The Economic Rationale behind being a Freeloader

A person or company that gains the benefit of a good without having to pay for it is a freeloader.

Goods can be described as rival or non-rival (depending on whether one person's use of the good diminishes another person's experience or not), and as excludable or non-excludable (depending on whether people can be prevented from accessing the good).

My newspaper and my coffee are excludable goods because I will smack you if you touch either of them. My coffee is a rival good because the more you drink it the less there is for me. But my newspaper isn't rival - as long as you don't crease the edges of my newspaper or get it wet when you read it on the toilet I will not loose any benefit if you borrowed it.

But other goods are not excludable. You can fish as much tuna you want out of the sea because nobody is stopping you. Of course, fish stocks are rival commodities because a greater number of fishermen means that there would be fewer fish caught per participant. Radio broadcasts are non-excludable and non-rival - nothing can stop me tuning in, and it won't stop you from listening too.

Many activities involving non-excludable commodities produce positive externalities, such as knowledge from a university, pleasure from music or good-will from a sporting event. But often the government or really nice benefactors are needed to fund such ventures since there would be very little return offered, although society as a whole would benefit. A freeloader could be the recipient of a $10 polio jab, since he is not paying the full cost of all the research that went into polio over the last few centuries.

Freeloaders exist when people can get something for nothing, ie: a non-excludable good. It is then up to whatever legal or cultural rules exist that determines what they can get for free. They are more likely to get up the nostril of paying customers if the goods are rival goods. If a city was putting on a firework display funded by its ratepayers, it would be unreasonable to expect non-ratepayers to avert their eyes during the display. But it would be a different matter if the city provided a limited number picnic hampers.

Whilst it is up to the individual to decide how guilty they should be the next time they go mooching, it is better to approach the issue of freeloading according to how rival or non-rival a good is. A good idea is to be the benefactor to one's mates once in a while (bake a cake for your work colleagues, shout a round of drinks), to assauge guilt and to maintain an informal economic system of reciprocity.