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A collective action problem arises when two or more individuals have the potential to jointly coordinate on some mutually beneficial action, but do not face the right incentives to act in this manner. Such situations are ubiquitous in economic and social life, and arise in the context of political mobilization, electoral turnout, pollution abatement, common property resource use, and the private provision of public goods such as irrigation systems, parks, and national defense.
Collective action problems are often modeled using the theory of games. A simple example is the public goods game, which has the following structure. Consider a group of n individuals, each of whom can either “contribute” or “not contribute” to the provision of a “public good.” The private cost of contributing is c. Each individual’s contribution results in a benefit b to each member of the group, including those who do not contribute. The aggregate benefits resulting from a contribution are therefore equal to nb. If b < c < nb, then the benefit to the group of a contribution exceeds the cost, but the benefits that accrue to the contributor are less than the cost. In this case, individuals who are unconcerned with the effects of their actions on others will fail to contribute, and if the entire group is composed of such individuals, no contributions will be observed. This is a worse outcome from the perspective of each individual than would arise if all were forced to contribute. Each member of the group can therefore benefit if, instead of being allowed to freely make their own choices, they were all subject to “mutual coercion, mutually agreed upon” (Hardin 1968, p. 1247).
When some individuals behave in a manner that is beneficial to the group while others choose in accordance with their private interests alone, the latter are sometimes referred to as free riders. There are several ways in which collective action problems may be mitigated through the punishment of free-riding behavior. If the group is sufficiently small and stable, and interactions among its members are repeated over a long horizon, actions that benefit the group can be sustained by the fear that an individual deviation will trigger deviations by others, resulting in the complete collapse of prosocial behavior. Alternatively, even if interactions are not repeated, collective action can be sustained if individuals have the ability and the inclination to impose direct punishments on each other for free riding. Experimental evidence suggests that many individuals do indeed have such preferences for “altruistic punishment,” and that such propensities have played a key role historically in the sustainable management of common property resources.
The most common solution to collective action problems is through the intervention of a centralized authority that can set rules for behavior and impose sanctions on those who fail to comply. Sometimes these sanctions take the form of monetary fines, as in the case of tax evasion or the failure to meet pollution standards. In many instances, however, punishments can take the form of ostracism or expulsion, as in the case of clubs, trade unions, or political parties.
- Bergstrom, Ted C., Larry Blume, and Hal Varian. 1986. On the Private Provision of Public Goods. Journal of Public Economics 29: 25–49.
- Fehr, Ernst, and Simon Gächter. 2000. Cooperation and Punishment in Public Goods Experiments. American Economic Review 90: 980–994.
- Hardin, Garret. 1968. The Tragedy of the Commons. Science 162: 1243–1248.
- Marwell, Gerald, and Ruth E. Ames. 1981. Economists Free Ride, Does Anyone Else? Journal of Public Economics 15: 295–310.
- Olson, Mancur. 1965. The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge, MA: Harvard University Press.
- Ostrom, Elinor. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge, MA: Cambridge University Press.
- Sethi, Rajiv, and E. Somanathan. 1996. The Evolution of Social Norms in Common Property Resource Use. American Economic Review 86: 766–788.
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