The Free Rider Problem

Yesterday I received my copy of PA Times–a publication that is admittedly unlikely to be on the bookshelves of those who read this blog. It’s issued by the Association for Public Administration, and it has articles that appeal primarily to geeks like me who study how governments work.

The article that caught my attention–and raised my ire–was all about “crowd-funding” government.

Crowd-funding, like crowd-sourcing, is a phenomenon of the internet. People wanting to raise funds for new businesses, or for charitable efforts, use the web to solicit many small investors or donors, rather than attempting to raise capital from banks (many would not be “bankable”) or large amounts from big donors. That’s creative, and I applaud the entrepreneurs and nonprofit organizations that are using that new tool.

But now, according to the article, the same approach is being taken by cash-strapped units of government to raise money for public projects. And I have a big problem with that.

Let me make one thing clear: I do not oppose efforts to trim government spending by revisiting what government does. Although citizens would passionately disagree over the propriety of having this or that task done by government, that is a discussion we should be having. (I would vote to discontinue the drug war in its current form, for example. Others might argue that local government ought not provide golf courses, or other recreational services.)

Once government at any level assumes responsibility for providing a service that benefits all its constituents, however, all of us need to pay our share to support those services. And let’s be honest about what constitutes “benefit.” My children aren’t in the public school system any more, but I benefit in numerous ways from living in a community where people are educated. I also share the disadvantages of a school system that is below par. A good school system adds value to my property, it helps my community attract good jobs, etc.

A government agency that inspects the chicken before my local Kroger can sell it, another that monitors air and water quality and yet another that keeps merchants from peddling unsafe devices all benefit me. I benefit from paved streets and traffic signals, from parks I can walk in, from zoning laws that keep someone from building a strip bar in my neighborhood…Well, you get the picture.

If these government functions are financed by contributions, rather than taxes, we have the classic “free rider” problem. The people who are unwilling to pay their fair share benefit equally with those who do pay. This is the dirty little secret that the rabidly anti-tax folks want to ignore.

In a sane world, citizens would decide by majority vote just what services government ought to provide. Then they would fund those services through a system of fair taxation. We can and should debate just what role government must play in our communities, and we can and should have robust arguments about the sort of tax system that is fair and equitable. We can and should demand efficient and businesslike management of our government agencies.

But when we reorder our common institutions to satisfy the selfish, when we burden those who care about their neighbors and neighborhoods in order that others can enjoy the benefits of government without bearing their fair share of the costs, we’ve truly lost any sense of what it means to build communities.

I don’t know about anyone else, but the last thing I want on my tombstone is the epitaph “free rider.”


  1. ah, but the twin to free rider is social parasite, (or economists would call “rent seekers”) which accurately describes the functions of so many local government activities. IPS, for example, will focus on maintaining its’ structure and personnel, which has very little to do with having educated children in society. The HHC would be totally disfunctional in event of a real health emergency, and pretends to compete w/real medical facilities, while failing to remove medical waste from Winona, etc. The best example of local gov. at work is Hurricane Katrina in New Orleans, where a widely anticipated and thoroughly forewarned emergency showed that Wal-Mart was the best local government unit, and spending money on the Superdome instead of better dikes an example of governing bodies priorities. Does anyone really believe that Indy government would perform any better? Especially consider that our advance warning would be shorter, and unanticipated in nature i.e. terrorist or natural, smallpox or dirty bomb, etc.

  2. Well stated Ms. England; however, I suspect you will be condemned by many of the liberal readers for even suggesting that WalMart and the free market system actually did something good.

    Indianapolis is about as prepared as any major Midwest City can be considering the resources we have. I certainly trust our city’s leadership over the leadership of most other big cities like New Orleans, Detroit, Chicago, Los Angeles, Atlanta. There has been a lot of training and “war planning” regarding terrorist attacks and natural disasters. Implementing the plans and training is a whole different beast though.

  3. J. England’s point might be a good one if she actually addressed anything that was put forth in the main post. Rather, in typical knee-jerk fashion, she types non sequitur after non sequitur, each of them based on nothing more than her own opinion. Well-stated? Not so much.

  4. “Once government at any level assumes responsibility for providing a service that benefits all its constituents, however, all of us need to pay our share to support those services.”

    If we really believe this, then I presume we would expect all Americans to contribute towards the cost of nationalized health care, and all other manner of benefits coming from all levels of government.

    There’s understandable furor over the affluent and powerful taking advantage of their stature. However, I think a bigger collective fury from the Occupiers and Tea Partiers is our societal tolerance of irresponsibility.

    Given the collective villainy of the recent financial crash, I think it’s symbolically (and at least preliminarily) fabulous news that a former Goldman Sachs director has been indicted for insider trading. However, with few exceptions, that doesn’t absolve all of our citizenry from contributing and participating: responsibly, lawfully, and fiscally.

  5. Some additional similarities between the Tea Party and the Occupiers of Wall Street – both are tired of frustrations and fears of a diminished future. Virtually all want good jobs, to be upwardly mobile, to be able to pay off college loans and mortgages, and for our children to have a better future than that of their parents.

    Unfortunately, the future isn’t looking so bright for a dwindling middle class and poorer poor people. When folks are losing ground, they can turn on each other. Here’s hoping they hold corporate and political feet to the fire to improve the standard of living for all. Everyone is wealthier when everyone is wealthier.

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