Getting Interested in Economics : Free Rider Problem & Law of Unintended Consequences

Getting Interested in Economics : Free Rider Problem & Law of Unintended Consequences

Economics, Free Rider, Management, Leadership, GDP, Wisdom, Investments

Free- rider is a person or group of persons who knowingly or unknowingly shares the benefits acquired from a collective effort, but contributes little or nothing to the effort. It is considered to be a problem when it leads to non-production or under-production.

An example of the free-rider problem : This can happen in a cricket matches series. We have often seen that when a team wins the series, then each player belonging to the winning side, irrespective of whether he has performed or not, enjoys the reward. This happened recently in WC T-20 when India won the series and few players enjoyed the benefits of winning the world cup by not playing a single match or having under performed. The rewards were substantial to the tune of millions of dollars.

Here the players who have not contributed or have contributed little are known as free-rider. The free-rider problem will arise when few players start taking their position for granted in the team, and assume that they will get rewarded without contributing. And this could lead the down fall of overall team.

 

Unintended Consequences , Economics, Basics, Concepts, Fundamentals, GDP, ManagementUnintended consequences  are outcomes that are not the ones intended by a purposeful action. During the cold war between US and USSR – the Americans had the

following strategy. They supported the Afghan rebels against fighting the Russians in Afghanistan. This went on for almost a decade leading to increase in arms and trained mercenaries amongst the Afghan rebels.

The cold war lasted until 1990’s when the USSR collapsed. After this event and the cold war the Americans withdrew supporting the rebels and left them on their own state.

The unintended consequences of this series of events happened when the Afghan rebels turned against America culminating in a terrorist attack on 9/11 in 2001 on the WTC.

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