Free-Riding Investors Set up Markets for a Major Collapse

By James Rickards | 24 September 2018

DAILY RECKONING — Free riding is one of the oldest problems in economics and in society in general. Simply put, free riding describes a situation where one party takes the benefits of an economic condition without contributing anything to sustain that condition.

The best example is a parasite on an elephant. The parasite sucks the elephant’s blood to survive but contributes nothing to the elephant’s well-being.

A few parasites on an elephant are a harmless annoyance. But sooner or later the word spreads and more parasites arrive. After a while, the parasites begin to weaken the host elephant’s stamina, but the elephant carries on.

Eventually a tipping point arrives when there are so many parasites that the elephant dies. At that point, the parasites die too. It’s a question of short-run benefit versus long-run sustainability. Parasites only think about the short run. […]

Be the first to comment

Post a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Winter Watch

Discover more from Winter Watch

Subscribe now to keep reading and get access to the full archive.

Continue reading