|Print | Back||November 5, 2013|
The Dismal ScienceGetting a Free Ride
by Adam Smith
My family enjoys going to Busch Gardens Williamsburg, Virginia. It is a beautiful amusement park with seasonal flowers and foliage. They also have some very well done shows with great singing and dancing.
And of course, there are the roller coasters. They have several that are recognized as some of the best in the world. My kids love to ride the roller coasters. But to get to ride the coasters you first have to pay for admission to the park. There are no free rides.
In economics there is a term known as the free rider problem. Let me give you a quick example of the issue.
Suppose a city is going to build a park that has a playground for the toddlers, lakes for the fishermen, and trails for the runners and bikers. The city decides that to pay for the park they are going to go around and ask people to donate for the park.
Some people will recognize that the only way the park gets built is for everyone to help pay. But some individuals will realize that if they do not pay anything towards that park they still will get the benefits of the park once it is built.
This is the free rider problem. Free riders are people not helping to pay to build something and then getting the full benefit after the project is complete. At one time this was the main rationale given for government spending. The government collects money from all for projects that will benefit all. This would include roads, parks, defense, and so on.
If you look around in life you see the free rider problem everywhere. Even in church.
Have you ever heard of someone that will not serve in Primary because they have children and just do not want to deal with kids on Sunday during church? So what you have is someone who decides that they are going to have children, wants those children to be taught the gospel when they go to church, but do not want to be part of the organization that teaches their children. Free riders.
This is a rational response. Primary is a hard calling. So it would be rational for someone to want an easier calling while still getting the benefit of Primary for their children.
There are free riders driving a car, and I am one of them. (Please do not think less of me because of the next two paragraphs, and do not follow my example.)
When taking long trips on the interstate, there may be times when I am tempted to go faster than the posted speed limit. This desire to drive faster than the posted speed is offset by the risk of getting a speeding ticket. So I do not go faster unless I get the chance to free ride.
How do I free ride? I wait to find two cars following each other and going about the speed I want to go. Then I get in between the two cars. This way if there is a police officer catching speeders up ahead, he will get the car in front of me. If there is a police officer coming up from behind, he will get the car behind me. I get the benefit of going faster with limited risk or cost to me.
Finally, there is an enormous incentive for people to free ride with Obamacare, and the ability to free ride is built into the law.
The law states that you can get insurance at any time and that preexisting conditions must be covered. So someone could not pay to have insurance and then when they get sick they could sign up and be covered while they were sick. People can have the benefit of having insurance without the ongoing cost.
Even if the government can get free riders to initially to sign up for health insurance, eventually the free riders will cancel the insurance, pay the minimal penalty, and free ride. It is a rational decision. It is also one that will make the whole Obamacare system collapse.
People, over the long run, make rational decisions that they determine are in their best interest. It is a law of economics. Obamacare is another attempt by the government to defy an economic law. They have as good of chance succeeding as I do jumping to the moon.
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