1.4 A Brief Introduction to Collective Action Problems
Now that you understand the concepts of scarcity, trade-offs, and incentives, we can preview the kinds of social problems you’ll study throughout this book.
Suppose a huge crowd packs a stadium to see Taylor Swift perform. When the performance begins, everyone is sitting. Then a single fan in the front row stands. When she does, she obstructs the view of two or three fans behind her. Those fans stand, too, obstructing the view of another six or seven fans behind them. Before you know it, the entire audience is standing, and they remain this way for the entire show.
This is a very interesting situation! Every individual can improve his or her view by standing. But when everybody stands, nobody can see any better than they could when they were all sitting. The only thing the audience gets for its trouble is a tired back from standing for hours on a concrete floor.
If, hypothetically, the audience could vote to either sit or stand, sitting would be the likely winner. But it is unlikely that an audience will put this to a vote, and it is unlikely that members of the audience will unilaterally forgo what is in their best interests as individuals (namely, standing) and choose to act in the best interest of the group, or collectively. For that reason, problems like this are referred to as collective action problems. A collective action problem A problem that exists when naturally occurring incentives encourage sufficient numbers of people to act in a way that makes everybody worse off. exists when naturally occurring incentives encourage sufficient numbers of people to act in a way that makes everybody worse off. Simply put, individual trade-offs are different than the trade-offs for society as a whole.
The world is full of collective action problems. In fact, many if not most of the toughest problems society faces today are some type of collective action problem. We’ll devote quite a bit of time and paper convincing you of this in the remainder of this book.
The general trouble with collective action problems is that no individual has any incentive to act in the best interests of the group. In other words, private incentives are not properly aligned with collective, or social, goals. In cases like these, individuals may be powerless to solve the problem through individual action. Under those circumstances, we may need a more powerful entity to alter incentives so that individuals are guided to make choices that are in the best interest of society. In our stadium example, that entity might be a fire marshal who orders everyone to sit. In society as a whole, that entity is often, but not always, the government. When a collective action problem exists, the government often has the ability to guide behaviors in ways that make the world better off.
Before steam power, men were paid to tow cargo boats upstream. Who, in this replica of Ilya Repin’s Volga Boatmen, is earning a paycheck but not pulling his freight?
Source: Tramp57 / Shutterstock.com
However, it is important to note that not all problems are collective action problems. It is also important to note that often, individual and collective incentives line up quite nicely. (We’ll spend a great deal of time talking about an example of this in Chapter 5 “Free Exchange: Individual and International Trade”.) In these situations, government intervention may actually make the world a worse place rather than a better one. So, a big part of your job as students of the economy is to ask first under what circumstances the government’s attempts to solve problems can potentially make the world better off, and second, what kinds of policies might be necessary to realize that potential.