L7: collective action and cooperation

Interesting questions in public choice

• Why do some individuals in a community seem to follow conventions?

• Why do we drive on the right side of the road?

• How are large number of people able to coordinate their behavior?

• Why do we participate in protests or armed groups?

• How do we make sure that people do their fair share of collective undertaking?

• How do we make sure that each person in our household does part of the cleaning?

• Do groups uniformly represent the interest of their members?

Mancur Olson

1932 - 1998

• Former professor of Economics at the University of Maryland

• A prominent figure in Political Economy and Public Choice

  • Public financing and public policy

  • Political economy

  • International Relations e.g., economic theory of alliances

Olson: the logic of collective action

• Collective action problems became a large topic within RC after Mancur Olson's publication of "The Logic of Collective Action" in 1965

• Prior to this, scholars took groups for granted, assuming they were a natural state of social and political affairs

• Furthermore, many believed that groups representing the wide array of interests in a society would 'naturally' form to represent these interests

• Olson's work demonstrated that these assumptions were false

Olson: the logic of collection action main arguments

• rational and self-interested individuals will not act voluntarily to achieve their common or group interests

• Collective action is problematic if we talk about public goods

Public goods

non-excludable (available to everyone)

Non-rival (the goods do not disappear→ ex lighthouse)

What public goods actually meet these criteria?

• clean air

• National defence

• Lighthouses

• Highways

Private goods

excludable and rival

Raise no collective action problems

Olson and public goods

• Olson (1965:12) defines public good solely on the basis of excludability

• However, public goods are also defined in terms of their non-rivalrous

• This suggest that his theory also applies to common pool
  resources

Common pool resources

• Goods that are non-excludable but rivalrous

• Ex. Environment, fishing grounds

Public goods: non-excludability

• It means that if some members of a group achieve a public good, then every member of the group gets to enjoy this good, whether or not the member contributed to the achievement of the good

• However, in most cases excludability is a matter of cost

• Example:The owners of a Lighthouse could arrange for a series of ships carrying giant black-out screens to sail directly in front of any boat which had not paid to use the lighthouse beam...

What does non-excludability incentivize?

Free-riding

Collective action problem

"Any group or any organization, large or small, works for some collective benefit that by its nature will benefit all of the members of that group in question. Though all members of a group therefore have a common interest in paying costs of providing that collective good. Each would prefer that the others ay the entire cost, and ordinarily would get any benefit provided whether he has borne part of the cost or not"

RCT and collective action problem

• The assumptions of RC lead to pessimistic conclusions about the willingness of individuals to engage in collective action

• And... when RCT correctly predicts that individuals will not rationally pursue a common interest, this is often a
  "problem" in that a common good is not obtained

Example: voting paradox

• In a large election, the probability that an individual vote might change the election outcomes is extremely small

• If each person only votes for the purpose of influencing the election outcome, then even a small cost to vote - like bad weather - should dissuade anyone from voting

  • Bc I don’t determine the election outcome, the cost of voting should be too high

    • Going there

    • Biking

    • Etc.

Example: voting paradox economist view

Economist ask why the voter turnout is so high bc they deem it irrational

• The only reason you should go vote is bc you think that your vote will have an effect on outcome

  • In reality your one vote makes no difference on end result

• The cost of voting is higher than the expected benefit of it = voting is irrational

Example: voting paradox theory vs reality

• Instrumental voting model: an action has value only if it affects outcomes

• However, we observe that many people do vote...

• This inconsistency between the theory and real-world turnout rates is known as the "paradox of (not) voting"

• How can we explain this? Why do people vote anyway?

  • Social pressure

  • Internal/individual pressure

Example: voting paradox theories

• Expressive theories: the act of voting itself gives utility, which can depend on various factors (how other people vote,…

• Bounded rationality voter theories: weaken the full rationality assumptions of voters 

Example: security dilemma

Realist argue that in an anarchical system, states confront a 'security dilemma'

• The more one state arms itself, the more reason other states have to either accelerate their own rearmament of contemplate a pre-emptive attack

• Yet, even if it is in the interest of every country that everyone disarms, it may not be in the interest of any one country to be the first to do so

Key factor in collective action problem occurring according to Olson?

Group size

"Indeed, unless the number of individuals in a group is quite small, or unless there is coercion or some other special device to make individuals act in their common interest, rational, self-interested individuals will not act to achieve their common or group interests."

Group size: small groups

• According to Olson, the free-riding problem is common to all groups

• But collective action problems are easier to overcome when the size of the group is small

• The effectiveness of each individual is rather large in a small group

  • Each individual contribution makes a noticeable difference → free-riding is much harder in smaller groups bc you will be able to detect them

• Because each member matters, the other members have incentives to make sure everyone is cooperating

• Small groups still have problems, specifically the exploitation of the "large" by the "small"

  • The larger the group the harder it is to find free-riders

Group size: large groups

• Collective action problems are most severe in large groups

  • Individual contributions may matter less

  • Free-riders are difficult to identify → anonymous in large groups

  • Free-riders difficult to punish

• Thus, large groups often remain "latent" (plagued by free-riders)

• The types of groups likely to remain latent are those that represent broad societal interests

• What really matters is the difference an individual contribution makes to the pursuit of the public good

Examples of solutions to the collective action problem

• state provides public goods

  • How well is the gov capable of supplying public goods? The gov changes, which could change how much public goods they provide

    • Can have long term problems/costs

• Large members/political entrepreneurs have a stronger incentive to engage in cooperative behavior and produce a public good

• Privatization

  • Pay to have access to

  • Ex. Fishing rights, pollution vouchers

• By-products and selective incentives

Examples of solutions: by-products and selective incentives

• This is Olson's explanation for the existence of large-scale collective action

• Groups can entice members to join by providing selective incentives - i.e., benefits (private goods) that can be obtained only by contributing

• Selective incentives are private and exclusive; they are "rewards" for being a member of the group

• Selective incentives can be positive (i.e., a reward) or negative (i.e., a fine, bad for reputation)

Selective incentives example

• Negative selective incentives

• Punishment or costs to only those who fail to contribute to the provision of collective good

• State coercion and regulation: if you do not pay tax, you will go to jail

  • Govs can solve many collective action problems

• Non-state actors such as warlords or the Mafia can also enforce rules and regulations

Enforcement problems

• costly enforcement

  • Enforcement is not costless; small departures form cooperative agreements are likely to go unpunished

• Imperfect enforcement

  • Think about judges making the wrong call and send the wrong person to prison

• Enforcer incentives

  • We assume that enforcers are honest, but…

    • Ex. Racial profiling 

Elinor Ostrom

• Female political scientist who won the Nobel Prize in economics (!!!) in 2009

• She won the prize for her "analysis of economic governance, especially the commons"

• Ostrom, Elinor (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge, UK: Cambridge University Press

• Field research

Governing the commons basics

• Detailed case studies of the management of common pool resources

  • Goods that are non-excludable but rivalrous Ex. Fishing grounds

• She shows that over-time groups of individuals have developed complex formal and informal rules of allocation to overcome collective action problems

• She argued strongly against Garrett Hardin (1968) and his idea of the "Tragedy of the Commons"

Garret Hardin

• 1968), biologist

• Racist (!) and anti-immigrant

• Against welfare state; which promotes the tragedy

• Restatement of Olson's argument with respect to latent groups and common pool resources

Tragedy of the commons: the problem

• Every individual has an incentive to consume a resource, but at the expense of every other individual

• There is no way to exclude anyone from consuming

• Negative results

  • As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others—and themselves too-who can no longer enjoy the benefits

Commons: a piece of land for everyone to use for livestock etc

• Used in old towns

Tragedy of the commons: Hardin’s solution

either privatization or state control

Governing the commons

• Ostrom rejected the idea of the outside solution

• Instead, she argued that individuals can escape collective action problems by converging on informal norms or crafting formal rules to facilitate cooperation

• Privatization or nationalization will often be unnecessary

• Additionally, Ostrom shows that it might even be counterproductive

Governing the commons NOTE

• Norms will not always arise to solve collective action problems!

• It will only be adopted by individuals if it is somehow in their own interest

Governing the commons: example

Privatization of a lake

• Might solve overfishing but might also prevent non-rivalrous use of the lake for transport

Olson vs Ostrom

• Ostrom provides many case studies of specific instances of collective action

• Ostrom argues against Olson's idea that voluntary cooperation is out of the question in large groups

• Ostrom argues against Olson's idea that social incentives do not play any role