Why is there a free-rider problem in the provision of pure public goods? Externa
ID: 1228761 • Letter: W
Question
Why is there a free-rider problem in the provision of pure public goods? Externalities cause many civil complaints and disagreements. How might you go about internalizing the external costs causing the following disputes? A private golf course opens near a residential area. Some residents complain of broken house and car windows caused by golf balls. The manager of the golf course apologizes but says it is impossible to identify the offending player. Householder A complains that householder B is making a lot of noise each weekend building a boat in his backyard. Farmer A complains that farmer B is not killing her blackberry bushes, and farmer A is consequently having a hard time keeping blackberries out of his own paddocks. Governments usually provide education for free, or at least well below cost price. What is the economic justification for this policy?Explanation / Answer
free riders" are those whoconsume more than their fair share of a resource, or shoulder lessthan a fair share of the costs of its production. Free riding isusually considered to be an economic "problem" only when it leadsto the non-production or under-production of a public good (andthus to Pareto inefficiency), or when it leads to the excessive useof a common property resource. The free rider problem is thequestion of how to prevent free riding from taking place (or atleast limit its negative effects) in these situations.
In the context of laborunions, a free rider is an employee who pays no union dues oragency shop fees, but nonetheless receives the same benefits ofunion representation as dues-payers. Under U.S. law, unions owe aduty of fair representation to all workers that they represent,regardless of whether they pay dues. Some legal professionals havequestioned the fairness, if not the legality, of thispractice.
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