![]() ![]() The Free Rider Problem isn’t really about fairness. In the very interconnected system of modern retail, it’s ludicrous to suggest that shopping is not connected with road transport. It doesn’t matter how deeply we delve into the scenario: the roads are involved. The corporations that decided to build the store in this location used information about the neighborhood’s infrastructure to make that decision. The materials that built the store were brought by road, and so were the vehicles used in construction. The teachers who taught the cashiers the math they need to sell the goods used the roads to get to the schools. The people who sell the goods came to work on roads. Look more closely, and you’ll see that the goods those shoppers buy came to the shop on roads. On the surface, it may seem that people who shop and people who use roads are two different sets of people. Are they right? Who’s using the roads?įirst, let’s consider the idea that people who shop aren’t necessarily using the roads. It creates a Free Rider Problem for those whose casual shopping is funding the roads for truckers and bus drivers. Using a general sales tax to pay for roads makes residents of the state pay for the roads. At first glance, a gas tax for roads makes sense, since drivers pay the tax and drivers use the roads. Think about a sales tax to pay for roads. When it comes to sales tax, the Free Rider Problem often comes up in decision making. If ten people pay taxes for the park and 50 people use it, though, the people who pay will soon find that their park is crowded, filled with rubbish, and generally not being cared for, because the resources they’ve pooled aren’t enough to cover the needs of so many people. If ten people pay sales taxes that cover the cost of a park and eleven people use the park, there is no negative effect for the ten who paid.Įveryone benefits from the park, and the people who pay are not affected by the extra person’s use of the park. The Free Rider Problem comes up when someone uses the resources without paying their share. In theory, everyone uses these resources, and everyone pays for them, so there’s no problem. The list includes roads, hospitals, schools, public parks, and many other things that can be funded at least in part by sales tax. Economists talk about the Free Rider Problem with reference to common resources - things that benefit everyone.
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