Thursday, October 22, 2009

Free Rider

Free rider describes those people who take advantage of a certain goods without having any intentions of purchasing it as they are aware they cannot be excluded from the consumption process. It is an individual who avoids the cost and expense and acquires it without the ordinary effort. They are consumers who take advantage of public goods without contributing sufficiently to its production or creation; they consume more than their fair share. This is known as the “free rider problem” and has the capability of destroying common goods. It is an economic issue when it leads to an under-production of a public good or excessive use of a common property resource.

National defence is a public good that gives people incentives to be a “free rider”. The benefits of national defence must be distributed among a large mass of people, it is barely beneficial to those who serve the nation exerting the efforts to defend. They must put their personal health and lives on the line during their military service for the sake of the nation and its large population.

Simultaneously ‘free-riders’ are acquainted with the fact that he or she will not be excluded from the benefits of national defence regardless of their absent contributions. The advantages of national defence cannot be divided to favour particular individuals either. Free riders may refuse and avoid making payment for national defence, despite the familiarity that they are well guarded by other individuals that contribute; therefore the government has to rely on voluntary donations and taxes. Majority of free riders would never pay for a free benefit or put forth any voluntary assistance unless they were guaranteed a reward; such as an imbursement from the government.

References:
http://www.lse.co.uk/FinanceGlossary.asp

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