Estimating the Demand for Money Essay Example for Free

Estimating the Demand for Money Essay We all know that money employed in consumption sustains life and gives pleasure, but it does not lead to economic growth. Money employed for investment increases productive capacity, thereby increasing wealth available for consumption investment in the future. Use of money for both consumption investment leads to employment but later reaps future benefits. The quantity theory of money posits that the value of money is equal to the collective supply of goods and services in an economy. The value of money could be called the aggregate clearing price for the aggregate supply aggregate demand in an economy. A condition in which the aggregate clearing price is below the aggregate costs of production would be symptomatic of gross misallocations of resources in an economy but this kind of condition is not theoretically impossible. Ending of wars that includes cold wars are often associated with massive reallocations of productive resources and these reallocations can involve painful periods of readjustment. â€Å"Artificial bubbles† resulting from central banker manipulation of money and interest cause boom bust misallocations. Regarded money as nothing but a means to facilitate barter, the aggregate supply of goods and services represents the wealth of society. If everyone woke up one morning to find every dollar replaced by one hundred dollars, no one would be wealthier or poorer because wages and prices had two additional zeroes. Nor would there be any change in either aggregate supply or demand. The concept of aggregate supply to represent the wealth of society can be misleading. Most homeowners would sell their house if offered an outrageously high price for it. In that sense, nearly all existing homes are part of the aggregate supply. But in the normal course of events, homeowners are slowly consuming their houses by living in them and are not considering an immediate sale although the thought of eventual re-sale is usually in their minds. Similarly, most capitalists would sell their factories if offered a high price, but are primarily focused on increasing the productivity of those factories and ensuring that the factories produce goods for which demand is high. Money works magic in the minds of many economists which transform simple relationships into complex conceptual nightmares. Say’s Law one monetary interpretation holds that the costs of production (paid for labor, land and capital goods) results in the incomes essential for purchasing output. Moving this argument further, critics of Says Law express concern that all the income will not be spent concerning that some money will be saved or even hoarded. Thinking that it is better to save the money than to spend it that result to manufacturing decline, unemployment and recession. But the confident consumer who saves and invests actually benefits the economy more than the consumer who spends. Invested capital provides the means to hire labor and other factors of production that increase employment and wealth. Vision of economic activity as a circular flow of money between spenders earners blinded him to the nature of wealth-creation, productive incentives, productivity increase and economic growth. The economic benefits of savings should not be justified on the grounds that savings is another form of spending. On the contrary, savings is the source of capital accumulation. Capital technological progress is the source of economic growth. Capital means plant, equipment, technology, research and employees to make new products. Consumers can only keep an economy from recession if they are employed in productive activity. If unemployment is low and those employed are producing useful goods services, then an economy can remain healthy. High consumer spending is more an effect than a cause of the economic well-being associated with low unemployment. Consumer confidence is expected to be high if unemployment is low. Recession is not just a national bad mood. Unemployed consumers who spend money received from government destroy consume wealth without producing wealth. Economic growth occurs only if the consumer is also a producer. In empirical method it determines the relationships between economic variables through observation or experiment. The Baumol-Tobin model provides the foundation for most empirical studies of money demand. The Capital Asset Pricing Model, while important in financial economics, is viewed to be much less important in determining money demand. Most wealth is shifted under the speculative motive from long-term to short-term securities rather than money. The prices of short-term bonds do not change as much as long-term bonds and there is a default risk with money because of the limit to federal insurance on deposits. One of the difficulties in empirical work on money demand is that money demand adjusts to changes in income and interest rates with a lag. In other words, a change in income leads to a delayed change in money demand. Money demand may be slow to change because of adjustment costs, expectations may be slow to adjust or may hold that a change in income or interest rates is in part temporary. Consequently, empirical studies of money demand look at both short-term and long-term responses to changes in macroeconomic conditions. An increase in the interest rate reduces the demand for M1 money as expected, but the effect is small. An increase in the interest rate from 4 to 5 percent (a 25 percent increase) reduces money demand in the short run by 0. 5 percent (= 0. 02 x 25%). The long run response is about a 1. 25 percent reduction in money demand. An increase in the interest rate from 10 to 11 percent produces even smaller money demand responses. There is an extensive literature on the theory of money demand and the influencing factors. In general, the real money balances are related to some scale measure, such as income or wealth, and some opportunity cost measures, such as inflation, interest and exchange rates. There are various discussions on the form of the money demand function and the selection of the variables entering in the equation. Thus the choice of economic indicators varies in different country experiences due to the distinction in different financial systems. The choice of an appropriate monetary aggregate for the estimation of a meaningful money demand function is complicated. Either a broad or a narrow definition of money can be used as the monetary variable depending on the issue of the monetary authorities. Generally it may be thought that a narrow definition of money like monetary base or M1 tends to be more flexible and reactive to market operations and thus to interest rate policies. Narrow money can have a close relationship with prices since it can easily be influenced by economic variables, however it cannot always be adequate to capture all the information related to the financial system. Although narrowly defined aggregates are easy to control, their relationship with income appears subject to considerable variability. One main cause of this insufficiency is due to banking habits of money holders, as they wish to hold their savings not only in demand deposits, but also in time deposits or other different financial instruments. For that reason, a broader definition of money, such as M2 or M2X, can comprise a wider range of the financial system; however it may be less sensitive to the changes in the economy. The scale variable measuring the level of economic activity is the first determinant of the money demand function. The holding of money and thus the demand for money are related to the volume of the transactions, using the fact that the amount of the transactions is proportional to the level of income. Either a wealth variable or an income variable can be used as a scale variable. Generally, when wealth data is not available, an income variable like the Gross National Product or Gross Domestic Product can be taken into consideration. Money demand is directly proportional to income, but inversely related to market interest rates and yields on different financial assets. The interest rate concerning time deposits is thought to be the nominal return of holding money if the broad definition of money is considered, hence has a positive sign in the money demand equation. Another important variable which measures the rate of return of an opportunity cost is the interest rate on government securities. As currency substitution can occur either by switching into foreign denominated deposits or by switching to bonds or securities, the rate of interest on government securities is a measure of the rate of return of an opportunity cost, and its expected sign in the equation is therefore negative. The relationship between inflation and the demand for money has been studied widely. If there are high fluctuations in prices, the rate of inflation becomes an important determinant of the money demand function. Money demand is inversely related to predictable inflation rate since an increase in inflation increases the cost of holding money. Especially, in developing countries, the long run inflation elasticity is generally expected to be high as the range of financial instruments outside money is limited and real assets represent a substantial part of the public’s portfolio (Nachega, 2001). Like in Turkish economy that is subject to not only a high degree of price level but also a high variability in the prices, the price level has a considerable impact on the return of financial assets; as money holders will have difficulties in predicting the prices, the risk in saving money will raise and consequently the holding of money will tend to decrease. Since foreign exchange rate measures the rate of return on holding foreign currency, it is also an important determinant in the demand equation on holding foreign currency. The sign of exchange rate is negative since when the deposit holders increase their demand for foreign currencies, the domestic currency will depreciate. In an open economy, the return of foreign assets is usually denoted by some exchange rate variable, which may have an increasing role due to the high level of financial globalization. (Central Bank Review, 2002 pp. 55-65). Boughton (1992) presents the sources of disturbances that can affect the elasticities of variables in the long run equation. Inflation expectations varying over time is the first important factor that may affect real return of assets which is a vital element of the money demand equation. An inflationary expectation is generally proxied by the inflation rate, thus it is essential to examine the inflation data before inserting in the money demand equation. The change in exchange rate is the second important source of variability. Therefore the relationship between the exchange rate mechanism and the dynamics of real money balances is important, justifying the addition of the real effective exchange rate into the model.

The South Pole, a comparison essay :: essays research papers

An arid tundra; temperatures so cold that limbs become black and immobile, land so barren that hardly anything can survive, this is the South Pole. Why anyone would want to go there may be hard to understand. Traveling to the South Pole isn’t just a lengthy process and an uncomfortable experience, it is extremely dangerous as going to far south provides several life threatening conditions. To survive in such cold conditions one would need specially made clothing designed for such extremely cold climate. Maybe the pre-planning part of the trip is what separates Amundsen and Scott the most. Both explorers have reached the South Pole but only Amundsen has returned, in good health. This can be mostly attributed to careful planning or as some would call, luck. Amundsen once said, â€Å"’Victory awaits those who have everything in order. People call this luck†¦Ã¢â‚¬â„¢Ã¢â‚¬  (517). It can be judged from this quote that Amundsen is not one to believe in superstition. He believed that luck is a direct result of cautious planning and careful decision making. Scott on the other hand had a more fate oriented outlook on luck. A note was found beside Scott’s body that read, â€Å"’The causes of the disaster are not due to faulty organization but to misfortune’† (522). Scott believed that several events could take place during a journey that were out of the control of the explorer, who in this case was Scott. Several events have occurred in Scott’s journey but not in Amundsen’s. Some of the misfortunes of Scott’s advent ure include having several supplies break through thin ice and become lost in the South Pole water. This mishap probably couldn’t have been avoided unless the utmost scrutiny was observed during the trip. Being so cautious and careful would take a large amount of travel time away however and one can not possibly expect to reach the South Pole while traveling so slowly. So perhaps Scott was right and Amundsen has succeeded by blind luck along with his careful planning.   Ã‚  Ã‚  Ã‚  Ã‚  Amundsen analyzed every aspect of the journey before setting forth. If he felt that any particular item wasn’t as efficient as it possibly could he would upgrade and modify it. This act of Amundsen can be attributed to his success as well as some other plans he made. Amundsen planned for a long time, he studied everything that was written about the South Pole.

Real Number Essay

1. How do modules help you to reuse code in a program? It reduces the duplication of a code within a program by reusing the module that was written once. 2. Name and describe the two parts that a module definition has in most languages. The Header and a Body First the Header indicates a starting point Second the Body is a list of statements 3. When a module is executing, what happens when the end of the module is reached? Its executed and returned back to the point in the main program where it was sidetracked from 4. What is a local variable? What statements are able to access a local variable? A variable is declared inside a local module in which it is the only statement within a module 5. In most languages, where does a local variable’s scope begin and end? It begins at the variables declaration within a module and it ends at the end of the module in which the variable is declared. 6. What is the difference between passing an argument by value and passing it by reference? By the value only a copy of the arguments value is passed and by reference it is passed into a special modifications parameter. 7. Why do global variables make a program difficult to debug? It is because the global variables is used throughout all modules and plus they are hard to track. Algorithm Workbench 1. Design a module named timesTen. The module should accept an Integer argument. When the module is called, it should display the product of its argument multiplied times 10. Module Main () Call timesTen Module timesTen (Integer Value) Declare integerValue Set result = value*10 Display result End Module 5. Design a module named getNumber, which uses a reference parameter variable  to accept an Integer argument. The module should prompt the user to enter a number and then store the input in the reference parameter variable. Module getNumber (Integer Ref value) Display â€Å"Display a number† Input number End Module Module main () Declare Integer number x = 1 Declare Real number y = 3.4 Display (x, â€Å" † ,y) Call changeUS (x, y) Display (x, â€Å" † ,y) End module 6. What will the following pseudocode program display? Declare Integer x = 1 Declare Real y = 3.4 Display x, † â€Å", y Call changeUs( x, y) Display x, † â€Å", y End Module Module changeUs( Integer a, Real b) Set a = 0 Set b = 0 Display a, † â€Å", b End Module It will not display anything since there is nothing within the quotation marks 7. What will the following pseudocode program display? Module main() Declare Integer x = 1 Declare Real y = 3.4 Display x, † â€Å", y Call changeUs( x, y) Display x, † â€Å", y End Module Module changeUs( Integer Ref a, Real Ref b) Set a = 0 Set b = 0.0 Display a, † â€Å", b End Module As far as the module you would think that the displays would show something. But in both strings within the quotations marks both are blank to display. Programming Exercises 1. Kilometer Converter Design a modular program that asks the user to enter a distance in kilometers, and then converts that distance to miles. The conversion formula is as follows: Miles = Kilometers Ãâ€" 0.6214 Module main () Declare Real Kilometers Display â€Å"Enter a distance in kilometers† Input kilometers Call conversion (kilometers) End Module Module conversion (Realvalue) Declare Realmiles Set miles = value*0.6214 Display miles 2. Sales Tax Program Refactoring Programming Exercise 6 in Chapter 2 was the Sales Tax program. For that exercise you were asked to design a program that calculates and displays the county and state sales tax on a purchase. If you have already designed that program, refactor it so the subtasks are in modules. If you have not already designed that program, create a modular design for it. Module main () Declare Realpurchase Display â€Å"Enter the amount of purchase† Input purchase Call Module totalState (purchase) Call Module totalCounty(purchase) Declare Real totalTax Declare Real totalSale Set totalTax = totalState + totalCounty Set totalSale = purchase + totalTax Display â€Å"Your total state tax is†, totalState Display â€Å"Your total county tax is†, totalCounty Display â€Å"Your total tax is†, totalTax Display â€Å"Your total of your sale is†, totalSale End Module Module totalState (real Ref purchase) Set totalState sales tax = purchase*0.04 End Module Module totalCounty (real Ref purchase) Set totalCounty sales tax = purchase*0.02 End Module

African-American Soldiers In World War 1 - Free Essay Example

Sample details Pages: 3 Words: 853 Downloads: 5 Date added: 2019/05/13 Category History Essay Level High school Tags: War Essay World War 1 Essay Did you like this example? The digital archives of the, ?Library of the Congress, provide valuable and credible chronological documentation of the events which occurred in Brownsville. The following night after the case with Mrs Evans, ?a group of unidentified men rushed through Brownsville firing wildly In the course of the fracas one white person was killed and two other wounded. Wynne highlights the main fact the group of men responsible were ?unidentified, by the local investigation units as well as the police. On the other hand, this was not the case with the Brownsville Daily Herald, as it states, ?the Negroes seemed to have divided into squads going on different streets it is estimated between 100 to 200 shots were fired by the negroes. The opinionated newspaper was very quick to address the ?suspects were the African-American soldiers stationed in Brownsville without any proper investigation. This enforces Wynnes notion of a stigma directed towards the African-Americans, that they were always the, ?problem, justified or unjustified. In addition, the local Brownsville police patrol, ?found only one of the soldiers on the streets and it seems that he had a pass and was unarmed. Don’t waste time! Our writers will create an original "African-American Soldiers In World War 1" essay for you Create order The investigation following the Brownsville Incident The Brownsville Incident had an enormous impact upon the African-American population as it posed as a grave turning point after the election in 1906. According to Wynne, ?the beginning of the twentieth century saw a rise in the hopes of Negroes the focal point of these hopes was Theodore Roosevelt. African-Americans believed they had the President on their side especially after the appointment of , ?black officeholders in the face of white opposition, dined with Booker T. Washington in the White House. At the time it was believed grave steps were being made in the right direction in order to improve the social justice and rights of African-Americans in the U.S. This all would change prior the incident at Brownsville where Roosevelt betrayed the same Black soldiers which marched with him through San Juan Hill. The evidence used against the African-American soldiers was almost minimal, no soldiers were ever to be identified to have been at the scene of the incident. Yet, most of the ?eye-witnesses claimed that African-American soldiers were responsible. The most credible allegation made against the soldier was that, ?eight Brownsville townspeople that they recognized-either by sight or by voices to be Negro Soldiers. This evidence, however, is inconclusive and inaccurate. Most allegations put forward for investigation were racially instigated mainly because no civilians nor policemen were able to identify the perpetrators, yet the eye-witlessness were always certain they were African-American. This notion is supported by James A. Tinsley, who regards the unfalsifiable allegations as, ?responsible for shaping decisions. Tinsley implies that the racist motives of the supposed ?eye-witness fuelled the efforts of Southern investigators to unlawfully punish the African-American soldiers without a valid means of investigation, hence, the false allegations against the soldiers which never proven. Another point to consider, is that the African-American soldiers were under curfew in camp whilst the incident took place. Evidently, ?Major Charles W. Penrose first thought the post had been attacked. For more than an hour after the shooting Penrose kept his troops deployed in a defensive position within the reservation. According to this the soldiers of the regiment could not have been at the incident since they were in ?defensive formation around Fort Brown. Evidently, it was when Penrose ordered a patrol into the main town to, ?investigate the shooting, was when Penrose and his were confronted, ?with the accusation that men of his command had caused the disturbance. President Roosevelts inclusion with the Brownsville Incident began after his ?approval of the Major Blocksoms report. Major Blocksom issued an, ?ultimatum in his report and administered it to General Ernest Garlington. Garlingtons observations whilst questions the suspected soldiers was, ?they appear to stand together in a determination to resist the detection of the guilty; there- fore they should stand together when the penalty falls. A forceful lesson should be given to the Army at large, and especially to the non-commissioned officers. The nature of the report African-American soldiers already had information regarding the incident because Blocksom believed it was prearranged. This is shocking because all of the soldiers pleaded that they had no knowledge of the shootings. Blocksoms statement demonstrates how racist motives against African-American Soldiers affect justice. Tinsley stated how earlier allegations would go on to ?shape later decisions because of their racist prejudices against Blacks. Roosevelt alongside Blocksom and Garlington gave no proper nor lawful investigation of the incident. There never enough evidence to charge the soldiers, however, the Federal investigator treated the soldiers as if they were already guilty. This can be supported by Weavers investigation in 1970 which describes Roosevelts impatient behaviour surrounding the incident, ?By George! The mens guilt is clear as day! Weaver also support the notion that, ?none of the soldiers was ever proved guilty of the crime for which all of th em were punished. Furthermore, throughout the entire investigation the African-American soldiers were treated as if they all were involved, whilst the truth was they never knew what happened, yet 167 soldiers were still dishonorably discharged.

Controlling Malaria Sub Saharan Africa - 1650 Words

Controlling Malaria in Sub-Saharan Africa Abstract Malaria is the world’s most deadly infectious disease by numbers and disproportionately effects tropical third-world populations which are ill-equipped to handle it. Each year hundreds of thousands of lives are lost to Malaria and more than one-million more are disabled or lose productivity due to symptoms. Current malaria prevention efforts are focused on Insecticide Treated Nets (ITN’s) and Indoor Residual Spraying (IRS) tactics. Currently, there is not sufficient data which supports one prevention method as more effective than the other. Recent malaria statistics were used to create a mathematical model for determining the most effective prevention method. The model plotted expected†¦show more content†¦This happens to contain some of the most destitute regions of the world including Sub-Saharan Africa. Sub-Saharan Africa was home to 89% of malaria cases and 91% of malaria deaths. Increased prevention and control measures have led to a 60% reduction in malar ia mortality rates globally since 2000. Malaria can be treated using both vaccines and other prescription drugs. In developed countries this has effectively negated Malaria as a public health threat. For instance, in the United States there are only 1500 cases of malaria per year, all of which are linked to travel to tropical regions in Africa and South America. Unfortunately, less developed regions do not have the proper infrastructure to produce, store or distribute these drugs. Third-world efforts are focused on prevention rather than treatment. The majority of Malaria funding is allocated to two different prevention concepts, Insecticide Treated Nets (ITN’s) and Indoor Residual Spraying (IRS). Nets are made of finely woven fabrics which provide a physical barrier between infected mosquitoes and humans. Mosquitoes which land on the nets absorb insecticide which kills them. Nets can be costly, and have a high rate of misuse, as many villagers use them to fish. The alternative to ITN’s is the practice of Ind oor Residual Spraying of insecticides. This is very effective in sprayed areas, but is stationary and poisonous to the

Rise and Fall of Enron Essay - 872 Words

The rise and fall of Enron is a company that was lead to its own demise by it’s own leadership and ill business decisions. The motivational theories explained from the readings of Organization Behavior can correlate with the failure of Enron’s internal organization. Even though a company may appear to display successful business practices, the influence of leadership through management can ultimately lead the company to fail. Enron’s code of ethics prided itself on four key values; respect, integrity, communication, and excellence. Codes of ethics should be a reflection of what the owners, investors, and employees work towards as an organization. Executives overlooked those values as they deliberately corrupted Enron by engaging in†¦show more content†¦Motivational goals may come from promotions, raises, long term careers, or working for a great company. Self-concordance reflects in the way people reason in practicing goals that are in line with their interests and values. Enron offered those goals to their employees and in returned hired the most qualified, experienced, and self driven people to attain those goals. Working for a very prominent and successful company gave employees the sense of comfort and dependability that breathed prosperity. However, it was those goals that had false hopes. Enron had high aspirations that joint ventures in trading energy with investors in the new virtual market place would be successful but failed and lost millions of dollars. Enron continued to press forward and kept all employees on track but if they were not able to obtain their goals, for the sake of keeping the company above water, they were let go. Once employees dedicate and committed themselves to a strictly structured organized culture, they have a tendency of enduring ethical judgement that is later rationalized in one form or another. Strong leadership, management and organizational structure is what every business should be governed around. The neglect and abuse of that leadership, management, and organizational structure was the ultimate contribution to the failure of Enron. The executives displayed leadership inShow MoreRelatedThe Rise And Fall Of Enron1008 Words   |  5 PagesIntroduction Enron began as an energy company in 1985. After the deregulation of oil and gas in the U.S., Enron lost its’ exclusive rights to natural gas pipelines. The CEO, Kenneth Lay then hired a consulting firm to reinvent the company in order to make up lost profits. He hired Jeffery Skilling, who was in banking, specifically; asset and liability management. Under the topic â€Å"The Beginning Presages the End†, C. William Thomas (2002) writes: â€Å"Thanks to the young consultant, the company createdRead MoreThe Rise And Fall Of Enron1900 Words   |  8 PagesThe Rise and Fall of Enron One of the most basic tenets of all companies, whether small or large, is to create a principled corporate culture. 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It could be said that ethics was the last thing on the minds of the executives that worked at Enron. People employed at Enron cared about two things the stock price of the company, and the money they could put in their own pockets. This was what caused the fall of one of the biggest energy companies in the U.S†¦ Enron failing did not happen overnight it tookRead MoreWhat I Learned from Studying the Rise and Fall of Enron693 Words   |  3 Pagestolerated and can lead to the fall of anything from a small mom and pop business to massive a Corporation. That is exactly what happened to the Enron Corporation back in 2001. In this essay I will discuss what exactly Enron is, the unethical business practices that occurred, and my opinion on the scandal and how I would have handled the situation. I will have help accomplishing this with quotes from other credible sources. Honestly, I didn’t know what exactly Enron was before this assignment. 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Free Rider Problem Essay Example For Students

Free Rider Problem Essay The Free Rider ProblemThe free rider issue has become one of the most serious economic issues today. The free rider is a lazy type person who wants the benefits that others bring in without having to do the work. The free rider typically takes advantage of a public good.Living in a civilized society presents many opportunities for free riding, which we have yet to find a way to control. Economists regard the possibility for free riding as a problem for the free market, which usually leads to government intervention. Government intervention is not generally needed in a free market society but in this case if there were no government intervention this problem would not find a solution. The free-rider issue is often seen as a serious problem because of the assumption that a free riders best self-interest is that they interact with others by force and fraud. If they can get away with the fraud and begin to gain the benefits of others they have reached their first goal. Their next goal is to make some good money or get credit for someone elses hard work before they get caught. Then they get out and are long gone by the time anyone notices. Life in a civilized society allows each of us the opportunity to enjoy the benefits of the work of people with productive ability far greater than our own, but what happens when people begin doing this? They get used to not having to do much work and become lazy. In some cases people look at welfare in this way. If a person is able to get a good job and chooses not to, but instead, to live on our government, this would be considered free riding. This causes a fluctuation in our market and it can have a negative effect. When the bene fits go away people do not want to go back to work and eventually will loose their jobs or quit and become a true free rider. Clearly there is an essential difference between cases in which one cant contribute to the benefits one enjoys and cases in which one chooses not to make a contribution that is within ones power. But apart from this distinction, we can differentiate between harmless free riding and the worthless free riding. The free rider wants anything he can get for free and will think nothing of it if he can get away with it. Free riders take advantage of public goods without having to contribute to them. For example, if society decides to encourage people to use less of a product and many people actually respond to this call, the products market will improve. Although the free rider may continue using this product, he will benefit.This creates a tremendous problem for activists who attempt to start a movement to improve the environment. Many people, seeing no incentive t o join personally in the movement, just continue behaving the way they did before and yet reap the benefits of other peoples work. When everyone acts as a free rider, no benefit at all will come from the proposed action. Because it is in everyones personal interest not to participate in the collective movement, the movement is highly vulnerable to failure. Though society as a whole may try to conserve a resource, the free rider can easily take advantage of this by not participating in the conservation effort. Those who believe in the concept of the free rider and the problems such people create might advocate government policy to require everyone to take part in efforts to improve the environment. Such people might contend that government action is the only fair and reliable way to prevent environmental problems. David Hume recognized the free-rider problem associated with public goods, even before the time of Adam Smiths writings. Each citizen who can enjoy the benefit of a public good has an incentive to try to lay the whole burden of provision on others, whenever the exclusion of nonpayers is very costly or impossible. Markets work to exhaust the gains from trade and cooperation because each individual has an interest in finding and capturing any and all such gains. Of course, when free riders can enjoy a public good without payment or trade, production and the potential gains from it may never occur. Efforts to originate government programs and to control them in the public interest are no different. The public decision-making process is a procedure for generating a public good and the persons involved in it, whether they are the voters, judges, legislators, or civil servants, all can be expected to treat it as any other public good. A public good is a very special class of goods, which cannot practically be withheld from one individual consumer without withholding them from all. In other words, a public good is given to everyone. The free riders like publ ic goods because they are easy to get to and there are tons of them. When there are this many goods, it is hard to spot some of them missing until a bunch are gone and by that time the free rider has moved on too. When this good is used and not paid for, the results can be very ugly. The free rider takes these goods for free, leaving the rest of the hard working people to make up the difference. This difference we have to make up is usually a higher tax. In raising the tax the price of the good goes up and when price goes up demand tends to go down. As the demand keeps falling and the price keeps rising the product usually ends up off the market and filing a chapter eleven. It typically does not go that far but this is an example of what could happen. A free market is a privilege to have and it is a shame people have to take advantage of it because they do not feel the need to work hard or to go out of their way to do something for someone else.The free rider is a menace in our soci ety and we do not need to let him take our money and put it to his use. We have found ways such as government intervention and price lids to help control the problem but we have yet to find a solution. Once a solution is found we will have fewer worries and possibly a true free market. These are very difficult problems to stop and may never be stopped. It will take a long period of time to begin the process to bring it to an end, but it will be nice to maybe some day have a true free market without the problem of a free rider. Words/ Pages : 1,177 / 24