Tuesday, June 11, 2013

Edward Snowden and the Free Rider "Problem"

We are all free riding on the back of what Edward Snowden did a few days ago. In economic theory, a free rider is one that benefits from the actions of another person but never compensates that person for those benefits. The public's reaction to Snowden's admission of  the NSA recording online activities of millions of internet users was overwhelmingly positive. Thus, we can assume that most people think they benefited from Snowden's actions. However, Snowden himself stated that these actions were not motivated by the expectation of a future payback (monetary or whatever) by the public. In fact, he was well aware that he would be punished by those in power who wanted to keep this information secret. So, he expected no monetary payback. On the contrary, he expect all sorts of hardships, and he still went and did what he did.

The curious thing about the free rider "problem" is that students of economics are taught that one of the roles of governments is to fix this "problem". Typical examples include education, healthcare, roads, and national defense. It is argued that, since these services benefit many people who would not necessarily have to pay to receive these benefits were they provided by a private company, there would be strong incentives for private providers to "undersupply" the service. In other words, the argument is that, due to the free rider "problem", these "public" goods will be undersupplied or not supplied at all in a private system. The "solution" is that governments use tax revenues to pay for the services prone to the free rider "problem" and offer the service to everyone at no charge.

We can learn two things from Snowden's case. First, it does not follow that, if there is a free rider "problem", the service will be undersupplied or not supplied at all to the public. We are witnesses that Snowden overcame the free rider problem of epic proportions without fussing much about it. In fact, if we go  a few years back, Bradley Manning overcame a similar free rider problem when he gave up his freedom for the sake of providing valuable information to the public. Julian Assange is another person that did something similar recently.

But, it is not only recent history that is full of people who solved free rider problems that the standard economic theory would classify as unsolvable. The list is long, and I am sure each of us could compile his or her own list. Just to name a few on my list, let's remember social activists like Martin Luther King, Nelson Mandela, and Mahatma Gandhi, scientists like Nikola Tesla, Galileo, and Copernicus, artists like Orwell, Hemingway, and Bukowski. These people overcame all sorts of personal hardships just to provide the public with services it would later enormously appreciate. These notable individuals did what they did largely without expecting monetary compensation for their services. Thus, the free rider "problem" may not be a problem at all if there are individuals who are willing to solve it.

The second thing we can learn from the Snowden case is that, in many cases, governments not only avoid using the tax money to support and compensate these people who wish to solve the free rider problem, but, in fact, governments use tax money to chase them down, prosecute them, torture them, and imprison them. Only in cases when governments see that, year after year, these brave people enjoy growing support of the public that cannot be silenced, they change their methods.

So, not all free rider "problems" are apparently the same in the eyes of governments. Some, like education, roads, police and military service, seem to have much more favorable position in the eyes of governments than the service of providing timely and accurate information about the activities of these same governments. What is it that makes the difference? I have my own answer to that question, but, unlike those individuals I listed above, I am not brave enough to provide this information while knowing that there may be negative consequences, and knowing I would not be financially compensated for those consequences. I will leave this free rider problem to someone else to solve.

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