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Monday, May 11, 2009

What's wrong with this video?





Concept: Public goods and the free rider problem. What happens in the video? Two office workers discuss a new swear jar into which co-workers are supposed to put a quarter each time they swear. The man asks what the money will be used for and the woman says, "I don't know--we'll use it to buy something for the office, like a case of Bud Light or something." The rest of the video shows office workers swearing every chance they can. (Note: This exercise may not be appropriate for high school students, since it promotes both beer and profanity.)

The commercial assumes that the office workers don't object to contributing to a pool of money that will be used to buy a collective good--beer that can be consumed by anyone in the office, regardless of how much they contributed to the swear jar.

If people really behaved this way, there would be less need for the government to provide public goods like fireworks, roads, police protection, and lighthouses, since these services could be financed through private contributions. But the free rider problem suggests that consumers tend to contribute less to public goods than the cost of what they expect to consume. In this case, economists would predict that the office workers wouldn't contribute enthusiastically to the swear jar, since they'd be able to consume beer whether they contributed or not. (Note: Beer isn't a pure public good. It's non-excludable, but rival.)

source: http://www.econoclass.com/whatswrongwithvideo.html

Mervyn


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09s101 became richer at 7:22 PM