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Free-Rider: Definition & The free use of public goods

Free-Rider: Definition & The free use of public goods

Free-rider is an economic term, used to refer to those who use public goods but do not shoulder the expenses of manufacturing these products. In other words, Free-riders are free beneficiaries of society’s common assets.

What leads to Free-riders?

There are three main reasons leading to the existence of free-riders:

  • First, public goods and services do not exclude users, which means anyone can use them without any expenses or requirements.

  • Second, because anyone could have the same benefit with low or no cost, a free-rider will try to maximize benefits and minimize expenses. In this case, if a person is offered two options: (1) make a payment for uses and (1) still be able to use without any payment, this person will definitely choose no payment. Therefore, the phenomenon that users do not pay is the result of the typical homo economicus following economic theory (i.e. excluding ethical and psychological issues). In real life, when using public services, users may generate a certain psychological part that they want to contribute; however, this group accounts for a small proportion and needs a certain guidance (i.e: from the government or an influencer).

  • Third, free-riders come with the mentality that the fee will be borne by others, thus users will not be interested in contributing to the construction of public goods and services.

Why should Free-riders be prevented?

From a personal perspective, free-riders will bring about the most significant benefits for them. However, from a social perspective, many public goods and services will be damaged or lacking sufficient funds to maintain and repair because many users do not pay. Take the construction of bridges and roads as an example as it requires an extremely large amount of money to build. However, if the investor cannot collect amounts to compensate for the costs (because users do not pay), no one would be willing to build infrastructure and lead to an undeveloped country. In addition, some goods are difficult to charge, such as fireworks and public entertainment, so these particular goods are not getting much concern by the private sector. Another consequence from free-riders is over-using. Some public products, if not well managed, will be overused and cause damage to society as a whole. For example, if the control of green parks is not good, some people will utilize these places for personal purposes (such as illegal street vendors) and influence other citizens.

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