Olson: The logic of collective action
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Olson. 1965. The logic of collective action. Cambridge: Harvard University Press.
Olson lays out his general theory in chapter 1, where he discusses individual rationality, selective incentives, and so on.
Three kinds of groups
- Privileged groups (members of this group would gain more from a public good than it would cost them to provide it unilaterally);
- Latent groups (any member of this group could withhold his contribution to the public good without causing a noticeable reduction in its supply); and
- Intermediate groups (if any member of this group withholds his contribution, it will cause a noticeable decrease in supply of the good, or a noticeable rise in cost to other contributors).
Variables and hypotheses
Y = common goods provision; X = group size
- As group size increases, provision of the common good becomes less optimal. You can only have optimal provision of the common good if the marginal costs are shared in "exactly the same proportion as the additional benefits" (30).
- If there is a PRIVILEGED group, the good will always be provided
- If there is an INTERMEDIATE group, the good might be provided.
- If there is only a LATENT group, the good won't be provided without coercion or selective incentives.
- Small stakeholders will tend to exploit big stakeholders (i.e. make them pay a larger share)
Why large groups have problems
Large groups have problems providing common goods for three reasons:
- each group member has a lower share of the benefits;
- so it's less likely that anybody's benefits of helping provide the good exceed the costs;
- and organizational costs rise with group size.
Exclusive vs inclusive goods
There are two kinds of common goods: exclusive and inclusive. With exclusive common goods, the supply is limited. Think of a cartel; each firm wants to increase output (to increase its profits), but if all firms do this, the profits disappear (as the price falls). The supply of profits is limited, so it is an exclusive good. With inclusive goods, however, supply is not limited. Whether more members are welcome depends on whether the good is exclusive or inclusive. Firms prefer to have few competitors because goods are exclusive; unions prefer to maximize membership because its goods are inclusive, and having more members spreads the costs around more.
Group Size and Group Behavior
- Social pressure can be an effective (negative) selective incentive
- Large groups can work better if they are "federal" (63)
Orthodox Theories of State and Class
In chapter 4, Olson applies his theory of collection action to a review of what he calls "orthodox theories." Although he starts by looking elsewhere, the chapter rapidly becomes a review of Marxism. Marx was often criticized for placing too much emphasis on self-interest (in his view, ideology, religion, and everything else were just veiled ways for one class to express its wealth-maximizing interests). The state was the means by which one class could oppress another. What Marx missed, however, was that the rational individuals he envisioned would not have an incentive to participate in the class revolts he predicted. Lenin appears to have understood the problem; in "What is to be Done," Lenin argued that communists would need to be led by a committed, disciplined, self-sacrificing minority.
The following summaries link (or linked) to this one:
- Bates: Markets and states in tropical Africa
- Kiewiet and McCubbins: The Logic of Delegation
- Meltzer and Richards: A rational theory of the size of government
- Noll: Economics perspectives on the politics of regulation
- Page and Shapiro: Effects of public opinion on policy
- Peltzman: Toward a more general theory of regulation
- Stevens: The economics of collective choice
- Stigler: The theory of economic regulation
- Truman: The governmental process