Question

5. In the city of Crimetown, many businesses and neighborhoods are hiring private firms to install locks and gates and to provide security guards. However, during the last city election, a majority of people in the city voted against expanding the city’s police force. Use the concept of the free rider problem to explain why the same people might hire security guards for their own homes and businesses but vote against expanding the city police force.

Answer 1

This is classic case of free rider problem. For providing the police service the city government will have to raise taxes. Once the tax has been imposed then everyone will have to pay for it. Thus the tax is levied on everyone.

Now there are people who will evade the tax. So some people will not pay and get the benefit in terms of increased security. So, people know this and thus they are arguing against the extra increase in police force.

In the case when they are hiring private forces only those who truly need it will pay and there will not be any problem of free rider in this scenario.