Free-Riding for a Free Dinner

     In my sorority, house dinner is catered every night, Sunday-Wednesday, by Flavor Catering. All members are required to buy house dinner for at least one night each week, every week for the entire semester, at the beginning of every semester. Girls that live in the house, however, are required to buy three nights of house dinner. This semester, I bought house dinner for Tuesday nights. However, I lived in the house last year, and bought three nights a week for two semesters, and know that there is always extra food on Sunday nights because they expect most people to eat house dinner that night. Because I have this knowledge, if I am at the house before dinner on Sunday nights, for chapter or other events, I will typically stay and eat the Sunday night dinner, despite the fact that I only paid for one dinner a week on Tuesday nights.

    I am an active contributor to the free-rider problem in this instance. Because I know that there is always extra food on Sundays, and I know that they are not going to object to just one more person eating dinner than is supposed to be, I take advantage of available food that is difficult to exclude people from eating and get a free meal. If more people use this knowledge to their advantage and ate house dinner on nights that they did not pay for, then the sorority may have to start making house dinner available to everyone by charging for it in dues, effectively making house dinner a public good for sorority members, or restrict house dinner to only girls that live in the house, preventing people like me from free-riding and taking free meals whenever we want one, regardless of which night we actually bought dinner for.

Larry David the economist

 I've recently been binge watching Larry David's "Curb Your Enthusiasm". The show follows Larry as he goes through life. Larry has a very particular way of thinking that often causes him to get into verbal altercations; however, Larry is almost always right. He views life economically. If he is wronged he expects an equal "payment" to compensate him for the negative externality that was imposed on him. This payment is not always a money transfer (mt), but I am sure that Larry does the calculations to make sure the utility he gains from any form of payment (ap) would equate to a money transfer so that, MUmt = MUap. Unfortunately for Larry, the tragedy of life is that most people are "irrational" and don't think like his economic brain does. This often fuels the confrontation. 

One day Larry walks into a gym locker room. Gyms and therefore locker rooms are private with a limited membership (excludability and rivalrous). However, the air inside the locker room is public. When Larry walks up to the sink, there is a paunchy man applying a hefty amount of baby powder to his armpits. As he does this, powder explodes into the air contaminating it significantly, covering Larry's glasses. Because the air inside the private area is public, a fair coasian solution to this localized problem would be for the paunchy man to offer some sort of payment to offset the marginal damages that the powder in the air. In this situation, the damage of the powder is a complete loss of vision for Larry and because of this he just turns away and leaves he locker room. In a rare moment of self restraint and non-confrontation, one can only assume that the damage done to Larry was so costly to him that he had no interest in staying around no matter what the cost. If the man offered Larry $1,000 (maybe even $100) he surely would have stayed and endured the powder contaminated air, but in the real world transaction costs are a real issue and the cost to Larry of having to ask this man to either stop or pay him a fee and then bicker and negotiate with the man was too high for Larry this time. 

Pareto Efficiency and Gift Giving

 When growing up my favorite gift was Star War Lego sets. I could build and play with them for hours on end, and since my parents were not a fan of letting me have a lot of “screen time” growing up I often did. So naturally when Christmas and my birthday rolled around I wanted Legos.. So what does this have to do with Economics? Well, gift-giving in theory is a Pareto efficient move, it's a move that makes someone (the recipient) better off without decreasing the utility of others (if the person giving the gift derives satisfaction from making the recipient happy that outweighs the costs of purchasing the good). However, in reality, it is not Pareto efficient its Pareto inefficient. We live in a world where gift-givers do not know their recipient's preferences perfectly and thus situations arise where it is possible to reallocate resources to make someone better off without decreasing the utility of others.

For example, there were many years when my Grandmother, who is very sweet and loving, would get me nice button-down tees, which I despised wearing. If the shirts and the Legos cost the same and my Grandmother derives the same amount of utility from seeing me with Legos or with shirts then moving to the bundle where I receive the Lego Star Wars is a pareto efficient move. While I tried leaving hints over the year that I really wanted a Star War Lego set she never caught on and so we were stuck in a Pareto inefficient equilibrium. And this happens with most gifts unless someone is given a cash transfer, which is typically seen as taboo. Even when I received a Lego Treehouse set it still was not Pareto efficient equilibrium because I preferred the Lego Star Wars set (costs being the same). I know this sounds like I was being ungrateful but ultimately it doesn’t change the fact that it was not my preferred choice. I do not think the takeaway is that we shouldn’t give gifts, rather I think this should make us realize that maybe gift-giving is more about kindness and acknowledging the important people in our life than the gift in and of itself.

America's Newest Citizen!

     Last week, one of my best friends got his American citizenship after years and years of preparation. After our in-class discussion of the utter irrationality that is the act of voting in America, I thought about David. David has spent countless hours advocating for U.S. candidates he believes in and campaigning for their success anywhere from local to national elections. This seems crazy given David could not even vote himself. Yet, he has and continues to be involved almost every day, regardless of election cycles. He even ran for student government in our high school. Why?

   Under the assumptions made in the equation B+D-C≥0, I would argue David's "D" would indicate that he receives immense utility from the actions of his involvement in the political realm. I would go so far as to say that the expressive value of his involvement and "Americanness" outweighed his inability to actually cast a vote. I also firmly believe that his "D" will continue to be greater than 0 for his entire life suggesting that David will now vote any time and every time that he can as his expected utility will be greater than 0.

The Fresh Water Club

Apparently, some people prefer warm tap water to cold, filtered water from a Brita. I was shocked to learn this when a vote went out on whether to use house funds to buy a Brita filtered water dispenser for everyone in the house to use. It seems that $2.35 each was too steep a price to pay, and a heated debate ensued. With friendships hanging on by a thread, the vote was shot down with a slim majority, and it was decided that the house funds would not go to buying a Brita. 

One housemate, James, determined to get his fresh water, gathered up the people who voted for the Brita, and we decided to share a Brita among just these people. James saw the value in making this a public good instead of buying one privately. In doing this we established a club for Brita water as Buchanan discusses in his theory of clubs. We were able to offer a nonrival good, privately for those in the club. One housemate in the Brita club, who is not an ECON major, brought up a very important objection. He said in a text "Who is to guard the Brita from the non Brita people when they realize that cold filtered water might be better than musty tap water?" He astutely pointed out that it would be difficult to make our Brita excludable. Since the Brita would be in a public fridge, we would have a difficult time preventing free-riders who voted against the Brita from taking our precious water. Relying on human decency threats of retribution, and the pride of those individuals who were so against the Brita, we established this club, and are now able to enjoy fresh filtered water instead of "musty tap water". 

P-ickleball

This past week, the RUF Pickleball Groupme (linked here, for any interested picklers) debated randomizing teams for our next monthly tournament. To settle this debate, the GroupMe admin sent a poll with options “1: randomize teams,” “2: pick partners,” and “3: I don’t care.”

Right before the poll expired, I remembered to vote. When I opened the ballot, I could see how many people had voted for each option! 24 people had voted for randomization, 23 for picking partners, and 7 were indifferent. I was already planning to vote for “2: pick partners” (I did not want to subject an unwitting, unknowing, random partner to my horrible lack of hand-eye and a subsequent first-round elimination). However, this count told me that my vote could tie the election (at 24-24-7), and that I would 100% influence the outcome of the election so long as I was the last voter. In other words, my EB increased as my perceived P increased, and my motivation to vote grew stronger. 

When discussing presidential elections, we’ve often claimed that "p" is practically 0. We've also suggested that it can be almost-impossible to determine the individual i’s "p" with civilian-level information. However, given the small number of voters, simplicity of this ballot, and published vote counts, I could somewhat-accurately approximate the “p” that my vote would make a difference in the pickleball group chat.

I was ultimately not the last voter, and the other last-minute voters won the election for “1: randomize teams.” But, at least for a minute, I experienced the triumphant feeling of a non-zero p and a rational decision to vote, given b*p-c.

Good politicians vote for themselves...right?

In fourth grade, I decided to run for the Leadership Council. My elementary school was a Leader in Me school, which is a school intervention focused on student leadership. I knew I wanted to be on the council and help decide curriculum and school structure (so there was a massive B). 

There was one thing standing in my way. My best friend Kori was running too – and I thought I should be a good friend and vote for her. My mom thought this was ridiculous – “if you don’t vote for yourself, why should anyone else?”. Further, she argued, my vote could be decisive – and if I really want the role, I should vote for who I want to win. 

Little did my mom know, she was employing the minimax-regret decision rule. By voting for myself, I was minimizing the regret I would feel if I were to not win and it was decided by a single vote. 

And my vote ended up mattering. By just one vote, I was elected to be the Ms. Bentley’s class representative. I guess good politicians have to vote for themselves.

Breaking and entering...and free riding.

        The house I currently live in got broken into during the summer of 2022, while only two of my roommates were in town. Suddenly, while on vacation with my family, I was on the phone with home camera system companies. Of course, in the heat of the moment all of my roommates offered to pitch in to buy the cameras, or offered that their parents would pitch in. I didn’t think this was necessarily the right time to be stingy so I went ahead and bought 4 Blink cameras before Venmo-requesting anyone. 

Now, fourteen months later, no one has paid me back. I bring it up from time to time and say “remember when you all offered to pay for these?” but it never seems to land very well. However, I granted everyone access to the camera system’s App and they all reap the benefits of 24/7 camera security. This is an example of the free rider problem. The Blink is our shared resource that, due to its common benefit, has resulted in people simply not contributing to it at all. Once each of them saw that the other 7 roommates also offered to pay for the cameras, they felt less inclined to actually follow through with their contributions. Since it was a one-time payment, I can’t realistically just take the resource and its benefits away from my roommates, but economically speaking I probably should’ve. 

The Green House on Elliewood

I’m the engineering director at Forge, a nonprofit with a mission of empowering students and accelerating their early career growth. Until recently, we held the beautiful green house at #9 across from Bilt and Take It Away. The space functioned as a sort of better 1515 where students had 24/7 access to computers, projectors, books, study spaces, and more. But the space suffered from two large issues.

The first issue was free-riding by non-paying guests. Members were charged a small membership fee ($25/semester) to keep the space clean. Too often, members shared their unique pin code with non-paying friends. The shared resources of the space became messier and more wore down given the overuse compared to the membership revenue to replenish the space. But since this isn’t a public good (the door can be locked), the solution is simple: charge a higher price or fine members for allowing non-paying guests. The second issue was the negative externality of our neighbors below, Coupes. It’s loud, late-night music made the building shake and made it hard to study. The only period it was quiet at night was when Coupes was rebuilding itself after its kitchen fire, but then too the construction noise only shifted the externality from night to day. Perhaps the solution here would have been to buy out the space before they rebuilt themselves or find another study location with more favorable noise ordinance policies.

Someone Else Will Write it, Right? 😅

 I was recently asked by a 2nd-year student I know moderately well to submit a nomination for him for the Meriwether Lewis Institute for Leadership and Citizenship. The nomination form includes writing a 300-word or less essay explaining why we think the candidate would be good for the program.

Thus, I asked him to send his resume or some of his involvements, and he did. However, after hearing that he's asked multiple people to write him a nomination, I decided that I was not going to submit a form because the marginal private benefit of my submission to his odds of becoming a fellow would not exceed the marginal private cost to me of spending the time to write the nomination. I value my time at $27 an hour for the two jobs I work, plus the expected future value of my degree in the labor market, which is a function of the time I spend developing my human capital and progressing towards my degree by completing assignments and studying. This situation can be looked at as analogous to the rational voter hypothesis because my nomination for him, in some ways, counts as a vote for him to be a part of the program; (PB) + (D - C) in my case is not greater than zero because (D-C) is $-13.5 because my "vote" for this person does not benefit me at all, so D = 0 and C equals 13.5 because the form will take an estimated 30 minutes to complete. B is zero because I am indifferent about this guy being in the program or not; thus, PB = 0, even though my "vote" would undoubtedly have some benefit. Therefore, we end up with (0) + (0 - 13.5) = -13.5.

All these factors led me to neglect to submit a nomination form for the good homie, even though the 45 minutes I spent writing this blog post could have been devoted to his nomination form 😅. I'm just hoping I can free-ride off the generosity of others he asked to submit a form if they choose to do so and take partial credit for his success in becoming an MLI fellow 🤭.

Too Many Cars, Not Enough Space

I live in a house of 12 girls, 9 of which have cars. Yet, we only have 6 total parking spaces. So, we always need to have at least 3 street spots. That sounds easy enough until you realize we live on Chancellor St., which is packed with cars bumper to bumper day in and day out. We have found that the only way to maintain parking spots for everyone is for everyone to prioritize street parking; you see a spot, you take it. As a house, we came to this collective agreement to prioritize street spots. But as course loads pick up and schedules get busier, certain people have decided to neglect the agreement. They get home and immediately park in a parking spot.

If too many people neglect the agreement, the free rider problem arises and we end up with too many cars and not enough spots. Currently, the only reasons to park on the street are altruism (doing it so your housemates won’t get home without a spot) or the negative incentive of the possibility of you being the one left without a spot. Thus, I am proposing a new system tonight at our house meeting. We have a jar in our foyer. If you park in a parking space, you have to put a dollar in the jar. But if you park on the street, you get to take a dollar from the jar. This imposes a negative incentive to parking in a space and a positive one to parking on the street. I am hopeful this will help our problem of free riding but doubtful I will actually get all 12 girls to agree to this collective agreement.

The Rational Voter Hypothesis and Student Voting in Lambeth

Checking my email today, I felt frustrated by yet another reminder to vote in our dorm's student council election. While I've often faced criticism from my friends for my reluctance to vote, following Thursday's lecture, I've realized that my decision not to vote isn't due to laziness but instead is me innately following the rational voter hypothesis.

Lambeth is home to approximately 600 students, and I'm confident that the probability (P) of my vote influencing the election is very low (1/600 is almost negligible). Since I'm indifferent to the policies of the candidates, my Benefit (B) is effectively zero. Regarding costs, I've chosen to value my time at $15 per hour (equivalent to my current wage) and estimate that the process of watching the candidates' videos, reading their testimonials, and casting my vote takes about 30 minutes, costing me approximately $7.5 (C). When applying the formula PB - C (Mueller 14.1), the result is -7.5 (0*0 - 7.5). From a purely rational perspective, as this value is less than zero, it suggests that it is not in my self-interest to vote

Tiebout and the Tebow State

Charles Tiebout wrote an article titled "A Pure Theory of Local Expenditures."  Tim Tebow was a National Championship and Heisman Trophy winner at the University of Florida.  Last year, Florida had the largest positive net migration in the US among states.  In his writing, Tiebout focused mainly on migration and government expenditure structures in smaller sizes, and we are looking to apply this to a state level.  Interestingly, some of Tiebout's assumptions do not hold true, making this large migration even more significant.

If Florida won the migration game, California lost it: the former gained ~300,000 people while the latter lost roughly the same.  While there are people from other states in these numbers (including one of the best quantitative hedge funds in the world moving from Chicago to Miami), comparing the two generates interesting results.  To start, California is known as a blue state, and Florida is known as a red state.  The two governors clash on issues like transgender policy, immigration, and corporate governance.  In regards to Tiebout's work, the tax structure is different: California's income tax rate over $1,000,000 is 13.3%, while Florida's is, well, 0%.  While I'm not a statistician, I would argue that the movement of that many people out of California and the same amount (although not necessarily the same people) into Florida is in some way significant and that when reviewing their state government, at least when compared to before, people see more benefits to living in Florida and less to doing so in California.  

In his writing, Tiebout assumes no costs in moving: in reality there are extreme costs.  These are part of the personal calculus of moving, and still overcome by the perceived change in benefits.  Wages in California are much higher, but this may be attributable to a higher minimum wage and may be canceled out by a higher cost of living.  California has been known as the place for young people and growth (watch the show Silicon Valley or the movie The Social Network).  Now, there's a bestselling book detailing the failures of the third largest city in California.  Migration data give us insight into how people review their government (with limitations), and the recent data help us define and decipher how the American population views our states.

A True Redistribution of Wealth

 I recently have been second guessing my decision to work as a server at Bizou. While the food is very good, and I enjoy waitressing (to an extent), my problem recently has been the tips. While any server knows that a decent payout is not guaranteed at the end of the night, I have become really frustrated recently with my paychecks. I think I know the problem: at Bizou we pool tips. 

When I first applied for Bizou, I had no restaurant experience and no idea if I would be any good at serving. Under a true Rawlsian veil of ignorance, I thought tip pooling was the right move. What if my section just wasn't busy that night? What if I didn't get any big tables? What if I got a real mean group of Virginia Tech fans who would refuse to tip me? Tip pooling was a wonderful solution of perfect redistribution. Until it wasn't. As I got more experience, I realized I was consistently making less money than I pulled for the group. This perfect redistribution ignores that my marginal utility per dollar seems more than some of my coworkers. Where I would happily take a big table for a better tip, I know that some of them would derive just as much utility taking a stress free two top. So if anyone knows a restaurant that doesn't pool tips, text me. I'll be their star server. 

Grappling Game

While training Brazilian-Jiu-Jitsu tonight, I noticed something interesting about how I fight and its pertinence to economics. For those who don't know, BJJ is a grappling art that has a strong emphasis on submissions. To lead up to a submission, one has to make a series of moves, which all have a certain probability of working depending on who you are going up against. Better fighters will have more counters to high-percentage moves, decreasing their expected utility, and worse fighters won't. In this sense, BJJ is a game of expected utility maximization.

For example, tonight I was trying to escape from a rather disadvantageous position, and during the match, I was trying to use one of my best escapes. My opponent believed that this was the only thing that I was thinking of, so prepared themselves to defend against this. However, since I knew my opponent and was maximizing expected utility over the entire game, I had prepared a counter that could then deal with how they were going to defend. As a result of this planning and understanding of the probabilities that each move would work, I was able to win the match.

Sunsets on Skyline

     Skyline Drive and the greater Charlottesville area in general can have some beautiful sunsets. Last weekend, my roommates and I drove along that road with the idea to stop and have a sunset picnic dinner. Sunsets can be categorized as a public good as they are non-rivalrous and non-excludable, in theory. Many people who want to view a sunset can (and should!) without bothering or lowering anyone else's utility in consumption. Further, we stopped in a small parking lot with just a few spots-- one of which we were lucky enough to snag. Like many roads or parking lots, it seems as though there was some degree of rivalry present in our situation through a risk of overcrowding and having one's view inhibited as well as a lack of availability to stop in that parking lot.

    As a notable market failure, there was allocative inefficiency present in this sunset scenario because there's no way to appropriately charge consumers when a good is non-excludable. Q* does not equal QAE. A potential solution for this issue may be to utilize the gate (entry point) that is present along the road to "close the door" or to enforce Shenandoah National Park's entrance fee to create excludability to re-allocate resources efficiently. So, is it the government's role to step in and solve this economic issue?

"All the Debts I Owe"

As an enjoyer of live music and a fan of the band Caamp, I was thrilled to hear they would be playing at the Ting Pavilion in Charlottesville. However, a quick survey of my bank account discouraged me from attending the event. The night of the concert left me disappointed to miss the chance to see them. I had heard rumors that there was a spot near the venue where you could sit outside, and hear the concert, so I grabbed a friend and we found this spot. Atop cement blocks and rebar, we enjoyed a full Caamp concert, with a great view. The best part of this view was that I paid nothing for it. 

Sitting on my cement block and listening to the chorus of “By and By” I began thinking about the economics behind this situation. It became clear to me that this music was a positive externality in production, and I was free-riding by enjoying it without buying a ticket. Since Ting Pavilion is an outdoor venue, it is much more difficult for them to exclude than say JPJ. The non-excludability of this event allowed me to free-ride and enjoy a concert that others paid hundreds of dollars for. This relates to the externalities and the free-rider problem that Gruberch discusses in Chapter 5. Caamp produced the music for the patrons in the venue who paid for it but could not prevent me and others from enjoying the public good that they were providing.

Penny is a freeloader

In "The Big Bang Theory," (tv show) Penny, an aspiring actress who supports herself by waitressing, takes advantage of the kindness and resources of her neighbors, Leonard and Sheldon. Leonard and Sheldon are roommates who also work at the same university. Both, Leonard in particular, are benevolent to Penny, so she enjoys free Wi-Fi, meals, or help with various tasks. In this case, Penny benefits from the goodwill of her neighbors, without having to pay them back.

Now, this pattern of behavior mirrors the classic case of the "free-rider problem". The free-rider problem arises when there is a reluctance to contribute to the cost of goods that bestow group benefits. If a public good or service is being provided, some might benefit without contributing to its production. In this context, we can highlight the Wi-Fi conundrum. Now, I know what you're probably thinking: "Wi-Fi is excludable, so this example is rendered moot!" And yes, you would typically be correct. HOWEVER, you see, we haven't considered Leonard's kindness toward Penny, rendering him incapable from excluding her usage of Wi-Fi. And hence, we have the free-rider problem.

Negative Externalities of Music Consumption

 I have a friend, Andrew, who lives on the first floor of an apartment building on JPA. One thing about Andrew is that he loves his music. He really likes to feel like he's at trin at all times of the day. It doesn't matter if it's Tuesday at 1pm or Sunday at 2am, He's blasting his music. As you can imagine, Andrew consumption of music has a significant negative externality for neighboring apartment and significant. So much so that Andrew received a message from his landlord on Monday that his neighbors had the right to file a police report if he kept it up. 

While most people would have simply turned down their music, Andrew took a different approach. He research the Charlottesville City noice ordinance to determine the exact decible limit at various times of the day. He then purchased a tool to measure the decibels of his speaker at max volume. AS it turns out, his music plays 5 decibels below the legal limit. Much like the farm with the smelly hogs, Andrew's not liable for the negative externalities he's causing. So clearly, Andrew wont be turning his music down anytime soon. So, I suppose the real question now is: How much do his neighbors value their peace and quiet? And are they willing to compensate him to lower his consumption to the level of the social marginal benefit?

UVA parking is annoying

 My friend Bill and I had a long discussion this weekend about parking here at UVA. Bill claimed that parking was “for the people” and that he should be able to park wherever he wants. I explained to him, using Buchanan’s “An Economic Theory of Clubs”, that parking is not a public good but a private good given that it is reasonably excludable and rivalrous in consumption.

I live on Wertland Street and Bill lives at Bond. He comes over to do homework all the time and I always warn him not to park on the street because the parking patrol here is fierce and he doesn’t have a parking permit. Bill comes from a small town in Champagne, Illinois where parking is in abundance and it seems that anyone can park wherever they want with no consequences because Champagne police are not concerned with parking infractions.

I explained that parking is reasonably excludable because there is often limited space in population dense areas such as UVA. I also explained that parking is obviously rivalrous because there are more drivers than parking spots available on Wertland Street requiring some people to park elsewhere. He still wasn’t convinced that parking should be this restrictive– given his upbringing in parking abundant Champagne– so I explained further. While I agreed with him that parking has degrees of publicness especially in less-densely populated areas, parking on Wertland should not be considered a public good because the people authorized to park there have to pay every month for a spot. His decision to take an available space on Wertland Street is robbing another resident. This can also be seen as a negative consumption externality because the consumption of a parking spot by Bill reduces the well-being of Wertland residents who now have to spend time and fuel driving around to find a place to park.