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Good Governance: Public goods and the free-rider problem

IN this article, I borrow a concept from economics to make what I hope is a persuasive argument for why more of us should get involved in public affairs; why we should speak out, participate, and where the facility is available, register to vote. The task of achieving good governance has never been cheap or […]

IN this article, I borrow a concept from economics to make what I hope is a persuasive argument for why more of us should get involved in public affairs; why we should speak out, participate, and where the facility is available, register to vote. The task of achieving good governance has never been cheap or easy. It is costly and, as the history of humankind has proven time without number, it can also be a hazardous exercise. But the prospects of achieving it are better when more people work together in strong networks of co-operation.

To advance the argument, I am going to use building blocks around the concept of public goods and the problem that is often associated with them: the free-rider problem. Allow me, therefore, to take a tour with a rudimentary account of the nature of goods. The idea of goods in this case includes services. Economists classify goods based on two important features that distinguish them. The two features are the rivalrous (or non-rivalrous) nature and the excludability (or non-excludability) character of the good.

Rivalrous or non-rivalrous

A good is considered rivalrous if its use or consumption by one person deprives another person of the opportunity to use or consume it at the same time. If there is one tractor and two farmers want to plough their respective fields, only one can use it at any given time. It cannot plough two fields at the same time. Likewise, a pair of shoes are rivalrous goods because two people cannot wear them at the same time.

The opposite, where a good is regarded as non-rivalrous is when its use or consumption by one person does not diminish the ability of other people to enjoy it too at the same time. Air is non-rivalrous because all things being equal one’s ability to breathe does not reduce another person’s ability to also breathe. Likewise, the State’s ability to defend the nation is non-rivalrous because the peace and protection it delivers can be enjoyed by everyone at the same time.

Excludable or non-excludable?

A good is considered excludable when it is possible to exclude others from enjoying it. For example, it is possible to exclude people from a music concert when you demand payment for access to the concert hall. Only those who pay can enter the concert hall. A website can prevent those who have not paid subscription fees from accessing it. Television services providers like Netflix or DStv for example, exclude those who have not paid their subscriptions. Now, you might say but I use my friend’s password to access these services. There is a term for it which we will encounter shortly: free rider. It only works as long as your friend or neighbour is willing to give you a free-ride.

The opposite is where a good is non-excludable. As we have already seen, the air that we breathe is non-excludable. Streetlights are often used as a good example of non-excludable goods because everyone who uses the street or lives in the area can benefit from the light. You cannot prevent people in the neighbourhood from enjoying the benefit of the streetlights. Peace and security in the neighbourhood are also public goods. Therefore, if people establish a neighbourhood watch committee, it will benefit everyone, including those who are not participating and paying for it.

Based on these two qualities, economists classify goods into four types.

Private goods

First, there are private goods, which have both qualities of being rivalrous and excludable. If there is one shirt in a shop and two people want it, it is impossible for both to have it at the same time. Whoever gets it means the other cannot have it. The shirt is both a rivalrous and excludable good. Whoever between the two can pay the price for the shirt will get it. You can imagine any number of things that qualify as private goods.

Common goods

Second, there are common goods. They are rivalrous but unlike private goods, they are non-excludable. They are rivalrous because one’s enjoyment of the good diminishes the other’s ability to enjoy it, but they are non-excludable because you cannot exclude others from enjoying the good. Take the communal pasture where peasant farmers’ cattle graze. Their cattle must compete for the pasture because they all have access to it. Another example is animals in the communal forest. Everyone can go and hunt. The problem, as you can imagine, is that the common resource is finite. The more animals graze in the same field or hunters hunt in the same forest, the rivalry leads to depletion of the resource. Economists refer to this as the “Tragedy of the commons”.

Club goods

A third type is called club goods. One might say they have opposite qualities to common goods. Club goods are non-rivalrous but there is a possibility to excludability. The enjoyment of the good does not impact another’s person’s enjoyment of it. You can both watch your favourite football teams playing a match on satellite television in your own homes. However, it is possible to exclude others from accessing these goods. Although satellite television is non-rivalrous, the satellite television provider can exclude others by demanding a subscription fee. If the forest becomes privately owned, the owner can exclude hunters by demanding a fee to hunt in it.

Public goods

The fourth type of goods are public goods. Such goods are the opposite of private goods because they are both non-rivalrous and non-excludable. Everyone can enjoy them at the same time without reducing the others’ ability to enjoy them as well. I have already made reference to the example of peace and security in the neighbourhood. All people can enjoy the peace and security that is brought by having a community security arrangement.

But even those who do not pay for that arrangement will also benefit from the peace and security. This is the free-rider problem that I referred to earlier. Those who are not paying for the cost of the neighbourhood security are taking a free ride on the efforts of those who are paying. Likewise, at the national level, national defence benefits everyone, but someone must pay for the upkeep of the security services through taxes.

The free-rider effect

The free-rider problem, therefore, exists where one person enjoys the benefit of a good without paying for it and someone else is paying. This is not a problem if those who are paying are prepared to continue with that arrangement. However, most people might become frustrated and disheartened when they realise that they are carrying everybody else on their shoulders. Over time, they might decide to express this frustration by withdrawing their payments altogether. This will result in under-provision of the public good. Club goods can suffer the same fate if fewer people subscribe while the rest take a free-ride. One outcome might be that the provider will raise the price for the few who are paying subscriptions, but this might only lead to less subscriptions as people switch off. The quality of the goods might suffer and at worst the provider might close because it would not be viable to continue when costs outweigh benefits.

Scenario: Peace and security in the neighbourhood

Imagine a situation where there was a neighbourhood watch committee formed by the community to provide security in their area. At first 18 out of 20 households agreed to join the association. They paid a $10 subscription each month to hire guards to patrol the streets at night. In that case, already there were two households which were taking a free ride on the rest because they were enjoying the benefit of security in the area without paying for it.

Over time, some began to neglect their duty to pay until there were only 10 households left. This meant just half of the community were paying for security of the entire neighbourhood. Faced with fewer resources, they had two choices if they wanted to continue with the arrangement: either to reduce the number of guards they were paying and, therefore, have less security or to raise subscriptions to retain the full service. The problem of raising the subscription is that they might lose more members. But the low subscription would mean a poorer service.

The problems persisted. Eventually, only five out of the 20 households remained in the association. They carried on for a few months but frustrated at having to carry everyone in the neighbourhood, they abandoned the project. It was back to the old situation of each household for itself. The end of the neighbourhood watch system left everyone vulnerable. When criminals sensed that there was no security in the area, they went on a rampage, burgling and stealing from the households. Even those who had private security suffered because the reputation of the neighbourhood soured, and insurance premiums rose.

The moral of this story is that free-riders are bad because their existence only leads to disillusionment and more free-riders and eventually the abandonment of something that benefits the community. If all members of the community paid to install streetlights, it means there are no free-riders. However, once some of them stop paying their subscriptions, they become free-riders. As more join them in the ranks of free-riders, the community will end up in complete darkness. It only requires the act of people getting together again, with everyone playing their part, for light to be restored in the community.

Having set the scene, let us now apply this to the field of governance.

Good governance as a public good

I have given these elaborate examples to demonstrate why the conduct of public affairs (or politics in general) can improve if more citizens play their part instead of leaving it to others. I am not going to let the conceptual complexities of the notion of good governance detain us, although they are acknowledged. However, the concept of good governance features prominently in our national charter, the Constitution. For example, good governance is recognised in section 3(1)(g) of the Constitution as one of the fundamental values and principles upon which Zimbabwe is founded. Section 3(2) goes on to outline several “principles of good governance” which include a multi-party democratic system, free and fair elections, equitable sharing of resources, separation of powers, transparency, accountability, and responsiveness, among others. Good governance is the first national objective in Chapter 2 of the Constitution.

It is fair to say that good governance is a standard that citizens expect from their government and that all institutions have a role in the management of public affairs. An environment of good governance is one in which citizens enjoy their fundamental rights and freedoms. It also provides a conducive environment for citizens to fulfil their economic potential. Every person wants peace, freedom, security and prosperity.

If we go back to the taxonomy used by economists to classify types of goods, where would good governance fit? Let us recall that there are two features that are used to define goods: whether it is rivalrous or excludable. Good governance is non-rivalrous. In other words, the enjoyment of good governance by one person does not diminish its enjoyment by another person. It is not like a pair of shoes which can only be worn by one person at any given time. Good governance is also non-excludable within a given state. It can be enjoyed by everyone without excluding others. It is like tower lights — they shine the light on the entire neighbourhood. It may, therefore, be safely concluded that in that taxonomy of goods, good governance falls into the category of public goods.

The reason I have chosen this path is to emphasise the problem that comes with this character of good governance as a public good. But if you have been following the thought process so far, you can see where we are going. Remember that the biggest problem with public goods is that there tend to be free-riders. Recall from earlier examples, those in the neighbourhood who refused to join the neighbourhood watch security system and those who eventually dropped out? Remember those who stopped paying their share for streetlights? We called them free-riders. That problem is also prevalent in the pursuit of good governance. It benefits everyone, but not everyone is prepared to play their part for its achievement.

Good governance does not come on a silver platter. Humans have had phenomenal achievements over the course of history, but they have also committed the most abominable atrocities against each other. Since repression is a recurring theme in the history of humankind, members of different societies have had to invest a huge number of resources to overcome repressors and in pursuit of good governance. Wars have been fought against imperial regimes. Revolutions have been carried out against repressive regimes. Lives have been lost and limbs have been broken and properties have been destroyed. Some societies have managed to find a formula in electoral processes, but many more still struggle to hold a decent election. The inherent risks mean that while good governance is desirable for everyone, not everyone is willing to do their fair share, which leaves only a few carrying the heavy load.

Categories of free-riding

First, there is a category of people that says politics is not for them. They just do not want to be involved. For some, they have graduated into an increasingly small enclave of the middle class where they have found relative comfort. With access to better things that most can only dream of, some in this category see politics as something for “the masses”. Parents in this group are wont to remind their grown-up children not to get involved in politics. And getting involved has a broad and malleable definition: it includes even talking about political affairs. The reality, of course, is that the consequences of this indifference will also bite them at some point. At that point, they blame politicians, and yet they stood by and did nothing when they had opportunities to stop it.

The second category has people who say they are disillusioned by the political choices on offer. But incredibly, despite having the answers to what must be done, they do not have the appetite or guts to lead an option that is agreeable to them. The outcome is that while they are not totally indifferent, they withhold active participation in public affairs. They are only too happy to criticise those who are trying to restore the tower lights.

A third category consists of those who are frustrated by the political process and regard elections as futile. They see no point of participating in elections for whom, in their view, the outcome is predetermined. This leads to withdrawal. People in this category might have been registered before but they no longer turn up for elections. Others, especially the younger generation, taking a cue from those around them have never registered.

The fourth category comprises people who are simply dumbstruck by fear. Politics is an intensely hostile space in some societies, Zimbabwe included. Elections have historically been characterised by violence. People in the opposition parties have been killed, tortured, assaulted, or jailed. The risks of being in politics are exceedingly high. One only must look at the recent examples of the mistreatment of young people like MDC Alliance MP Joanah Mamombe and her fellow cadres Cecilia Chimbiri and Netsai Marova or the arrest of student leader Takudzwa Ngadziore and the recent jailing of another young opposition cadre, Makomborero Haruziviishe. The political persecution of journalist Hopewell Chin’ono, MDC vice-chairperson Job Sikhala and MDC spokesperson Fadzayi Mahere are other current examples. Faced with these high risks in an intensely adversarial and hostile political environment, some people decide to keep away altogether.

This is obviously not an exhaustive list and there is room for more categories. For example, the diaspora might be regarded as citizens who voted with their feet, walking away from the scene of political chaos. But being in the diaspora is not a vow of silence or indifference. There are still avenues of participating in public affairs, providing support and solidarity to those on the home front. The categories are not neatly separated. One person might fit in more than one if not all of the categories. I have only used the rudimentary taxonomy to examine the reasons for non-participation in pursuing the public good of achieving good governance. These different categories represent the free-rider problem in the pursuit of good governance. They want good governance, but they are not willing or prepared to carry the cost of it, leaving it to others.

This problem is not unique to one country. There is never total turnout in elections. But the problem is more acute in some societies than others. While I have no tools to put numbers to it, there is, one might imagine, an optimum of participants who take part in political processes. The problem is when the number of free-riders rises far beyond the optimum level; when there are too many free-riders. The few who remain must carry the load alone, but eventually, they might decide to give up, frustrated that they are paying the price for everyone else. If they succeed, the majority should not be surprised if they develop a sense of self-entitlement. It is because they think they are the ones who suffered and must, therefore, get a bigger share of the cake. It is another way to look at the problem of war veterans and their incessant demands for more compensation and rewards after the war.

In conclusion, if we take good governance as a public good — something that is enjoyed by all without diminishing the enjoyment of others or excluding others — then it is important to ensure that everyone plays their role in achieving and maintaining it. In this regard, it is important to appreciate the free-rider problem, a recurring weakness where public goods are concerned. While there is always someone who does not pay, the problem occurs when many others join that person, and the burden is left to only a few people. Eventually, they might give up. To use the streetlights analogy, the free-rider problem will lead to darkness. For there to be light, people must speak up, participate and, at the very minimum, register to vote. That will be the first step on the road to overcoming the free-rider problem.