The Free Rider Benefit

A common defense of the state made by statists is the public goods argument; that there are certain non-excludable and non-rivalrous goods and services that a person can consume without reducing their availability to others, and that these must be provided by the state. Examples include military defense, infrastructure, and legal systems. The obvious retort is to ask a statist to prove that a certain good or service must be public and monopolized by the state, as this amounts to an inexhaustible proof by exhaustion; every other possible method must be examined and proven not to work. The usual method of demonstrating uniqueness, that of positing a second solution and showing that it equals the first, does not work in this case because a government monopoly is unlike any other arrangement.

But suppose we do not make this move. What argument will the statist make next? If there must be public goods, then there is a possibility for a tragedy of the commons. A person acting on rational self-interest will realize that one can benefit from a public good without contributing to its provision. This leads to what is called the free rider problem, where some people either consume more than or pay for less than their fair share of a public good. This situation is frequently taken to provide a rationale for government intervention, but the case for this is fallacious. Let us examine why.

If we wish to have a rational discussion, it is essential to define terms. A problem is an undesirable situation which can be remedied. This is because a situation which is not undesirable presents no problem to solve, and an undesirable situation which has no remedy is just a fact which must be tolerated. The free rider “problem” is a situation of the latter type, as it is impractical to make sure that everyone pays exactly what they should pay for the amount of public goods that they consume. That government monopolies destroy competition, and thus the market price system, makes the free rider “problem” impossible to solve, as the information needed to determine how much each person should pay for the amount of public goods that they consume is destroyed beyond repair.

The concept of the free rider problem also proves too much. If taken to its logical conclusion, the idea that no one should be able to consume more than or pay for less than their fair share of a public good means that the state should be eliminated, as the very presence of a state means that some people are consuming more than and paying for less than their fair share of the total wealth in the economy, as states are funded by coercive means which violate private property rights. Those who receive government welfare payments, bailouts, grants, or any other form of government funding are free riding upon the backs of taxpayers and anyone else who uses currency printed by a government’s central bank. The latter group of people are forced riders who are required to pay for public goods from which they receive insufficient benefit. Charity would also be unjustifiable if the concept of the free rider problem is taken to its logical conclusion, as those who receive charity are not paying the full cost for what they are using.

But suppose we ignore this as well. If we accept for the sake of argument that there are public goods and that no one should be able to consume more than or pay for less than their fair share of a public good, then the result will be a massive distortion of the economy, as both the state and private charity must go. While the demise of statism is nothing to lament, the absence of any form of private charity would lead to the very sort of Hobbesian war that statists fear and think that they are preventing. It must also be noted that the money for payments for public goods which are now being made was once being put toward another purpose. Whether that purpose was spending on other goods and services or investment (which is really just another form of spending), the diversion of spending away from these purposes and toward public goods will eliminate some other economic activities that were occurring. To ignore this, as most people who argue for the free rider problem do, is to commit the broken window fallacy.

It is clear that the idea that free riders are a problem is fallacious at every level. But how can free riders be beneficial? There are two ways in which free riders can be beneficial. Some people will argue that free riders are responsible for higher costs, but they are actually signalling that a good or service is overpriced. While degenerate freeloaders do exist, most free riders who are aware of their free riding are willing to pay for what they are receiving but believe that said goods or services are overpriced. In the state-enforced absence of another provider, they choose to “pirate” the public goods rather than pay the cost which they believe to be too expensive. If there are rational, knowledgeable people in charge of a public good that has many free riders, then they will respond by lowering the cost to convince more people to contribute, which can actually raise the total contribution.

The above result is rare, of course, as rational, knowledgeable people tend to be productive rather than become part of the state apparatus. The more useful role of free riders is to crash government programs which cannot be ended by normal political means. Most government programs help a few people by a large magnitude while harming a much larger number of people by a much smaller amount. This means that an irate and tireless minority will work to keep their sacred cow from being gored, while the majority is not being harmed enough to take action to end the harm. Thus, there is nothing more permanent than a temporary government program, and it is politically impossible to abolish entitlement and welfare programs. While the strategy of overloading such programs was first proposed by leftists who wished to replace them with far more expansive redistributions of wealth, it could also be used by libertarian-minded people who wish to replace such programs with nothing. The potential to roll back or even eliminate state power by causing a hard crash and reset is the free rider benefit.

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