Noncompetitive Politics

A number of theorists have attempted to analyze political phenomena in terms of the concept of collective goods. The work of these theorists can be divided into two principal streams. The first focuses on difficulties that occur when individuals attempt to supply themselves with a collective good. This stream, which encompasses the majority of existing analyses of collective goods, concentrates on difficulties arising from the free-rider problem and tendencies for the supply of the goods to be extremely suboptimal. The second stream emphasizes the introduction of the concept of entrepreneurship to augment the explanatory power of the original models to handle cases in which large groups apparently do receive meaningful amounts of collective goods.

We begin this chapter with a brief account of these two streams of analysis, together with a discussion of their shortcomings as the basis of a consistent explanation of the supply of collective goods. This will set the stage for our effort to construct an alternative model to explain political phenomena in terms of the activities of entrepreneurs who act to supply collective goods.

The Problems Inherent in the Supply of Collective Goods

Let us assume that the resources required to supply a given collective good (Xi) exist, that the members of the social structure, as a group, value the good more than the cost of supplying it, but that each member values any additional unit of the good less than the previous unit (i.e., the members experience declining marginal utility with respect to the supply of the good). Assume also that the individual members of the group behave in a rational and self-interested manner. In such situations, the question of how the collective good can be supplied is not a trivial one. To the extent that the good is collective in nature, it is possible for individuals to receive it even if they do not contribute toward its supply. Consequently, individuals acting in a self-interested fashion will experience incentives to withhold their own contributions, hoping that the efforts of others will be sufficient to provide the good to the whole group. And under certain circumstances, these responses described in this discussion as free-rider tendencies) can jeopardize the supply of the collective good altogether.

Interactions Among Consumers

The first stream of analysis concentrates on interactions among prospective consumers of any given collective good. The theorists who have contributed to this stream make a key distinction between large groups and small groups at the outset, and they emphasize the problems of supplying collective goods to large groups. Their analysis leads them to conclude that the provision of collective goods to large groups is a major political problem. Specifically, their argument leads to the conclusion that some groups of individuals who value a collective good more than the cost of providing it will not, in fact, be able to supply it to themselves in any meaningful amount.

To illustrate this analysis in greater detail, let us summarize the argument of Mancur Olson, whose formulation is probably the best known and most powerful in this stream of analysis. Olson argues that two fundamentally different situations are possible in large groups. First, one or more members of the group may value the good more than the cost of supplying it. Here Olson argues that there is a presumption that some of the good will be supplied, at least over a period of time. Second, no individual member of the group may value the good more than the cost of supply. In this case, Olson concludes that the good will ordinarily not be supplied in the absence of indirect incentives. Let us briefly sketch the arguments underlying these conclusions.

Consider first the case in which one or more members of the group, as individuals, value the good more than the cost of supply. Simply stated, Olson's argument here is that the whole group will eventually receive some of the good because the individual who values it more than the cost of supply will realize that the other members of the group regard contributions on their part as unnecessary and act to maximize his own utility by purchasing the good. That is, any individual who values the good more than the cost of supply will act to maximize his own utility with respect to the good, thereby supplying some of it to the group as a whole, as soon as he realizes that he cannot rely on the contributions of others to achieve this result.

When a collective good is supplied through this procedure to a large group, however, the level of supply will be distinctly suboptimal from the perspective of the group as a whole. This follows directly from the collective nature of the good. If one member of the group purchases some of the good because he is able to maximize his personal utility by doing so, every other member of the group will receive these units at no cost. Given this free access to the units of the good purchased by the first individual, others (who are assumed to experience declining marginal utility with respect to the good) will have a reduced incentive to purchase additional units of the good. This means that as those who place the highest value on the good buy additional units, the other members of the group will remain free riders. Sooner or later the cost of purchasing an additional unit of the good will outweigh the utility accruing to any member of the group from such a purchase. At this point, no more units of the good will be purchased, and those who placed a relatively low value on the original units will enjoy those units provided by their more zealous neighbors.

It is clear, however, that the value of an additional unit of a collective good to the group as a whole is not the same as its value to the individual member who purchases it. On the contrary, the value of an additional unit of a collective good to the group is the sum of the values placed on that unit by the individuals who will receive it in the event that it is supplied. And in large groups, this aggregate value will usually be far greater than the value placed on the good by any individual member. Consequently, whenever the cost of purchasing the next unit of a collective good is borne by a single individual (who weighs only his private costs and benefits), the outcome will be far from optimal from the perspective of the group as a whole. In fact, when the group is very large, the good may be so suboptimally supplied that the situation is virtually equivalent to the nonsupply of the good.

Now consider the second case in which no individual member of the group values the good more than the cost of supply. Here Olson concludes that the prospects for supplying the collective good to a large group, in the absence of indirect incentives, are even worse. Thus, he argues that each individual in such a group will feel that a...