The Logic of Collective Action: Public Goods and the Theory of Groups

"This one is an exercise in political economy. Indeed, Olson himself was an economist, but a heterodox one. As I said, the second strand of political science as a science is the provision of formal models that explain why the correlations we observe are there. That’s what political economy historically contributed to the development of political science. A lot of the formal models grew out of various strands of economics, whether it’s game theory or mathematical economics or microeconomics or public finance – or whatever. Olson’s book is about collective action. He is interested in things like trade unions , where collective action is absolutely central. It starts from premises about rational self-interest and factual premises about the structure of payoffs and incentive structures, and from that, it derives an explanation of why it’s so hard to mount successful collective action, and why it’s harder for some groups than others. His key concept is public goods. Public goods are goods that if available to anyone are available to everyone, whether or not they paid for them. The classic example is the lighthouse: the same beacon shines out for all ships, whether or not the captain subscribed to its services. Lots of politics is about provision of public goods. Take national defence: the nuclear umbrella covered all Americans if it covered any of them. Or stopping climate change – you can’t stop it for one person without stopping it for everybody. And electoral politics provides public goods – if Labour wins, everybody gets Labour’s policies, for better or worse. Now the problem with public goods will be obvious from the definition, really: free riding. Why should you pay for it if you can get it for free? How you induce people to contribute to the provision of public goods is a tricky question. When another economist, Paul Samuelson, first came up with the notion of public goods, he took it as an argument about market failure. If things are going to be given to you, whether or not you pay for them, then the market’s not going to work. NATO is always offered as one of the main examples. In another paper, Olson developed a theory of alliances where NATO figures prominently. Why should people contribute their fair share, spending as much as they should on their own national defence, if the US and other major economies in NATO are going to be providing this protection against the Soviets regardless? Trump is going on about this again, and it’s a well-known problem. How did the lesser European powers get by paying too little? Well, the answer is easy: America used to care a hell of a lot about NATO, and was willing to pay more than its fair share rather than withdrawing its contributions and collapsing the whole Alliance. So that’s one way to get public goods: find somebody who’s super keen on the public good, and get him to pay whatever it takes and accept as many free riders as he has to. There’s a story I quite like (not in Olson’s book) illustrating this way of providing public goods. Howard Hughes, the famous reclusive American millionaire, ended his days living in the penthouse atop his casino in Las Vegas. He was insomniac, and he wanted to watch western movies all night. Now, this was before videos or streaming or computers, and the only way to watch movies all night was for them to be broadcast on free-to-air TV. Hughes was a millionaire, so no problem: he bought himself a television station. He broadcast movies all night, and if anybody else wanted to watch them, it was no skin off his nose. Get one super keen guy to provide the public good for everybody: if other people want to pay, then great. If other people don’t want to, no matter. Another way of getting people to contribute to the provision of public goods is what Olson calls selective benefits. Everybody gets the public good, and you can’t cut out people because they didn’t contribute. But what you can do is offer extras. For example, cheap health insurance was one way that unions used to get people to join. Unions push up wages for all the workers in the factory, whether or not they are members, but that cheap health insurance only goes to members. Political parties do the same sort of thing: patronage jobs and government contracts and public spending goes primarily, or maybe only, to people who supported the party in the election. A third way is to have a small group. In small groups, the public good’s benefits are concentrated on a few people, and that makes it easy for people in those small groups to organise reciprocal I-will-if-you-will contribution strategies. If there are just a dozen of us, we can’t afford too many people not to contribute, or else the public good wouldn’t be provided at all, and the I-will-if-you-will strategy is a way of getting the public good provided. That provides an explanation for what Olson calls the exploitation of large, diffuse interests by small and concentrated interests. Industries where there are very few companies – car manufacturers, for example – can get together and organize a lobby for new rules that make it cheaper for them to produce cars, but worse for consumers. Maybe the cars lack exhaust controls and so they are polluting, or they have crash problems. It’s easy for a small group of auto manufacturers to get together and lobby, and really hard for billions of consumers to organize any collective action to fight back. It’s spawned a huge follow-on literature. A lot of it is technical, some of it highly mathematical, but some of it is observational and sort of anthropological, looking at ways different groups in different societies manage to pool resources, like fisheries or aquifers or common grazing land. The small group story seems to be really important in most of those examples. Where it’s not a small group, you decompose it into smaller and smaller groups, and convert a large group problem into a small group solution. The most famous follow-on book from Olson’s is probably Elinor Ostrom’s G overning the Commons , which won her the Nobel Prize in Economics. Mancur was dead at this point, and a lot of us saw that as Elinor going and picking up Mancur’s Nobel for him. Yes. As I said in relation to The American Voter , those scholars were influenced by social psychology. The behavioural revolution was essentially a bunch of social psychologists invading political science. There was one famous dinner party at Charles Merriam’s house in Chicago in the 1930s: he happened to live next door to some psychologists, and he invited them around and introduced them to his political science colleagues, and they got all enthused that this was the scientific way forward for the social sciences. That psychology orientation carried through to the 1960s. Then you have these marauding economists who came from next door and said, “Those are pretty sloppy, casual models of how people behave.” You know, it’s quite frustrating: when you talk to psychologists, every small tweak in their research design gets to be called a new theory. They don’t have a coherent body of premises that organizes things. So economists said, “You want theory? Here, we have theory: we have rational maximizing agents. Their maximand is a well-structured set of preferences. They do what is instrumentally best to achieve their most preferred outcome in a feasible set. And we can do a lot with just a very few simple assumptions like that for explaining behaviour. So why don’t you see if this helps you?” Olson’s book was one important contribution to that."