Talk:Forced rider

Initial Copy Edit

I did a copy edit on this new article and removed some irrelevant and WP:SYNTH text. I left all of the original in-line citations in place, but many of the ones I checked contained irrelevant material or material not reflecting article text. These can be removed in the future if editors do not find useful material in them. For the time being it seemed worthwhile to leave them available for review. SPECIFICO talk 18:28, 27 February 2013 (UTC)

Utility maximization

SPECIFICO removed this section...

It's presumed in economics that individuals are utility maximizers. In other words, people want the most bang for their buck. This means that consumers prefer paying less for all goods/services both public and private. A Spoonful of Choice

...and Rubin removed this section...

In order to determine the actual demand for public goods, one possible solution would be to implement tax choice. If taxpayers had to pay taxes anyways, but they could choose where their taxes go, then, again presuming utility maximization, they would have an incentive to allocate their taxes according to their true preferences. In theory this would result in a Pareto optimal provision of public goods. The Economics of Earmarked Taxes

Let me break this down...

1. Individuals are utility maximizers
2. Utility maximization is what leads to the Pareto optimal provision of private goods
3. With public goods however, because of their very nature, utility maximization can result in their underprovision
4. Forcing people to pay taxes creates the forced rider problem
5. But because individuals are utility maximizers, creating a market in the public sector would result in the Pareto optimal provision of public goods

Utility maximization (people wanting more for less) is the basic premise of economics. Because 1. people want more for less and 2. public goods are non-excludable...then it's reasonable to expect that people will attempt to free-ride. But compelling people to pay taxes creates a forced rider problem and it does not solve the preference revelation problem. Therefore, to solve these two problems we simply return to the basic premise of economics. If people have to pay taxes anyways, because they want more for less, then they'll spend their taxes on whichever public goods maximize their benefit. That's why the outcome would result in a Pareto optimal provision of public goods.

As a result of this tag team effort by Rubin and SPECIFICO this article no longer covers...

1. the logical basis for this problem (utility maximization)
2. the logical obstacle (preference revelation)
3. the logical solution to this problem (taxpayer sovereignty/utility maximization)

--Xerographica (talk) 23:58, 27 February 2013 (UTC)

I'll only comment on my removal: it is a minority theory that tax choice is a solution to the problem. It's a fringe theory that it's the logical solution to the problem. — Arthur Rubin (talk) 15:41, 28 February 2013 (UTC)

I removed WP:SYNTH and WP:OR and added a WP:RS for some of the content. I also did an extensive copy edit to clarify the remaining text, which was not well-written. Please exercise care to confine your text to verifiable material you find in your cited sources and not to project your personal reflections on such descriptive material. Any appeal to Signor Pareto is at least several steps removed from a description of the purported problem, the existence and structure of which does not depend on any particular belief about fairness, efficiency, markets, optimal allocation... Incidentally the Rothbard work you cite is WP:FRINGE in its comparisons of government policy to crime. I think that you can find more useful sources for your topic. SPECIFICO talk 16:24, 28 February 2013 (UTC)

Labeling his theories or musings or opinions (whatever) as FRINGE is going overboard. Nothing is being advanced which purports to be scientific or pseudo-scientific. Heterodox, true, but not FRINGE in the WP sense of the word, which pertains to editing and content guidelines. – S. Rich (talk) 19:32, 1 March 2013 (UTC)

See also items removed

First some context. Rich, Rubin and SPECIFICO have been harassing me for quite some time... Wikipedia:Administrators'_noticeboard/IncidentArchive786#User:Xerographica.

Rubin removed two links from the "See also" section with this explanation, "Actually, neither article seems appropriate". The two links he removed are the benefit principle and preference revelation. Let's review...

Even though the article on the free rider problem clearly mentions the preference revelation problem... Rubin insisted that it is not relevant... Talk:Free_rider_problem#See_also_-_preference_revelation. Oh, I just now noticed that SPECIFICO removed the section relevant to the preference revelation problem. Here's the section that he recently removed from the free-rider article...

The free rider problem has deep roots in general bargaining and incentive compatibility. When bargaining, participants often bid less than they are prepared to pay, in order to improve their own position. This creates problems because it is impossible to discover the participants' true demand payoff curves, and a likely result is inefficient allocation of resources.

"True demand payoff curves" is the same thing as "true preferences". The difficulty in discovering people's true preferences is the preference revelation problem. So both SPECIFICO and Rubin removed the preference revelation problem from the article on the free rider problem and as I mentioned in the previous section and in this section, they also removed the preference revelation problem from this article on the forced rider problem.

The question is...how wrong are they? Let's turn to the reliable sources to find out...

• Nevertheless, the classic solution to the problem of underprovision of public goods has been government funding - through compulsory taxation - and government production of the good or service in question. Although this may substantially alleviate the problem of numerous free-riders that refuse to pay for the benefits they receive, it should be noted that the policy process does not provide any very plausible method for determining what the optimal or best level of provision of a public good actually is. When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money? There is a whole economic literature dealing with the willingness-to-pay methods and contingent valuation techniques to try and divine such preference in the absence of a market price doing so, but even the most optimistic proponets of such devices tend to concede that public goods will still most likley be underprovided or overprovided under government stewardship. - Patricia Kennett, Governance, globalization and public policy
• Nonexclusion poses free-rider problems for a pure public good, resulting in a preference revelation problem. That is, when polled, people will have a strong incentive to understate or hide their true benefits if they believe that charges will be based on their responses. This means that efforts to judge the suboptimality of a pure public good by asking respondants to reveal what benefits they derive are doomed to failure: because their marginal willingness to pay (MWTP) is difficult to ascertain through solicitation, the optimal provision where ∑MWTP = MC is anyone's guess (where MC is the marginal cost of providing the good). - Todd Sandler, Assessing the Optimal Provision of Public Goods: In Search of the Holy Grail
• Belief in the inevitability of the free-rider problem has gained wide acceptance among economists. The essence of this problem is that; for a Pareto-optimal solution to be reached, individuals must reveal their preferences for public goods. But since each individual consumes the total quantity of public good supplied, it is in any individual’s interest to understate the satisfaction he gains from consuming the public good, thereby only slightly reducing the quantity of public good supplied but significantly reducing his own tax burden. Everyone reasons in this way and the public good will be under-supplied. Thus arises a paradox: individually rational action leads to an outcome which is collectively irrational. - John McMillan, The Free-Rider Problem: A Survey
• Both Samuelson and Musgrave pointed out that the free-rider problem means there are difficulties in a Pareto optimum being attained: ‘no decentralized pricing system can serve to determine optimally these levels of collective consumption’ (Samuelson, 1954, p. 388) because ‘any one individual will find it profitable to understate his preference, knowing that this will have no significant effect on the total supply but result in a smaller assessment on himself‘ (Musgrave, 1959, p. 80). - John McMillan, The Free-Rider Problem: A Survey
• The free-rider problem is in fact not one, but three separate problems. In order for a Pareto optimum to be reached in an economy with a public good, there is a need, firstly, for consumers to contribute enough revenue to pay for an optimal quantity of the public good. Secondly, it is necessary for agents to reveal their preferences for the public good (so that it can be known what is an optimal quantity of the public good). Thirdly, a different kind of problem arises when the number of agents consuming the public good becomes large. - John McMillan, The Free-Rider Problem: A Survey
• Three divergent elements have emerged to challenge this orthodoxy; two are theoretical, the other is empirical. The first theoretical challenge assumes still that the free-rider problem is important but it seeks to develop ‘incentive-compatible’ mechanisms whereby individuals will be induced to reveal their true preferences. It involves designing a special tax/subsidy structure under which honesty is the dominant strategy [Clarke (1980) Green and Laffont (1979)]. However, the mechanisms developed are complex and a basic conflict inevitably remains between achieving a dominant equilibrium and achieving Pareto efficiency, i.e. the ideal preference revelation mechanism does not exist [Green and Laffont (1977)]. - C.D. Throsby, Glenn A. Withers, Strategic bias and demand for public goods
• Governments face a fundamental problem when deciding on the provision of public goods. Assuming they are interested in the welfare of their citizens, how can they disclose their preferences for different tax - expenditure bundles? Consumers are not interested in revealing their true willingness to pay and so may take on a "free-rider" position, since they cannot be excluded from the consumption of public goods. - Dietmar Wellisch, Theory of Public Finance in a Federal State
• Other pricing devices, such as marginal benefit taxation, which do not result in prohibitive police or exchange costs, give rise to the classic "free rider" or revealed preference problem whereby individuals are induced to hide or understate their true preferences in order to improve their individual welfare while foregoing jointly available potential gains. - Edward H. Clarke, Multipart Pricing of Public Goods
• The government has to provide social goods. However, it is not possible for the government to provide social goods in optimum quantities because of the problem of preference revelation or the free rider problem. - Ghosh & Ghosh, Economics Of The Public Sector
• The large theoretical literature on incentive-compatible demand revelation was inspired in part by attempts to design preference revelation mechanisms for public goods which would avoid free riding and result in the optimal decentralized provision of public goods. The incentive-compatible demand revelation devices (ICDRDs) proposed by theorists create situations in which it is in the person's selfish interest to choose to reveal his or her true preferences for a good. - Robert Mitchell, Richard Carson, Using Surveys to Value Public Goods
• On the other hand, there is, as Johansen argued, a lack of empirical evidence from political decision processes of free-riding actually occurring: ‘it is hard to believe that we should not get ample empirical evidence if concealment of preferences were as important in practice as it seems to be in theory’ (Johansen, 1977, p. 148). - John McMillan, The Free-Rider Problem: A Survev
• Other points thereon are available to the referee, but only the Wicksellian one is available in practice, i.e. that given by the voting process needed to secure preference revelation (Musgrave, 1996: 9–14). “My point of departure, following the Wicksell tradition, did not allow for preferences to be given. A political process and voting was needed to secure preference revelation” (Musgrave, 1986: X). In this respect Samuelson’s roots are in the anglo-saxon neoclassical (Mill-Walras-Pigou-Edgeworth) tradition while Musgrave is in the Sax-Wicksell-Lindahl tradition. To him, the problems how to overcome free riding and, thus, how to secure preference revelation, are central. - Bernd Hansjürgens, The influence of Knut Wicksell on Richard Musgrave and James Buchanan
• It is, however, interesting to point out one aspect which is important for an understanding of Musgrave’s theory. This concerns preference revelation and implies basic differences between Musgrave and Buchanan. In Musgrave’s view the problem of preference revelation is a crucial difference between his work and Samuelson’s approach. As is well-known, Samuelson showed that for given preferences, an optimal provision of public goods is possible when the marginal rate of substitution equals the marginal rate of transformation (Samuelson, 1954; 1955). Thus, the problems of free riding which – in contrast to Lindahl – played a major role in the Finanztheoretische Untersuchungen and the problem of preference revelation are eliminated. - Bernd Hansjürgens, The influence of Knut Wicksell on Richard Musgrave and James Buchanan
• To begin, recall Buchanan's (1967) argument that when taxprices are given - have to be paid - the incentive of demanders to free-ride by misrepresenting their preferences vanishes. That argument is correct. As I have just stated it, it does, however, neglect the fact that when taxprices are 'listed" or "posted," free-riding ceases to take the form of preference falsification - Buchanan's point - and takes instead that of tax avoidance and evasion. - Albert Breton, Competitive Governments: An Economic Theory of Politics and Public Finance
• The difficulty of excluding those who do not pay voluntarily from enjoying the benefits of public output gives rise to the problem of preference revelation and free-riding. In response, most collectivities use coercive taxation to finance public output, creating tax systems where there is only a diffuse and distant link between additional consumption of publicly provided goods and increases in tax liability. - Stanley Winer, Walter Hettich, The Political Economy of Taxation

Now, to be clear, these are only the results from a quick search in my database for "preference" and ("rider" or "riding"). But I'm sure that I could find plenty more sources given that these two problems have been described using different words. For example, as I've said before, in economics, "demand" is frequently used to mean "preference" and vice versa. But the point is, clearly the free/forced rider problem and the preference revelation problem are strongly connected to each other. An encyclopedia entry shouldn't talk about one problem without discussing the other problem. But that's exactly what Rich, Rubin and SPECIFICO want to do.

For reference, here's wrote I wrote when I created this article on the forced rider problem... User:Xerographica/Forced_rider_problem. On that page you'll also find numerous passages on the topic.

While on the subject of reviewing how wrong these editors are...

Over on the public finance talk page Rubin wrote, "Actually, I don't see how it's relevant at all, except through one of the other articles." He was saying that preference revelation was not at all relevant to public finance. How wrong was he?

Many public finance textbooks devote considerable attention to preference revelation and other political economy issues, including voting rules and the incentives of politicians and bureaucrats, which may give rise to government failures. - Inge Kaul, Blending External and Domestic Policy Demands

Over on the scarcity talk page he wrote...

All three links above are little related to scarcity. TANSTAAFL is the closest to be being relevant to scarcity, and that one is more closely related to opportunity cost, which is not relevant to scarcity.

How wrong was he? Well...dang...all you have to do is read the lede of the opportunity cost article. It quotes part of this passage by Buchanan...

The concept of opportunity cost (or alternative cost) expresses the basic relationship between scarcity and choice. If no object or activity that is valued by anyone is scarce, all demands for all persons and in all periods can be satisfied. There is no need to choose among separately valued options; there is no need for social coordination processes that will effectively determine which demands have priority. In this fantasized setting without scarcity, there are no opportunities or alternatives that are missed, forgone, or sacrificed. - James Buchanan

And again, when Buchanan said "which demands have priority" we can easily replace "demands" with "preferences"...which ties into the passage I shared above by Patricia Kennett...

When it is impossible to observe what individuals are willing to give up in order to get the public good, how can policymakers access how urgently they really want more or less of it, given the other possible uses of their money?

Right now the urgent priority is understanding why these three editors consistently make and/or support edits that do not reflect what the reliable sources have to say about the topics that they edit. Is this a significant problem? Or is it only a figment of my imagination? --Xerographica (talk) 15:51, 2 March 2013 (UTC)

Workers

I'm afraid I don't agree with the removal of forced union dues as part of the "forced rider" phenomenon. The The Freeman article seems to have sufficient material to support it:

1. Members of the union are not allowed to negotiate terms.
2. In a union shop, non-members are required to pay union dues, we may be used for purposes they do not support. (Oh, in theory, it is forbidden for union to used forced dues for political purposes, but enforcement is rare, especially in a Democratic administration.

Perhaps something needs to be done. (I started writing this about 3 hours ago; changes in the article may have been made since then.) — Arthur Rubin (talk) 21:12, 4 March 2013 (UTC)

The difficulty I saw was in "Public goods". The benefits and costs of union activities accrue to the members and non-members, not the public at large. Indeed, the citizenry pays when public service workers are able gain their private gains whether or not the non-unionized public service workers pay for the union representation. – S. Rich (talk) 21:31, 4 March 2013 (UTC)

Well, the "non-members" are not members of the union (the organization receiving funds), but I suppose they are not members of the general public. The article (The Case of the Free Rider) does use the term "forced rider", however. — Arthur Rubin (talk) 22:05, 4 March 2013 (UTC)

Yes, I see the usage of forced rider in that piece. The article was set up, though, with forced rider as a phenom in public goods. (Alas, just when we need an expert, they run out on you – .) So I re-wrote to remove the non-public goods aspects of the article and, as you can see, renamed it to a more NPOV title; i.e., removed "problem". So perhaps the general description can be re-done to include union workers/non-public goods situations. – S. Rich (talk) 01:40, 5 March 2013 (UTC)