Dominant Assurance Contracts and the Free Rider Problem

[WikiversityDiaspora]

Your are refering to a moral hazard problem. The critic points should be examined in an experimental economic labor. I suggest to change the distribution of the risk premium with a lottery among the entrepreneur and a restricted set of the last subscriber.

[t3hsauce]

I am still firmly in the anarcho-capitalist/anti-statis­t camp, but I tend to agree with you that assurance contracts probably wouldn't be a solution to the free-rider problem.

[fringeelements]

I'm not sure why you would say this. ITRPIS just said that dominant assurance pacts won't solve the free rider completely or work for homo economicus. It's undeniable that it does reduce the effect of the free rider and thus is a useful tool.

I'm really starting to hate anti-statists because of comments like this. Do you think there is some bullet-proof answer? If so, then by all means.

[t3hsauce]

@fringeelements To be honest, I don't think the free-rider problem is much of a problem to begin with. I'm working on a video about this and a host of other issues. It will hopefully be up within the week.

[fringeelements]

While it's important to take homo economicus into consideration, empirically there are many examples of voluntarily provided public goods with no mechanism to overcome the free rider - charity, campaign contributions, family, volunteering resources to schools. The combination of a zero-tax environment, dominant assurance which limits the free rider, what little exclusivity can be mustered, and 'social pressure' and greater necessity will certainly result in some increase in "private" provision.

[fringeelements]

I actually advocate a weaker form of dominant assurance contracts than Tabarok which does not involve the risk premium. IIRC Tabarok didn't take into account the little wristbands. Given that people pay more than what would be the cost of local public goods for status-symbols, and given a zero-tax environment in which the disposable income would be larger and lighter regulatory environment which makes cost of living lower, the wristband would be a "required" status symbol.

[ithinkronpaulissmart]

@fringeelements This wristband argument seems like a complete assertion. Why will donating to charity become the new status symbol? Why won't people still want fancy cars in an anarchist society?  Why doesn't this wristband phenomenon occur in the status quo?

[fringeelements]

Well it does occur today to a lesser extent. This notion has precedent with the "blue eagle" voluntary price fixing among businesses. Firms desperately wanted the blue eagle so they could get customers. They would even secretly charge lower prices, but the fact they did it in secret shows that the blue eagle was important. Paying for public goods is not only less controversial, but simpler to enforce - either they paid or didn't, so you don't have to check their books.

[fringeelements]

Firms today charge lower prices for veterans and people over 65, they pay to support the local football team. Perhaps it is an assertion, but it's not baseless. I don't know why you say I say people wouldn't want other status symbols. Since they'd be paying less for public goods than they are today, and everything is cheaper due to less controls on industry and a larger portion of the workforce engaging in productive work, people would buy more status symbols in absolute terms.

[InsecureAnimal]

Your argument assumes ppl to be in capitalist mode. That failed model will fade out in the future as ppl realise what is benficial for others is beneficial for them too (as a whole). Your whole point seems to be that no one will do "good" unless it benefits them.  This is out of date thinking.

[ithinkronpaulissmart]

@InsecureAnimal You are right in that my argument does assume individuals primarily act in their own interests.

Of course, if you believe people will be altruistic, it doesn't seem like you would need dominant assurance contracts anyway. There wouldn't be a freerider problem to begin with.

[dadrogon]

@ithinkronpaulissmart The words altruism and self interest shoudn't be used without being defined before hand. There are like 5 selfess people, all insane, and there aren't many peopel who actually do what is good for them all the time. The only thing we can bank on is that people do wha they want, and this is exactly what economics does now a days.

[fringeelements]

"if people are altruistic, you wouldn't dominant assurance contracts" (char lim)

HOW altruistic.

An analogy is the state. If people generally support the state, why must there be enforcement at all? Because marginal force lowers the support needed.

Dominant assurance merely lessens the free-rider problem, so LESS altruism is required. Moreover, public goods are never completely non-exclusive, and selfish individuals can find it in their best interest to pay in order to get the wristband.

[IndividualAutonomy]

How dare you! You may take away my arguments, but you will never take away MY FREEDOM (Islam and Aztlan).