The Logic of Collective Action

The Logic of Collective Action: Public Goods and the Theory of Groups is a book by Mancur Olson, Jr. published in 1965. It develops a theory of political science and economics of concentrated benefits versus diffuse costs. Its central argument is that concentrated minor interests will be overrepresented and diffuse majority interests trumped, due to a free-rider problem that is stronger when a group becomes larger.

The book challenged accepted wisdom in Olson’s day that:

The book argues instead that individuals in any group attempting collective action will have incentives to "free ride" on the efforts of others if the group is working to provide public goods. Individuals will not “free ride” in groups that provide benefits only to active participants.

Pure public goods are goods that are non-excludable (i.e. one person cannot reasonably prevent another from consuming the good) and non-rivalrous (one person’s consumption of the good does not affect another’s, nor vice versa). Hence, without selective incentives to motivate participation, collective action is unlikely to occur even when large groups of people with common interests exist.

The book noted that large groups will face relatively high costs when attempting to organize for collective action while small groups will face relatively low costs, and individuals in large groups will gain less per capita of successful collective action. Hence, in the absence of selective incentives, the incentive for group action diminishes as group size increases, so that large groups are less able to act in their common interest than small ones.

The book concludes that, not only is collective action by large groups difficult to achieve even when they have interests in common, but situations could occur where the minority (bound together by concentrated selective incentives) can dominate the majority.

Olson's original logic of collective action has received several critiques, based either on a different interpretation of the observations on minority interest representation, or on a disagreement on the degree of concentrated interest representation.

Susanne Lohmann agrees with puzzling observations made by Olson, which she classifies as economic and political puzzles. Economic puzzles, for instance, are measures that result in a general welfare loss in favour of minority protection, many times larger than the minority benefit. One example she gives relates to a quota on sugar imports in the United States, which is calculated to generate 2261 jobs at the expense of a general welfare reduction of $1,162 million (Hufbauer and Elliot, 1994). The implicit price for a job in the sugar industry is then above $500,000, allowing for significant room for Pareto improvement. Political puzzles relates to cases where minority trumps majority. An example she gives is the so-called rural bias in urbanized and developed countries, of which the Common Agricultural Policy in the European Union is a prime example.

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