Rebirth of Reason


Free Riders versus Forced Riders
by William Scott Dwyer

Economic theory makes a distinction between between private goods and public goods. Private goods are those in which your consumption reduces my consumption and/or in which the provider of the good can exclude non-payers from consuming it. An example of the first condition, in which my consumption interferes with your consumption, is a sandwich. I cannot consume a sandwich (or part of a sandwich) without preventing you from consuming it. An example of the second condition is a movie in which the theater owner can exclude non-payers. (Observe, however, that for those in attendance, watching the movie does not fulfill the first condition, because one patron's enjoyment of the movie does not interfere with the other patrons' enjoyment of it.)

Public goods are just the opposite. A public good is one in which my consumption does not interfere with your consumption and in which the provider of the good cannot exclude non-payers. Both conditions are required for the good to be considered "public." A fireworks display is a good example. Each person's view of the fireworks does not interfere with anyone else's, and the producer of the fireworks cannot exclude people who don't pay, because the display can be seen from people's homes miles away. Another example of a public good is national defense. The benefit that I receive from national defense does not interfere with the benefit that you receive, but the government cannot exclude non-payers from receiving the benefit. So public goods are said to be both "non-rivalrous" and "non-excludable."

Now it is argued that while taxes (i.e., forced contributions) are not required for the provision of private goods, in which non-payers can be excluded, taxes are required for public goods in which non-payers cannot be excluded. Otherwise, there are "free riders," people who get the benefit of the good without paying for it. This is the standard argument for taxation that appears in virtually all mainstream economics textbooks. Taxes are required to prevent free riders; otherwise the public good will be under produced, because people will have an incentive to free ride and not pay for it.

What the argument overlooks, however, is that in avoiding free riders, taxation imposes a condition of forced ridership. If, without taxes, public goods like national defense are under produced because people are free to avoid paying for something they value at the price they are being charged, then with taxes, public goods like national defense are over produced, because people are forced to pay for something they don't value at the price they are being charged. The so-called "free-rider" problem is being averted only by imposing a more serious condition of forced ridership in which people's rights are being violated by having their property expropriated.

Besides, there is no way to know whether someone who refuses to pay what the government is asking values the service at the price he is being charged and is therefore free riding, whether he values it at a lower price and therefore thinks he's being overcharged, or whether he doesn't value it at all and prefers to take his chances.

People refuse to purchase insurance against a potential, unforeseen disaster, because they prefer to take the chance that the disaster won't happen. People take such risks all the time. Some people are simply less risk averse than others. The same can be true for people who refuse to pay for national defense. They may simply be willing to take their chances that the country won't be attacked. There is no reason to infer that those who refuse to contribute to a public good like national defense are free riders. It could simply be that they don't value the service at the price they are being charged or at any price for that matter.

The argument that uses free riders as a rationale for forced contributions overlooks these important considerations and is little more than an excuse to take people's property without their consent. If one must choose between allowing people not to pay for something they value at the price they are being charged and forcing them to pay for something they don't value at the price they are being charged -- in other words, if one must choose between free riders and forced riders -- then the choice is obvious: one chooses freedom.

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