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The following essay will discuss free riding in public good games shown by James Andreoni (1988) and how this relates to the current global social dilemma of climate change. It will include what free riding is and how it is seen in an experiment by Reviva Hasson, Asa Lofgren and Martine Visser (2010), how climate change can be portrayed in a public good game as well as how policy makers can use these finding in South Africa.When a good is available to everyone in society and the use of it by one person does not decrease its availability to others, this causes there to be subjects that do not contribute to the but receive the benefits of others that contribute.
For instance, with climate change, all countries face private costs to reduce greenhouse gas emissions while the benefits are shared all over the planet regardless of whether or not the other countries have contributed.
This is called free riding.In the experiment by Andreoni he noted that there is no significant evidence of free riding in one-shot games.
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which can be seen in an experiment conducted by Maxwell and Ames (1981:291) who found that subjects only reach Paretto efficient levels halfway through a game. This shows that repetition is necessary to analyze the level of free riding in a game. The experiment was conducted using 2 hypotheses: learning (subjects will learn incentives of free riding as they play) and strategies (as the subjects play they will develop strategies to maximize their payout). In the experiment, the subjects were split into 2 groups: strangers and partners.
The theoretical predictions were that giving by Partners would continue throughout all rounds and that on average giving by the Partners will be more than that of the Strangers.
The Strangers have no incentive to continue cooperating and treats every round as if it were an end-game, will free ride.The Experimental Results based on the Strategies Hypothesis was that giving by Partners is less than giving by Strangers in all 10 rounds of the game and as the rounds progress the difference between the Strangers and the Partners grows. The strategies hypothesis predicted that giving by Partners would be greater in all 10 rounds with the difference decreasing. This result therefore goes against the theoretical prediction. It was also seen that Partners free ride more than that of Strangers which also goes against the theoretical prediction.
The Experimental Results based on the Learning Hypothesis was that Strangers give more and free ride less in the last round, which is seen as an end-game which goes to show that learning is not completely responsible for the decay of the public good as free riding increases.The economic issue that I believe can be influenced by this experiment is climate change. Climate Change being a change climate patterns that attributed largely to the increased levels of atmospheric carbon dioxide produced by the use of fossil fuels. Climate change is seen as an economic issue as it decreases the productivity of a region and could leave the global GDP 23% lower in 2100 than it would've been without climate change and global warming (Justin Worland, 2015). Since climate change was discovered 20 years ago the primary solutions were mitigation (the act of lessening the intensity of climate change) and adaptation (any action taken to reduce the vulnerability from climate change).
The main causes of climate change are the exponentially growing CO2 emissions. In the experiment by R. Hasson, A. Lofgren and M. Visser (2010:331), it stated that climate change is a social dilemma and because the environment is a public good it leads to a tragedy of the commons. In this experiment the subjects have a choice of adapting or mitigating. Adapting will be seen as free riding as it does not decrease/ better global warming, the subject merely learns how to survive in the conditions. The return from mitigation (being decreased global warming) is highest when all subjects mitigate that is not the case as majority of people have the social preference to adapt or do nothing as it saves them money. This is mainly done as people assume that others will mitigate and they can free-ride " receiving all the benefits without expelling any costs. This is dangerous though because as seen in Andreoni's experiment, subjects do not behave as expected with free-riding and is therefore very difficult to explain why people free ride or how to stop free-riding. The results show that as time progresses subjects begin to free-ride more. In terms of climate change, this shows how people may start to mitigate but will eventually stop and start adapting.
In the experiment by R. Hasson et al. (2010:335) it showed that the probability of a climate change disaster should no one mitigate is a certain. It was also mentioned that in South Africa the level of climate change mitigation is generally lower rates of contribution than the international average, which is normally between 40% - 60%. Adapting is the dominant strategy even though the expected payoff is higher if they choose to mitigate. The expected payoff being the long term environments' condition.These findings are applicable to South African policy makers as they can use these findings to increase the level of mitigation in South Africa. This can be done by introducing punishment in the policies/laws that are made regarding climate change. When the drought occurred in South Africa the past few years' policy makers introduces water restrictions and water levies for excessive use of water.
For climate change they can introduce fines to car that release excessive amount of CO2, fines to factories for the improper removal of waste and smoke released and can also start incentives for using alternative energy sources that do not damage the environment. By doing this it will incentivise people to mitigate rather than adapt (free-ride) as they will be fined for adapting and rewarded for mitigating.In conclusion free-riding can be seen in many aspects of the economy. Climate Change is an economic issue as is affects the productivity of a specific place and will only get worse as explained throughout the essay is people only adapt instead of mitigating. By introducing fines, the policy makers can minimise free-riding and thus try to better the environment and the economy for the coming future. But as seen in Andreoni's experiment, subjects behaviour is unpredictable which shows that no matter what the policy makers do the outcome will not be as expected.
Free Riding in Experimental Economics. (2019, Aug 20). Retrieved from https://studymoose.com/free-riding-in-experimental-economics-essay
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