Question

After reading the Economic Insight: "PROPERTY RIGHTS AND INCENTIVES" (Chapter 2), Comment on the following questions: How collective ownership and share consumption of the output create a ""Free Rider" problem? Are clearly defined property rights the foundation of Capitalism? Would you prefer to live a Socialist society?

Answer 1

Answer :- Let us understand that how collective ownership and share consumption make a free rider issue.

Consider 10 workers who share owership of land and who collectively produce 100 bushels of corn , Averaging 10 bushels each for consumption.

Suppose that one laborer starts to avoid and cuts his labor effort down the middle , lessening the output by 5. The shirkers consumption like the other specialist is currently 95/10 = 9.5 bushels as a result of the shared game plan . Through his efforts has fallen 50 percent , his consumption falls by just 5 % .The shirker is free riding on the labor of other.The incentive for every laborer in certainty is to free ride and this brings down the total effort and the total output .

Therefore all the more for the most part with private property for each any adjustment in the output from more effort goes to individual expanding additional effort .With the normal or shared property the increase isn't the adjustment in output yet the adjustment in output is partitioned by number in the group .The bigger the group will be the less addition will be from working harder and less is the misfortune from working less by the point of view of the individual .

Hence , the bigger group the more prominent incentive to free ride.Yes the plainly defined property rights is the establishment of the capitalism . As the asset which is being utilized for the income is appropriately leagl and the proprietor reserved the privilege to exchange or produce the output in support of him for his government assistance .This is the capitalism .

Yes I need to live a socialist society due to the Collective ownership , Economic social and political equity ,Economic arranging ,Perfect market , Positive job of government .These are the indication of progress and the socialist society along these lines make the fascination .