Editing Free-rider problem (section)

== Economic issues ==
Free riding is a problem of [[Pareto efficiency|economic inefficiency]] when it leads to the underproduction or overconsumption of a good. For example, when people are asked how much they value a particular [[Public good (economics)|public good]], with that value measured in terms of how much money they would be willing to pay, their tendency is to under-report their valuations.<ref name="Economics and the Environment">{{cite book |last1=Goodstein |first1=Eban |title=Economics and the Environment |date=2014 |publisher=Library of Congress |location=University of Minnesota |isbn=978-1-118-53972-9 |edition=7}}</ref> Goods that are subject to free riding are usually characterized by: the inability to exclude non-payers, its consumption by an individual does not impact the availability for others and that the resource in question must be produced and/or maintained. Indeed, if non-payers can be excluded by some mechanism, the good may be transformed into a [[club good]] (e.g. if an overused, congested public road is converted to a toll road, or if a free public museum turns into a private, admission fee-charging museum).

Free riders become a problem when non-excludable goods are also [[Rivalry (economics)|rivalrous]]. These goods, categorized as [[common-pool resources]], are characterized by overconsumption when common property regimes are not implemented.<ref name="Understanding Institutional Diversity">{{cite book |last1=Ostrom |first1=Elinor |title=Understanding Institutional Diversity |date=2009|publisher=Princeton University Press}}</ref> Not only can consumers of common-property goods benefit without payment, but consumption by one imposes an [[opportunity cost]] on others. The theory of '[[Tragedy of the commons]]' highlights this, in which each consumer acts to maximize their own utility and thereby relies on others to cut back their own consumption. This will lead to overconsumption and even possibly exhaustion or destruction of the good. If too many people start to free ride, a system or service will eventually not have enough resources to operate. Free-riding is experienced when the production of goods does not consider the [[Externality|external costs]], particularly the use of [[ecosystem services]].

An example of this is global climate change initiatives. As climate change is a global issue and there is no global regime to manage the climate, the benefits of reduced emissions in one country will extend beyond their own countries' borders and impact countries worldwide. However, this has resulted in some countries acting in their own self-interest, limiting their own efforts and free-riding on the work of others. In some countries, citizens and governments do not wish to contribute to the associated  effort and costs of mitigation, as they are able to free-ride on the efforts of others.{{Citation needed|date=August 2021}} This free rider problem also raises questions in regards to the fairness and ethics of these practices, as countries most likely to suffer the [[effects of climate change|consequences of climate change]], are also those who typically emit the least greenhouse gases and have fewer economic resources to contribute to the efforts, such as the small island country of [[Tuvalu]].<ref>Climate Leadership Council (2020), 'Why Climate Progress is Deadlocked'</ref>{{full citation needed|date=August 2021}}

Theodore Groves and John Ledyard believe that [[Pareto optimal|Pareto-optimal]] allocation of resources in relation to public goods is not compatible with the fundamental incentives belonging to individuals.<ref>{{cite journal |last1=Groves |first1=Theodore |last2=Ledyard |first2=John |title=Optimal Allocation of Public Goods: A Solution to the "Free-Rider" Problem |journal=Econometrica |date=May 1977 |volume=45 |issue=4|pages=783 |doi=10.2307/1912672 |jstor=1912672 |url=http://www.kellogg.northwestern.edu/research/math/papers/144.pdf }}</ref> Therefore, the free-rider problem, according to most scholars, is expected to be an ongoing public issue.{{Citation needed|date=August 2021}} For example, [[Albert O. Hirschman]] believed that the free-rider problem is a cyclical one for [[Capitalist economics|capitalist economies]]. Hirschman considers the free-rider problem to be related to the [[shifting interest]]s of people. When stress levels rise on individuals in the workplace and many fear losing their employment, they devote less of their [[human capital]] to the public sphere. When public needs then increase, disenchanted consumers become more interested in [[collective action]] projects. This leads individuals to organize themselves in various groups and the results are attempts to solve public problems. In effect this reverses the momentum of free riding. Activities often seen as costs in models focused on self-interest are instead seen as benefits for the individuals who were previously dissatisfied consumers seeking their private interests.{{Citation needed|date=August 2021}}

This cycle will reset itself because as individuals' work for public benefit becomes less praiseworthy, supporters' level of commitment to collective action projects will decrease. With the decrease in support, many will return to private interests, which with time resets the cycle.{{Citation needed|date=August 2021}} Supporters of Hirschman's model insist that the important factor in motivating people is that they are compelled by a leader's call to [[altruism]]. In [[John F. Kennedy]]'s [[John F. Kennedy 1961 presidential inauguration|inaugural address]] he implored the American people to "ask not what your country can do for you; ask what you can do for your country." Some economists (for example, [[Milton Friedman]]) find these calls to altruism to be nonsensical. Scholars like Friedman do not think the free-rider problem is part of an unchangeable [[Virtuous circle and vicious circle|virtuous or vicious circle]], but instead seek possible solutions or attempts at improvement elsewhere.<ref>{{cite news |last1=Frank |first1=Robert H. |title=When Self-Interest Isn't Everything |url=https://www.nytimes.com/2008/02/10/business/10view.html |access-date=29 April 2019 |newspaper=The New York Times |date=February 10, 2008}}</ref>