A recent article in the NYTimes introduces the free-rider problem as follows:
“You can watch PBS without making a donation; you can enjoy clean air even if you drive a car that pollutes. Such goods, however, give rise to the so-called free-rider problem: acting selfishly makes sense for each individual (why sacrifice if you don’t have to?) but as more and more people choose to act selfishly, the good disappears and everyone loses.”
The article struck a chord with me because I had just met an accountant who stated proudly that he knew how rich people could manage their money in ways that allowed their heirs never to pay any taxes. I was taken aback and remarked, “But will they use the roads built with other people’s taxes?”, to which he answered, gleefully, “Well, the roads will not be built with their taxes!” And when I pointed out that we were currently watching a whole country, Greece, going down the tubes because, among other things, cheating on taxes is endemic there, he replied that everything he would suggest would be legal.
In other words, I had encountered a form of the free-rider problem before I even knew that it had a name. Now, I find it perfectly legitimate to try not to pay more taxes than necessary, and that’s why we employ our own tax planner. But I do consider attempts to avoid paying any taxes while fully using the goods and services created by the taxes paid by others (roads, police protection, food safety supervision, to name a few) a form of sociopathology.
I knew that “cheating the government” was an attitude prevalent in the underground economy of tradespeople, which I deal with frequently. My conversation with the accountant showed me, however, that the attitude goes all the way up to people with the highest income. This is very different in the country I come from, where people are willing to pay taxes as long as they see them used in beneficial ways. In fact, conversations with friends and what I read in online magazines suggest to me that plans of the current German government for tax relief are meeting a less than enthusiastic response. People know that as a result, the public debt would have to increase or some social services be cut, and that’s considered worse by many than having 200 Euros or so more in their pockets.
2 hours ago