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Wednesday, November 14, 2012

Free Rider Problem? Increase Competition.

Given the free rider problem, why do species cooperate? As it turns out, free riders succeed only under monopoly conditions, while cooperators succeed under competitive conditions. When there is competition, the free riders are far less successful, and the number of cooperators increases.

To say this has significant implications for economics is an understatement. There is in economics the "free rider problem." How does one get rid of free riders? Well, the answer seems to be to create the social conditions in which competition is maximized and monopolies are minimized. Our governments are often monopolistic in nature. The result is the creation of more free riders. More decentralization of the government, from a central government to states and, preferably, counties and cities/towns, would result in competitive polities, reducing free riders on government.

The same is true in the economy. Freedom of entry and exit help create the conditions for increased competition. Under competitive conditions, there will be fewer free riders in the economy itself.

We should be on the lookout for where we can learn things. Yeast and bacteria growing together, it turns out, can be quite informative to those who want to understand human economies.

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