What is the difference between free rider problem and spillovers??

Question

What is the difference between free rider problem and spillovers (spillover costs, sillover benefits)? It be nice to give examples for me to understand better.

Answer 1

"Spillovers", or "externalities" are indirect added costs or benefits (usually to society) that are created from the production or consumption of a product/service.

An example of a spillover cost could be the manufacturing of a product that somehow leads to chemical pollution in rivers, which costs money to clean up, and therefore a spillover cost.  

To reduce these problems, the government could impose legislations or taxes to goods/services that create spillover costs. For example, here in Australia the government is imposing a policy where consumers must pay 10 cents for plastic grocery bags due to the threat they pose to marine life and the environment.

An example of a spillover benefit could be in education, which can create numerous spillover benefits because it keeps youngsters occupied, which would could potentially reduce the crime rate and attract more tourism. It would also lead to a more skilled labor force that will improve the quality of goods and services and amp up profits for companies.

Governments could promote more of this buy subsidizing consumers/suppliers to make such goods more available, and make spillover benefits more common.

The "free-rider problem" on the contrary, usually occurs when people can receive benefits from the consumption of a good or service without contributing directly to it's costs. For example; watching a television, or sitting on a park bench, national defense and infrastructure.

So the difference between spillovers and the free-rider problem is that one creates indirect costs and benefits from production/consumption, while for the other; no costs or benefits are added whether or not the product/service is consumer by more or less people.