Avoiding Free Ridership

In the last three days I have:

(1) Described the issue of free ridership in game-theory terms to show what the problem is and why it leaves us worse off than we would otherwise be.

(2) Discussed a political solution to the free rider problem and why it fails.

(3) Discussed a moral solution in technical game-theory terms and explained why it works.

(4) Listed a number of current political/social issues where the free rider problem exists and the stakes that are involved.

Today, I would like to explain the moral solution I presented in (3) in non-technical; non-game-theory terms for readers who might have gotten a headache as a result of the earlier discussion.

The conclusion that I defended is that people generally (meaning you and me) have reason to promote a desire to contributing to public goods (such as the items listed in yesterday’s post) and an aversion to not contributing. We also have reason to establish a system of rewards for those who contribute to the public good (praise, plaques, honors, and social status), and a system of sanctions for those who do not contribute (condemnation, ostracism, criminal penalties).

These policies will allow us as a society to harvest the value of “public goods” in ways that purely voluntary systems would not allow.

Go to the first post in this series for an explanation of why this is the case.

Game theorists have a tradition of calling a state where one person contributes to a public good when others do not to be the ‘sucker’ option. It is important for what they are focusing on to use a denigrating and derogatory term for those who would donate to the public good, because they need to preserve the problem that they are discussing. In fact, by using a denigrating term to refer to those who would contribute to the public good they make the option of contributing to the public good even less attractive – lowering the incentive to do so. This drives choices even more strongly towards the point where the public good goes unfunded and everybody loses the benefits that they could have otherwise obtained.

However, we, the people living in the real world who are talking about real-world harms and benefits, have no reason to drive choice towards the game theorist’s equilibrium point. Instead, we have reason to drive choices in exactly the opposite direction – to promote contributions to the public good so that we can harvest the benefits of those public goods.

In the example I used in Part 1 in this series, the outcome that the game theorist is trying to preserve is one where each of us in the community has $1000. The outcome that we are creating for ourselves in that example is one in which each of us has $1500. We certainly do not have any reason to adopt the game-theorist’s decision to apply denigrating terms to those who drive the outcome towards the “everybody has $1500” option.

Instead, we face the opposite motivation – to speak about those who do not contribute to the public good in terms of denigration and condemnation, and to speak about those who do contribute to the public good in terms of praise and commendation. The person who makes such a contribution shows civic virtue and deserves honors for what he has done. The person who hoards money and refuses to make a contribution deserves scorn and ridicule.

In doing this, what we are really trying to do is avoid the type of situation that makes free ridership possible. We want to do this by saying that those who contribute to the public good not only get his cut of the total social return, but he also gets to fulfill a desire to contribute to the public good. We are seeking to increase the value of contributing, while decreasing the value of refusing to contribute, in order to promote contributions and inhibit selfish restraint from making contributions.

Everybody has reason to contribute to these institutions, because everybody has reason to prefer the society where everybody has $1500 over the society where everybody has $1000. Please note, I am using money in these examples. However, the money is just a place holder for ‘getting what one wants.’ This is really a choice between a situation where everybody has a score of 1500 ‘getting what one wants’ versus a score of 1000 ‘getting what one wants’, Between these two options, the 1500 score is better (more of what one wants) by definition.

For example, there is a tendency of giving people who have served in the military some preference when it comes to electing community leaders. This makes sense. Somebody who has served in the military – particularly somebody who volunteers in times of war when the potential costs are particularly high and the payoffs certainly disbursed – has given us reason to believe that he has a desire to contribute to the public good.

Whereas, at the same time, if an agent shunned military service, and even took pains to avoid military service while others were serving (e.g., President Bush, Vice President Cheney), then we have reason to question whether the agent actually has much of a concern for the public good. Such an agent may be more interested in his or her own good, and may be quite willing to see the public good sacrificed for his or her benefit.

Of course, this is not an inviolable law. Somebody may fail to enter the military and yet still have a strong interest in making contributions to promote the public good. Similarly, somebody may see the military as merely another employment opportunity (particularly in times of peace) or as a way of making people think he or she cares about the public good. That is to say, they may see it as a stepping stone to public office.

The general principle is to be on the lookout for evidence that an individual sees value in contributing to the public good, and to hold those people up as role models for the next generation, while also finding examples of those who seem to care nothing for public goods and saying, “No good person will grow up to behave like that.”

Please note that I have been talking about two different ways in which the moral system avoids free-rider problems when it comes to public goods. One way is by providing an individual who contributes to public goods with praise and honors, and those who do not contribute with condemnation and dishonor. Praise and honor have positive value for most people, while condemnation and dishonor have negative value. Therefore, they increase the payoff of contributing to the public good, and decrease the payoff of not contributing. If these payoffs are sufficiently high, they eliminate the free rider problem.

In extreme cases, actual reward and punishment are possible, where ‘rewards’ of course are things that an individual desires that increase the value of contributing to the public good, while ‘punishment’ is something to which the agent is averse or has a reason to avoid, decreasing the value of not cooperating.

In addition, these types of institutions promote a desire to contribute to public goods and an aversion to not contributing to public goods that give these contributions a value independent of any rewards or honors that a person may receive. In this sense, “virtue is its own reward” in the sense that a person who has the virtue of a desires to contribute to the public good and who is contributing to the public good is in the same position as a person who desires to eat chocolate and who is eating chocolate.

Combined, these factors can do a significant amount of work in helping societies obtain the value of public goods by helping them to avoid the problem of free ridership.