me it’s a bad example. That drivers don’t accelerate and brake at the same time can be explained by a sort of prisoners dilemma.
You’re challenging my calling the OP’s solution “perfect” as distinguished from other “imperfect” solutions. You point out that there are still public goods that won’t be provided in real life because of transaction costs and rationality, so no solution is perfect.
I agree in the practical sense. But I want to consider ratex world where transaction costs are low. So by “perfect” i meant that it would always work in this world. Ostracism etc are imperfect solutions because they only work depending on the structure and incentives of the market.