Free Riding

Free riding means to benefit from a collective good, without having incurred the costs of participating in its production. This problem was articulated analytically by Mancur Olson in 1965 in The Logic of Collective Action. Here, he noted that where collective action is required to secure a common, or public good, rational individuals have the incentive to free ride. His thesis challenged pluralist assumptions in respect of group mobilization, which asserted that groups mobilized to represent sectional interests. His critique demonstrated that although people may feel strongly about an issue, group mobilization to advance a common interest may be difficult. Underpinned by the economic instrumental conception of rationality, Olson argued that individuals have little incentive to participate, given the costs that are incurred, because they will still receive the benefits of the provision of that public good. One of the defining characteristics of a public good is that nobody is excluded; once it is produced, everyone will benefit, whatever their contribution. As such, the pursuit of collective goods will not in and of itself secure members: Rational individuals will free ride. Olson offers the example of trade unions. For example, benefits that result from trade union activity (such as improved working conditions and pay rises) will benefit all employees in an organization. Provision of the good is compromised, indeed threatened, if each individual behaves in this rational manner, but individuals have no incentive to contribute to the costs of providing the collective good. Olson sought to overcome this difficulty by reference to the provision of selective incentives. These are benefits available only to members of the group. Organizations and groups also devise rules in relation to membership to limit the effects of free riding, for example, the closed shop of trade unions.

Others besides organizations and groups face the problem of free riding. The state, for example, also seeks to address this issue by taxing citizens to fund public goods and services. Anthony Downs's 1957 An Economic Theory of Democracy implicitly highlights the problem of free riding in relation to democracy. It is rational for an individual voter not to vote, given the costs associated with voting and the infinitesimal chance of influencing the electoral outcome. The concept of free riding has also been used to analyze problems of environmental politics. Garret Hardin wrote in 1968 in “The Tragedy of the Commons” that the exploitation and degradation of the environment is set to continue. It is rational for corporations to free ride given the costs of individual action, which, in an international economy, affect competitiveness and profits. For states, managing environmental concerns places an individual burden on them relative to regulation and expenditure from taxes. Therefore, there is little incentive for individual states or corporations to do anything other than free ride. Yet, collectively, this is the worst possible outcome for the environment. This highlights the fundamental concern at the heart of Olson's identification of this issue—that individually rational behavior (i.e., free riding) is likely to produce collectively irrational outcomes.