Political Theory

Re: Free Riding and National Defense - some problems and possible solutions

Joe — Fri, 06 Aug 2010 02:33:15 GMT

my guess is that in practice this would be dealt with mostly via homeowners/condo associations. In order to live in neighborhood x your fences have to be one of three shades of white and you also must belong to a PDA that meets the following minimum requirements.

There are also pricing/marketing strategies that I think would be very useful, such as offering bulk prices in that for every new person that signs up for our service everybody's monthly rate in this neighborhood drops by x amount. Also, with certain levels of commitment, the agency would offer certain special services (i.e patrol, setting up cameras, alarm systems, or if its a big enough community, a nearby station, who knows) So there would be lots of social pressure to sign up, as well as economic because it will be cheaper and cheaper .

Re: Free Riding and National Defense - some problems and possible solutions

Caley McKibbin — Wed, 04 Aug 2010 04:06:01 GMT

Well, it is because he has an option to be a free rider.

Do you not understand the difference between the economics of scale and getting something for nothing? I don't know how this can seem so foggy. It's like an apple in one hand and an orange in other. If you can't lift a rock by yourself, you have a challenge in achieving the required operation size by cooperating with other people. That is one thing. You can laze around waiting for someone else to do something for you at the risk of it not being done. That is another thing. Two different things.

It does make a difference if other people can provide the public good...

It does not make a difference that they are people.

The fact that you had to decrease the relative cost of the public good down to the individual level, AND complicate the public good with probability/risk assessment makes me scared. I don't follow what it proves, and if it does prove something you should be able to apply it back on the original example.

The cost is not reduced. I changed two things: 1. Extricated the free riders (i.e. the public). Our super fellow who can build the laser alone is the only man on Earth. 2. Replaced the removed risk of waiting for the public with a different risk, relying on the second meteor. I then demonstrated the exact do-or-not dilemma (the probability/risk part) from the original scenario applying to this new one (i.e. it was applied to the original). This proves that the existence of free riders is not required for that do-or-not dilemma; i.e. there is no unique problem created by free riders.

Before you say, "Aha! But a lone individual in original scenario cannot but waste his efforts in vain!" See the first paragraph. That is a logistical problem only.

Re: Free Riding and National Defense - some problems and possible solutions

Sieben — Wed, 04 Aug 2010 01:05:04 GMT

Caley McKibben:
The point is that Person A does not automatically expect Persons B-Z to do something different than what he does and furthermore does not act without regard to risk of Person B-Z doing nothing.

He does not think B-Z do the opposite of what he does. He assumes they are going to do whatever they're going to do. If B-Z is a very large group, he will reason that his contribution to the public good is so small that it doesn't matter what he does. His paying is essentially throwing money away.

Caley McKibben:
How Person A will overcome his individual incapacity to do X does not pertain to the free rider problem hypothesis.

Well, it is because he has an option to be a free rider.

Caley McKibben:
What I'm saying here and overall is that the particular external/uncontrollable source of the Earth-saving phenomenon is moot in the choice analysis.

So, if bill gates promises to build a laser but hopes other people will pitch in, do you think rational profit maximizing players will? It does make a difference if other people can provide the public good...

Caley McKibben:
For example, let's say a second meteor might intercept the first one before it hits Earth and you have the full individual capacity to build the laser. The decision in this scenario is qualitatively the same as in the original scenario. You assess the chance of the uncontrollable save event occurring and assess your tolerance for taking on the risk of a hit in order to accrue the "gain" as the unspent opportunity cost of the laser.

The fact that you had to decrease the relative cost of the public good down to the individual level, AND complicate the public good with probability/risk assessment makes me scared. I don't follow what it proves, and if it does prove something you should be able to apply it back on the original example.

Caley McKibben:
I'm not talking about public goods.

Exactly.

Re: Free Riding and National Defense - some problems and possible solutions

Caley McKibbin — Tue, 03 Aug 2010 23:40:07 GMT

Each individual realizes that he cannot control the behaviour of other individuals, and whatever his choice the change in the final outcome will be small. There is no infinite regress.

You didn't follow my explanation, but it doesn't matter. The point is that Person A does not automatically expect Persons B-Z to do something different than what he does and furthermore does not act without regard to risk of Person B-Z doing nothing.

The marginal effect of the individual's "small" contribution is a different subject. How Person A will overcome his individual incapacity to do X does not pertain to the free rider problem hypothesis. It is an economy of scale matter. Not to be conflated with the holdout spiral of death.

Because if other people exist there's a chance they could pay for the service before him.

What I'm saying here and overall is that the particular external/uncontrollable source of the Earth-saving phenomenon is moot in the choice analysis. For example, let's say a second meteor might intercept the first one before it hits Earth and you have the full individual capacity to build the laser. The decision in this scenario is qualitatively the same as in the original scenario. You assess the chance of the uncontrollable save event occurring and assess your tolerance for taking on the risk of a hit in order to accrue the "gain" as the unspent opportunity cost of the laser. Probability and risk assessment does not amalgamate with economy of scale problems in a puff of smoke and sorcerous incantation to create a holdout spiral of death. The two are unrelated for all intents and purposes.

I'm trying to block discussion of partially public goods because it will muddle the thread... Organizing to provide goods and services, even public ones, are real things.

I'm not talking about public goods.

Re: Free Riding and National Defense - some problems and possible solutions

Sieben — Tue, 03 Aug 2010 23:03:48 GMT

You're challenging my calling the OP's solution "perfect" as distinguished from other "imperfect" solutions. You point out that there are still public goods that won't be provided in real life because of transaction costs and rationality, so no solution is perfect.

I agree in the practical sense. But I want to consider ratex world where transaction costs are low. So by "perfect" i meant that it would always work in this world. Ostracism etc are imperfect solutions because they only work depending on the structure and incentives of the market.

Re: Free Riding and National Defense - some problems and possible solutions

DD5 — Tue, 03 Aug 2010 22:25:40 GMT

"Sorry. I mean when actors are rational and transaction costs are negligible."

Is this an evasion of the question.

Re: Free Riding and National Defense - some problems and possible solutions

Sieben — Tue, 03 Aug 2010 22:22:18 GMT

Sorry. I mean when actors are rational and transaction costs are negligible.

Re: Free Riding and National Defense - some problems and possible solutions

DD5 — Tue, 03 Aug 2010 22:19:41 GMT

"See I would expect many public goods to be provided because imperfect solutions exist,"

All solutions are imperfect. I wouldn't take this path if I were you.

Is there a way somehow to get all the drivers on the freeway to accelerate and brake at the same time as if each were part of one long train? Think about the incredible increase in efficiency in traffic.

The answer is that perhaps there can be such an innovative solution and perhaps the market will one day get us there. But according to you, that the market has not made such an innovation possible [yet] is a market failure. Any other solution to regulate traffic is imperfect???

And I hope you don't tell me it's a bad example. That drivers don't accelerate and brake at the same time can be explained by a sort of prisoners dilemma.

Re: Free Riding and National Defense - some problems and possible solutions

Sieben — Tue, 03 Aug 2010 22:00:50 GMT

Caley McKibben:
Everyone expects everyone else to think the same as he does, including second guessing everyone else, second guessing everyone else's second guess of him and so on ad infinitum.

No. Each individual realizes that he cannot control the behaviour of other individuals, and whatever his choice the change in the final outcome will be small. There is no infinite regress.

Cely McKibben:
It doesn't even matter whether any other human than the individual in question exists. Materially, whether the possible outcome includes other humans or any other phenomenon offering the possibility of a chance save is no matter.

Yes. Because if other people exist there's a chance they could pay for the service before him..

Caley McKibben:
Simply refer to a real case study with an equivalent set of options and consequences (including complete annihilation) where the hypothesized outcome happened. You should have such a thing before you believe it to begin with in the world of empiricism, after all.

See I would expect many public goods to be provided because imperfect solutions exist, such as ostracism and other options people have discussed. In fact I wouldn't expect to find many public goods failures for the reasons I've outlined in the OP. Everyone in the market would have to be insanely stupid not to be able to make use of one of the solutions... I just want to be able to say, that even if all the imperfect solutions fail, you can still play the game my way and always win if players are rational.

Caley McKibben:
You can find a briefcase with a million dollars. It means nothing.

The Probability of finding a briefcase is low. The probability that your contribution to the provision of the public good will make no difference is high.

Caley McKibben:
That's what they all say. I thought that the idea in an argument was to determine the accuracy of a proposition. I guess I'm just very boring like that.

I'm trying to block discussion of partially public goods because it will muddle the thread.

Caley McKibben:
It is irrelevant to bogus hypotheses about unreal things.

Organizing to provide goods and services, even public ones, are real things.

Re: Free Riding and National Defense - some problems and possible solutions

Caley McKibbin — Tue, 03 Aug 2010 21:41:51 GMT

When the enterpreneur trying to solve the problem goes to the individual, the individual thinks: Hmm.... if I turn him down, there's a good chance the service will be provided anyway because he's organizing etc. Every individual takes this option, the project fails because people didn't coordinate who got to be free-riders and payers.

I expected you to say that. That is a false psychological hypothesis. Everyone expects everyone else to think the same as he does, including second guessing everyone else, second guessing everyone else's second guess of him and so on ad infinitum. You can only make a decision based on what you know. Thus, the infinitesimal regression is null and the decision will be left to what you do know, which is that you can minimize the chance of the meteor hitting Earth by contributing to the laser. That is how a real person thinks in the real world.

It doesn't even matter whether any other human than the individual in question exists. Materially, whether the possible outcome includes other humans or any other phenomenon offering the possibility of a chance save is no matter.

I did not know whether you in particular would try using this, but I was aware of this phony psychology. If it is accurate, you can evidence it easily enough. Simply refer to a real case study with an equivalent set of options and consequences (including complete annihilation) where the hypothesized outcome happened. You should have such a thing before you believe it to begin with in the world of empiricism, after all.

And you can max your profit by benefitting from the public good AND not paying for it.

You can find a briefcase with a million dollars. It means nothing.

Well if I tried to consider common examples of public goods, they won't be pure public goods and the conversation will be very boring.

That's what they all say. I thought that the idea in an argument was to determine the accuracy of a proposition. I guess I'm just very boring like that.

Competition is never irrelevent in the market provision of goods.

It is irrelevant to bogus hypotheses about unreal things.

Re: Free Riding and National Defense - some problems and possible solutions

Sieben — Tue, 03 Aug 2010 19:31:23 GMT

Caley McKibben:
The only reasons to think that it would be built are (a) it has been built before and (b) it is already being built. In other words, there is no reason to think that it would be built at the start of the scenario.

When the enterpreneur trying to solve the problem goes to the individual, the individual thinks: Hmm.... if I turn him down, there's a good chance the service will be provided anyway because he's organizing etc. Every individual takes this option, the project fails because people didn't coordinate who got to be free-riders and payers.

Caley McKibben:
In reality the maximal profit may well involve you paying. You don't profit at all from finding a million dollar briefcase if you starved to death. Real people do not act on the assumption that the most heavenly fantasy will occur. They act based on what they believe will probably happen. Profit is only profit if the profitable thing happens; A is only A if A exists.

Yeah. And you can max your profit by benefitting from the public good AND not paying for it.

Caley McKibben:
What this does is avoid immediately obvious falsification that might be provided by applying it to a real event. That is why the meteor scenario is the poster child of the free rider problem hypothesis. It's a part of a greater irony that neo-classical proclaims the importance of empirical evidence and always fails by using anything but.

Well if I tried to consider common examples of public goods, they won't be pure public goods and the conversation will be very boring. A meteor hitting the earth is about as close to a pure public good as I can think of...

Caley McKibben:
Competition is irrelevent to the topic.

Competition is never irrelevent in the market provision of goods.

Re: Free Riding and National Defense - some problems and possible solutions

Caley McKibbin — Tue, 03 Aug 2010 18:43:55 GMT

Not if you think it will be built regardless of your participation.

The only reasons to think that it would be built are (a) it has been built before and (b) it is already being built. In other words, there is no reason to think that it would be built at the start of the scenario.

Thats the whole point of this thread. To try and describe ways of getting free riders to pay by appealing to their profit motive.

The whole point of the thread is to assume that the false free rider problem hypothesis is correct and attempt to solve it. Because it is false there is no need to solve it.

His maximal profit is to free ride given that the public good is provided.

That is the maximal profit in the most ideal fantasy. Reality and fantasy are two different things. In reality the maximal profit may well involve you paying. You don't profit at all from finding a million dollar briefcase if you starved to death. Real people do not act on the assumption that the most heavenly fantasy will occur. They act based on what they believe will probably happen. Profit is only profit if the profitable thing happens; A is only A if A exists.

Let me point out something that you have not yet realized from my reductio ad absurdum comparison between the meteor and briefcase scenarios. It is a common parlour trick to create a thesis and then apply it to hypothetical events that never have and probably never will occur. What this does is avoid immediately obvious falsification that might be provided by applying it to a real event. That is why the meteor scenario is the poster child of the free rider problem hypothesis. It's a part of a greater irony that neo-classical proclaims the importance of empirical evidence and always fails by using anything but.

This is one of the things I exploit in the "competition among free riders" part of the OP.

Competition is irrelevent to the topic.

Re: Free Riding and National Defense - some problems and possible solutions

Sieben — Tue, 03 Aug 2010 14:12:18 GMT

^right I was trying to describe both insurance and call options. Insurance is a transfer of liability of the many to that of the few.

Re: Free Riding and National Defense - some problems and possible solutions

Conza88 — Tue, 03 Aug 2010 13:49:14 GMT

"insurance, is that they transform communities of otherwise disjoint ownership to single ownership"

Nope, that isn't how the insurance industry works. It's nothing like that at all. They spread the risk. There are RE-insurers and it goes on.

Apologies, I can't be bothered addressing the rest of your post.

Re: Free Riding and National Defense - some problems and possible solutions

Sieben — Tue, 03 Aug 2010 13:33:11 GMT

[duplicate post]