‘All for One and One for All’: Transactions Cost and Collective Action
| Author | Philip Jones |
| Published date | 01 October 2004 |
| Date | 01 October 2004 |
| DOI | http://doi.org/10.1111/j.1467-9248.2004.00490.x |
| Subject Matter | Article |
‘All for One and One for All’:
Transactions Cost and Collective Action
Philip Jones
University of Bath
Rational choice analysis of collective action predicts that individual members of a large group will
not contribute voluntarily towards a common cause; members of large groups attribute no signifi-
cance to individual action. Large groups are mobilised by the attraction of private goods and ser-
vices; private interest, rather than identity with a common cause, is the stimulus. Yet the efficacy
of such selective incentives depends on the signal that erstwhile ‘profits’ (from the provision of
private goods) are dedicated to achieving a collective goal. At the same time, the signal that col-
lective action is ‘non-profit’ enhances the intrinsic value of the act of participation. When the
impact of individual action on outcome is difficult to discern, individuals rely on low-cost signals
relating to process. There are incentives to identify with the pursuit of a common cause when col-
lective action is deemed ‘non-profit’ and a common goal is non-rival.
Olson’s (1965) ‘logic of collective action’ rejected the supposition that the identi-
fication of common interests leads ‘naturally’ to collective action (Shepsle and
Bonchek, 1997). His logic predicted that an individual member of a ‘large’ group
would not voluntarily support an association, even if the association has the oppor-
tunity to advance the group’s common interests (for example, by lobbying for
legislative change). Each individual recognises that if the association were success-
ful, the benefits would be freely available to all; benefits would not be contingent
on having offered support. Olson’s insight was that contributing to an association
is tantamount to revealing demand for a collective good. Neither is ‘rational’.
Rational individuals attempt to free-ride, but, if all behave this way, there can be
no free-ride and the group remains latent.
The distinction between small and large groups is important. By definition, indi-
viduals in small groups can expect personal action to prove ‘significant’ (for
example, to affect the probability that others will contribute). However, in large
groups an individual is anonymous; personal action is insignificant. The rational
strategy for members of a large group is to free-ride; but if each individual chooses
this strategy, nothing is achieved (there can be no free-ride). Although large groups
may be mobilised by coercion (for example, closed-shop authority requiring mem-
bership of an association to secure employment), voluntary collective action is pos-
sible only if associations offer private (excludable) inducement. Olson argued that
associations representing large groups rely on ‘selective incentives’ (such as cheap
insurance, a journal, or an invitation to a social, or gala, occasion).
This assessment clashes with intuition; surely collective action is a response to col-
lective concerns? Rational choice theory insists that it is a by-product of private
concerns. For example, it is not opposition to oppressive regimes that motivates
© Political Studies Association, 2004.
Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
‘ A L L F O R O N E A N D O N E F O R A L L’
451
political revolution. Political revolution is simply a career-enhancing opportunity
– a chance for individuals to secure positions in a post-revolution government
(Tullock, 1971; Silver, 1974; Jennings, 1998). Identity with a common cause is
irrelevant; private gain (attraction of selective incentives) is the motivation.
The dichotomy between private inducement and collective motivation is stark, but
is it apposite? In this paper, rational choice pronouncements are questioned. In the
second section, I will consider the importance of an association’s institutional struc-
ture. Attention has already been drawn to the importance of institutional struc-
ture in terms of the potential created by size manipulation. Dunleavy argues that
Size manipulation strategies allow the leaders of large interest groups to
assure their members both that the group is viable (because of its size)
and that their own participation is important (because their efforts and
voice would be missed at the local level). (Dunleavy, 1991, p. 77)
In the second section, I will focus on a quite different adaptation to meet the dif-
ficulties of mobilising collective action. A comparative analysis of pay-offs for asso-
ciation membership reveals that the efficacy of selective incentives (the inducement
of private goods) is sensitive to the perception that an association’s institutional
status is ‘not for profit’. The ‘by-product theory’ of collective action reveals that
the likelihood of collective action depends on the attraction of selective incentives,
but the attraction of selective incentives is sensitive to the expectation that an asso-
ciation is ‘not for profit’.
Such analysis charts an illustrative route to my main objective in this paper. Indi-
viduals are rarely as well informed as is assumed in rational choice theory, and
there is no presumption that individuals calculate the pay-offs presented in section
two. Decisions are made with bounded rationality (less than full information).
Barry (1970) argued that political behaviour (such as voting and association
membership) is often a low-cost affair and, below a ‘threshold level’, individuals
are unlikely to incur high decision-making costs. The question is whether behavi-
our can be predicted in this ‘arbitrary domain’ (Green and Shapiro, 1994, p. 58).
My main objective is the exploration of this domain. Such exploration reveals that
perceptions of institutional structure play an important role, even if pay-offs are
never formally calculated.
Increasingly, an empirical literature reveals that individuals reduce the transa-
ctions cost of decision-making by relying on signals and heuristics (for example,
Thaler, 1994, surveys this literature). The implication is that behaviour differs
systematically from that predicted of a fully informed ‘representative’ individual
who bases decisions on an optimising calculus. Rational choice theory makes
predictions on the basis of information that individuals rarely access formally.
In the third section I will focus on the relevance of systematic responses to specific
low-cost signals – signals related to an association’s institutional structure and
status.
Institutional structures in representative democracy have been rationalised as
reducing transactions cost (see, for example, North, 1981; North and Weingast,
1989; Weingast and Marshall, 1988). Such analysis has yet to be applied to the
decision to engage in collective action. The focus in this paper is on the way in
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P H I L I P J O N E S
which institutional structure (adapted to the defining characteristics of common
goals) emits low-cost signals regarding the process of collective action. In this
‘transactions cost analysis’, identity with a common cause and with the process by
which it is to be pursued cannot be discounted.
The Efficacy of Selective Incentives
The Attraction of Selective Incentives
With emphasis only on non-excludability, Olson’s by-product theory of collective
action suggests that selective incentives (as distinct from identity with a common
cause) motivate voluntary collective action. It is private-good inducement that
mobilises voluntary collective action. Yet if this is so, a number of important ques-
tions remain unanswered:
(i) Questionnaire responses indicate that individuals do not attribute to private
goods (selective incentives) as much importance as implied by this theory;
respondents insist that commitment to an association’s ‘collective good’ is
their motivation (for a review of empirical literature, see Jordan and Maloney,
1996, 1998). Can members really be so unaware of the irrelevance of indi-
vidual action?
(ii) Theory fails to offer a rationale for the pursuit of a common goal; if the
common goal is redundant, why would an association pursue it (Stigler, 1974;
Fireman and Gamson, 1979; Udehn, 1996)? If an association’s future depends
on the provision of private goods, why devote resources to a common goal?
As Laver (1997) notes, it implies that political entrepreneurs prefer to act as
‘secular saints’ (foregoing pecuniary gain to devote profit to a common cause).
Although philanthropy cannot be dismissed (Glaeser and Schleifer, 1998), is
it really the case that collective action must rely on an assumed asymmetry
between the aspirations of entrepreneurs in non-market and market
structures?
(iii) If members are unwilling to contribute to a common goal, how can associa-
tions compete with firms supplying substitute private goods (Stigler, 1974)?
Profit-seeking firms are able to offer private goods at lower cost (they do not
bear the costs of a collective goal). Surely, if individuals really value private
goods, private firms would be at an advantage when marketing substitutes.
The absence of intense competition suggests that questionnaire responses are
honest (selective incentives are not the main concern of members).
Taken together, these criticisms paint a discernible paradox. Rational choice theory
(premised on neoclassical assumptions) maintains that membership is motivated
by private inducement (selective incentives), yet members state that their motiva-
tion is the common cause. Theory...
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