Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups, Harvard University Press, Cambridge, Mass., 1971.
Olson’s book was directed against the conception about group behavior and collective action, which was prevailing in his time, according to which people would instinctively or naturally act on common interests, and that inaction need to be explained. 1 The questions around which his investigation is structured are basically two:
What makes collective action possible?
What is the relationship between group size and the cohesiveness and effectiveness of the group? To quote Olson, "what needs to be known, in the words of the German sociologist Georg Simmel, is ‘the bearing which the number of sociated individuals has upon the form of social life’." [21]
Like many other social scientist approaching the issue before him, he starts from the assumption of rational individual actors, but his conclusion is radically different. Basically, his point is that "rational, self-interested individuals will not act [voluntarily] to achieve their common or group interests" [2]. The reason for this claim is that, when interests are shared, rational actors should prefer to free-ride, that is, to let others pay the cost of goods that will benefit everyone. If we nevertheless see groups acting to further their interests, this is possible to the extent that collective action is accompanied by private incentives to reward contributors or to punish non-contributors. The first part of the book is devoted to detailing and explaining this thesis. The rest of the book presents the history of labor unions, classes and the state, interest groups and pressure groups, which serves as the empirical evidence supporting his argument.
His solution to the collective goods problem is relatively simple and plausible: individual contributions are determined by the selective incentives. But critics of Olson 2 have shown that it simply begs the question: selective incentives also involve some costs, and collecting the necessary resources leads again to the same type of problem: "paying for selective incentives is also a collective action in that it will provide a benefit to everyone interested in the collective good, not just to the people who pay for incentives." 3 Moreover, empirical evidence suggests that private incentives have a smaller effect than it is indicated by the theory. A panel study conducted in Germany between 1987 and 1989 concluded that "variables related to rational choice – corresponding to the selective incentives or private material, social, and psychic payoffs associated with protest – are found to be weaker predictors of future behavior." 4
As for the second question, his conclusion is that group size is inversely related to successful collective action. "Large groups fail to provide themselves with any collective good at all" [28], while in the case of small groups the collective good will be provided, but at an suboptimal level. The logic of the argument that underlies both statements is the following: the collective good will be provided by the "largest" individual in the group, i.e., that individual for whom the personal 5 gain is the largest. The collective good will be provided at the level that this largest actor is willing and able to pay for, and "no one has an incentive to provide any more of the collective good, once the member with the largest Fi has obtained the amount he wants." [29] The larger the group, the smaller the capacity of one actor to cover the costs, and therefore the larger the suboptimality. If the size of the group exceeds a given threshold, no member, no matter how large, will be able to provide any quantity of the collective good.
It is not only the number of the members of the group that matters, but also the degree of homogeneity of the group, in terms of size: "A group composed of members of unequal Si, and, therefore, of unequal Fi, will show less of a tendency toward suboptimality (and be more likely to provide itself with some amount of a collective good) than an otherwise identical group composed of members of equal size." [29] In small groups, "there is a systematic tendency for "exploitation" of the great by the small" because "the member with the largest Fi will bear a disproportionate share of the burden." This way of sharing the costs leads to suboptimality, because the marginal costs of additional units of common good are not shared in the same way as the additional benefits (the condition for the optimal provision of a collective good, on page 30).
What is somehow intriguing is the feeling that, although the book’s title allude to The Logic of Collective Action, the author is not talking about this. The actor of the model is the isolated individual. By this I mean that the possibility of coordinating actions is not taken into account, and for the individual the behavior of others does not have any effect on his own contribution. All the individual knows (and needs to know) are the total cost of providing the collective good, and its personal benefit derived from the public good (see the condition for an individual to contribute to the provision of the public good, on page 24: Vi > C ). The individual is not aware of, and not concerned about, the possible existence of others interested in the same good. As Marwell and Oliver point out, this is usually not the case:
"People join groups involved in collective pursuits not only out of perceived common interests, but also because they regard the groups or individuals organizing the action as in some sense efficacious. . . . For most people, however, the most prominent and convincing evidence of a group’s efficacy is probably the group’s size and command over resources. . . . In this simple fashion, the decision of individuals who come into contact with a group or its organizer are clearly interdependent with the decision of others." 6
Again, as in the case of other economic explanations of social phenomena, the analyst does not take into account the existence of interactions between the actors. In this particular case, one of the consequences of this type of "extreme individualism" is the assumption of the model that individual benefits cannot be increased by organization and coordinated action. If this assumption does not hold (which I think is the case most of the time), then the model does not apply - that reduces significantly the relevance of the model. If the theory is modified accordingly, then the benefit of the individual cannot be derived from its "size". It is true that, by ignoring this aspect, the model became manageable and led to an elegant and intuitive conclusion.
There is yet another sense in which the model could be improved, and this is by enlarging the range of actions available to the individual actor. Originally, the individual interested in a collective good had basically two alternatives: first, to act and to provide the good by itself (had he the resources); second, to do nothing. In my view, there is a third important option. Facing a situation when one cannot cover the costs of the common good, the individual (let’s call it the activist) could consider the cost of organizing the group and gathering resources, which is considerably smaller than the cost entailed by the provision of the collective good. This is not an implausible course of action, and it is also rational. It has the obvious disadvantage that the costs of organization are difficult to assess, but here could enter the (distorting) perception of the activist.
To put it short, the model of collective action developed by Olson has an undeniable heuristic value, and it represents an important contribution to the advancement of social sciences. Nevertheless, it should be received with caution, since so many of both its premises and conclusions are contradicted by empirical evidence. As Elinor Ostrom puts it, "substantial evidence from experiments suggests that cooperation levels for most one-shot or finitely repeated social dilemmas far exceed the predicted levels and are systematically affected by variables that play no theoretical role in affecting outcomes." 7 There have been significant attempts to develop the author’s intuitions, and to come up with a more sophisticated, though not so ambitious, theory of collective action. Among these works, and within the same methodological tradition, I would like to mention the book by Marwell and Oliver (1993), which really helped me to grasp Olson and to formulate my critique.
Mancur Olson, The Logic of Collective Action
Andy Demetra
PSC 129
4/9/01
Olson, Mancur. The Logic of Collective Action. Cambridge, Massachusetts: Harvard University Press, 1965.
Review: Latham, Earl. "The Logic of Public Goods and the Theory of Groups." Political Science Quarterly March 1967: Vol. 86, p. 145-148.
In The Logic of Collective Action, Mancur Olson tries to apply his economic expertise to the political realm. He believes that the same principles governing market behavior can also explain collective group action in a society. As members of an interest group, he says that people act in a strikingly similar manner as members of a market group. Each seek the maximum output of some benefit, each operate according to a rational self-interest, and a member of a group will only contribute if he visibly gains from it. Olson dedicates his book to explaining and expanding on this analogy. While he presents some interesting ideas, Olson does not always make sound correlations when applying his economic theories to group behavior. His ideas are weakened by too much vagueness, and not enough concrete examples to support his analogy.
Olson defines a "group" as an organization in which people share common interests or goals. Its "characteristic and primary function is to advance the common interests of group and individuals" (7). Olson says that people do not lose their identity or personal convictions while in a group. They can still possess interests independent of their group; in fact, they often possess interests that run counter to the good of the group. Olson says that people operate according to a rational self-interest, and will only seek a benefit if they feel it is worth the investment. People will only join groups if the services it provides will make up for the costs -- both tangible and intangible -- of membership. As we later learn, this mentality plays a vital role in their group behavior.
Just like market groups, social groups (or as Olson calls them, non-market groups) provide members with collective benefits called "public goods." The achievement of any common goal or the satisfaction of any common interest means that a public good or collective good has been achieved for that group (15). Olson defines an important parameter for these public goods: they must be made available to everyone. Since all group members share the same goal, all of them must be able enjoy the fruits of it once it has been accomplished. Once an individual has helped provide for the collective good (either through dues or other contributions), no one can exclude that person from consuming his share of it (35).
In defining the size of non-market groups, Olson compares them with commonly known economic scales. In a competitive market economy, three group sizes exist: monopolies, oligopolies, and free competition. According to Olson, these groups correspond to three sizes of non-market groups, with monopolies resembling small groups, free market competition representing large groups, and oligopolies of an intermediate size.
However, in producing their "public goods," not all groups have the same success. Indeed, Olson wants to debunk one of the prevailing zeitgeists about group theory: that all groups, regardless of size, will work toward their goals in the same manner. Not all groups behave according to the same universal principles; different dynamics and forces are at work that cause them to have different degrees of efficiency when obtaining collective goods. Olson also wants to shatter the myth that "[i]f the members of some group have a common interest or objective, and if they would all be better off if that objective were achieved . . . the individuals in that group would, if they were rational and self-interested, act to achieve that objective" (1). Although united by a common interest, Olson says that rational, self-interested group members do not always share a common goal. This disparity in the behavior of group members comes primarily from the size of their group.
To illustrate why groups do not have uniform efficiency, Olson again relies on economic models. All markets hope to operate at an "optimal" level -- that is, at a level where "the gain to the group was increasing at the same rate as the cost of the collective good" (27). This theory presumes that all members contribute equally to the group, and that all bear an equal burden of the cost. However, Olson says that most large groups operate suboptimally -- proportionally, they do not produce the maximum amount of benefits as smaller groups. This inequality boils down to two factors: the rational nature of humans and the noticeability of a single person's actions.
Olson says that in a large, competitive market, the actions of one firm will not radically alter the market's conditions. If the actions of one firm benefit the market (in other words, if its actions produce more of the collective good), then those benefits go to the other firms as well. This tracks back to Olson's rule of groups: if the amount of collective good increases, no individual in that group can be excluded from partaking in it. A person could pump in more money for a collective good, but the benefits of that good are dispersed among the other members of his group as well. Of course, as the size of a group grows, the contributions of an individual will be spread among a greater number of people, and the amount of collective benefit that the person receives as a result of his contribution will also be smaller. In a large group, then, an individual will never gain a greater share of the benefits by making a greater share of the contributions. Therefore, a rational individual will stop contributing after a certain point; no matter how much more money he pours in, he will not gain any more from it. This threshold usually falls below the optimal level of efficiency for a large group. Both the law of numbers and the rule of groups prevent them from producing a collective good with maximum efficiency.
Conversely, small groups tend to operate more optimally. First, members receive a far more substantial piece of the collective good. They have more of an incentive to contribute toward it, because they will receive more proportionally than members of a larger group. Also, there is a greater likelihood of "members who would be better off if the collective good were provided, even if they had to pay the entire cost of providing it themselves, than they would be if it were not provided at all" (34). Unlike large groups, each individual's contribution makes a perceptible difference to the group as a whole. If one person decides not to pay, his actions will not be overlooked. In a small group, people feel more compelled to contribute optimally, because not paying will have a noticeable impact on the costs or benefits of others in the group (44). The noticeability of a single person's actions sometimes causes small groups to operate optimally. Each member can exact a greater influence on his peers, and force them to contribute more stringently. For this reason, Olson says that much of congressional decision-making comes from committees and subcommittees. Small groups operate at more optimal, efficient levels, and accrue more collective benefits than larger groups.
For the non-market groups in between, Olson classifies them as either "privileged" or "intermediate." In the privileged group, any member "has an incentive to see that the collective good is provided, even if he has to bear the full burden of providing it himself" (50). Meanwhile, an intermediate group encounters the same pitfalls as both small and large groups. The group is not so small that a single member will provide for the good himself, but it is not so large that people cannot discern whether others have contributed toward the collective good. In these groups, a rational individual will have no incentive to advance the group's cause beyond a certain level. Olson characterizes these organizations as "latent," because their members only have the potential to act.
Olson suggests that only "separate and selective" incentives can mobilize latent group members, and cause them to contribute (51). These incentives must go selectively toward the individuals in a group, so that those who do not belong to the group will be treated differently. Such incentives can work either positively or negatively -- they can "coerce people by punishing those who fail to bear an allocated share of the costs of the group action, or they can be positive inducements offered to whose who act in the group interest" (51). These incentives consist not only of monetary rewards, but also social sanctions and social perks (such as greater prestige or the fear of ostracism). In general, social pressure and social incentives operate only in groups of smaller size, in the groups so small that the members can have face-to-face contact with one another (62). The only situation in which this differs is in the case of a "federal" group, or a group divided into a number of small groups (62). As Olson explains, in almost all latent groups the collective good will not be provided unless there is some such outside inducement, compelling people to work for the common interest.