The Free Rider Fallacy
Posted on 20111102 by silver
A young man posted this scenario some years ago at TMM:
You live in a small town with five houses. You live in the center of town and four other people live north, south, east and west, completely surrounding you. This is a voluntary community – a gulch, if you will.
At the town hall meeting, the citizen who lives to the north of you brings up the fact that there is a gang of a hundred violent motorcycle nomads who will be raping and pillaging your town in two days.
Your four neighbors each decide independently that they will hire a private security force, and when they all learn of each other’s plans, they choose to go into it together, because they get a discount
You decide you do not want to be involved
Fifty heavily armed and trained mercenaries arrive at the gulch the next morning, and they form a perimeter around the town.
The nomads surround your town and attack the mercenaries. The mercenaries slaughter all of the nomads.
You have just been protected by your neighbors. You did not pay in. You just got something for nothing.
This scenario and its variants is offered as justification for coercive taxation, the theft of money from the unwilling citizen.
The free rider problem is a fallacy employed by people who use violence to obtain their personal goals. As the very construction of the scenario proved, there was no problem. Four out of five people thought the expenditure for defense services worthwhile. The fact that others benefit from their purchase does not change their economic calculation. Either there is enough demand for the defensive services for the consumers to part with their money and buy them, or there isn’t.
Using violence to take money from people who don’t want the good or service in question may lower the cost to the band of thieves who support such immoral behavior, but so does just killing the holdouts and taking their property.
Mises treated this nonsense thoroughly, see pages 650-656 of Human Action (Scholars edition).
If the results of an actor’s action benefit not only himseIf, but also other people, two alternatives are possible:
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The planning actor considers the advantages which he expects for himself so important that he is prepared to defray all the costs required. The fact that his project also benefits other people will not prevent him from accomplishing what promotes his own well-being.
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The costs incurred by a project are so great that none of those whom it will benefit is ready to expend them in full. The project can be realized only if a sufficient number of those interested in it share in the costs.
The example given used the second scenario. While no individual could afford the services, four could pool their resources, and did so. There is no problem. The decision of the 5th person that refusing to participate would maximize his personal satisfaction is may prove to be incorrect. His neighbors will remember his refusal to help defend the community. They may shun him or at least reduce their trust and trade with him. But there is no guarantee that free men make the correct choices at all times, only the guarantee that they are free to choose.
Here’s a real-life example of Mises first scenario. I keep bees. My bees fly far and wide, providing pollination services to over 8,000 acres.
As a free man, I decided to keep bees because I judged the benefits TO ME outweighed the costs. The fact that my bees would be providing a valuable service to others did not enter my calculation; I considered only what mattered to me.
Now if I were an amoral person who employed violence to get my way, I could demand money from all those neighbors in payment for the services of my bees. Services that they did not ask for and can not refuse, given the nature of bees.
Since I have renounced the use of violence to satisfy my desires, that isn’t a problem.
The reductio ad absurdum of the free rider fallacy was written by the great Hans Herman Hoppe:
You, dear reader, have never hired me as an economic consultant. You have not taken advantage of this marvelous opportunity open to you. However, whether you know it or not, whether you realize it or not, whether you appreciate it or not, you actually benefit from my economic analysis. You are thus a selfish, chiseling free-rider on these multifaceted benefits I have long provided for you, gratis. But now it is time to stop you from exploiting me regarding these spillover gains you have long enjoyed for free. It is time for you to pay your fair share! Accordingly, I am hereby presenting you with this bill for $100,000, a bargain at the price.
The free rider “problem” is a trivial fallacy. It only appears complex because there are so many cowardly thugs among us, willing to use violence but unwilling to do the dirty deeds themselves. They invent this free rider nonsense, they teach it to defenseless children in state indoctrination camps, and they quote it whenever they sense the opportunity to steal something. These people deserve contempt and disgust, nothing more. The charitable might try to educate the victims of this delusion, but tolerance of this pernicious nonsense is not a virtue.
