(David Reisman) Theories of Collective Action Dow
(David Reisman) Theories of Collective Action Dow
(David Reisman) Theories of Collective Action Dow
David Reisman
© David Reisman 1990
PART I DOWNS
2 DEMOCRACY AND CONSENT 7
2.1 Methodology 9
2.2 Policies Supplied 24
2.3 Policies Demanded 44
PART II OLSON
4 FREE RIDERS AND FREE MARKETS 141
4.1 Methodology 142
4.2 Group Size 149
4.3 The Prisoner's Dilemma 160
Index 339
Acknowledgements
This book was written during the period I spent as Hallsworth Fellow
in Political Economy in the University of Manchester. I should like to
thank all my colleagues in Manchester for making my stay so
agreeable, and Ian Steedman in particular for his help and advice.
DAVID REISMAN
The author and publishers wish to thank the following who have kindly
given permission for the use of copyright material:
VI
1 Introduction
Individuals make choices, reveal preferences and perform actions.
Their subjectivity may be purposively self-interested and calculatively
rational, but their calculus is still constrained and their freedom the
plaything of others. From the past comes the multi-period constitu-
tional conservatism of roles and rules, conventions and habits, the
moral consensus and the traditional standard which stultify innovative-
ness even as they cocoon the socialised actor in an external web that is
an ongoing culture. In the present there is the problem of interdepend-
ence of preferences and their consequences for, just as Robinson
Crusoe and Friday cannot both win the race for relative standing
purchased via conspicuous consumption of acknowledged status
symbols, so Sir Robinson, immobilised in a monumental traffic-jam
despite the fact that he himself is driving but one car, is bound to recall
with some nostalgia the halcyon days alone on his island when his
discrete and unique actions were not served up polluted with the
actions of others. With respect to the future, finally, there is the
uncertainty and unknowledge that is the inevitable concomitant of
decisions made in advance of outcomes being known, both in the case
of the isolated individual (as where the rational consumer must
estimate the utility to him of the apple in advance of having established
whether or not its taste actually satisfies his expectations) and a fortiori
in the case of the individual who knows he is not alone (as where the
rational oligopolist must decide whether to cut his price while dwelling
behind a veil of ignorance so thick that he hasn't a clue as to how his
cut-throat competitors will subsequently react). Individuals make
choices, reveal preferences and perform actions, but they do so,
evidently, subject to constraints so considerable that the Rousseauist
natural man, upset by convention, is likely to return in disgust to the
bush, the enfant sauvage, appalled by interdependence, to remain
resolutely sauvage, Wild Peter of Hanover, unable to cope with
uncertainty, to devote the rest of his life to teaching first-year
economics courses to students of mathematics and engineering.
Neither the natural man nor the enfant sauvage nor Wild Peter would
feel entirely at home with the theories of collective action which form
the subject matter of this book. The treble constraints upon individual
action that are represented by convention, interdependence and
uncertainty are so powerful, however, that it is much to be hoped that
1
2 Introduction
7
8 Downs
2.1 METHODOLOGY
2.1.1 Self-interest
that the outcome has gone sometimes one way, sometimes the
other.'14 Nor is it enough simply to state that the parties cannot afford
to alienate the enthusiasts who attempt to convince, on the doorsteps
and in the High Street, the undecided and the indifferent. Should the
winner-take-all voting rule of 51 per cent be employed both within the
nation and within the parties, the outcome of this two-stage exercise in
democracy can actually mean that the self-interest of quite a small
minority comes to dictate the policies that are adopted for the nation as
a whole - the phenomenon, as Matthews explains, of pyramiding, the
'26 per cent' phenomenon: 'Given party discipline, a choice may be
made that has the support of 51 per cent of the members of a party that
itself has the support of 51 per cent of the electorate - even though the
outcome is opposed by all but 26 per cent of the electorate.'15 Indeed,
should voting within the parties take the form of voting by
representatives, the percentage in question can actually fall still
further- as where, say, 51 per cent of union activists (themselves not
necessarily a random cross-section of the union rank-and-file) succeed
in appointing a delegate to the party congress who then forms part of a
51 per cent majority of delegates which selects a party programme for
which 51 per cent of the voters in the nation as a whole will ultimately
opt. Such a minority result is not inevitable (the proportion at each
stage could de facto quite easily be 95 per cent or more). That it is
possible, however, cannot be denied - one reason, one suspects, why
some observers find representative government unrepresentative and
wish to see a significant reduction in the role played by the State in
social processes unless and until the voting-rule more nearly
approximates the Wicksellian ideal de jure of 100 per cent.
construct, entirely separate from the first, in the sense that even a
politician who is seen to rank aid to the people of Ethiopia above
policies that yield benefits to him personally may nonetheless be
assumed to prefer efficiency to waste and more to less. That having
been said, it must immediately be conceded how seldom it is in practice
in the Downsian model that calculative rationality puts in an
appearance save in combination with the postulate of self-interest,
narrowly defined.
No theory of rational action can be constructed without the
postulation of rational calculation, but Downs is realistic enough to see
that his assumption can all-too-easily degenerate, like that of
self-interest, into a tautology. His technique for dealing with this
problem and putting teeth into his axiom is, arguably, somewhat less
realistic - as where he declares that he must suppress from his model
the idea that citizens find the act of voting per se a source of prestige
and then set out rationally to purchase for themselves that utility or
satisfaction: 'If it is rational to vote for prestige, why is it not rational to
vote so as to please one's employer or one's sweetheart? Soon all
behavior whatsoever becomes rational because every act is a means to
some end the actor values. To avoid this sterile conclusion, we have
regarded only actions leading to strictly political or economic ends as
rational.'16 Such a declaration is unjustifiably arbitrary and one in
addition which is capable of rendering the economic approach to
democracy toothless in the face of potential real-world observations. If
citizens genuinely regard it as desirable to vote for the prestige of
having voted rather than after consideration of the issues, then the
outcome of the election will be fully random but the election itself fully
rational; and a similar comment must be made concerning the man
who votes in such a way as to please his employer (thereby investing in
a promotion), or his wife (thereby forestalling a marital dispute). What
would be irrational in the former case would be to conceal the fact that
one has gone to the polls at all; what would be irrational in the latter
would be either to make a secret of the way in which one has voted
(perhaps even going so far as to insist on a show of hands rather than a
secret ballot as a public guarantee of non-duplicity) or to select a
candidate who is other than the optimal means for the attainment of
the desired objective. Where, however, social actors are seen carefully
to rank ends and then efficiently to choose means, it is somewhat
intolerant for the social scientist subsequently to dismiss their decision
as irrational (however sincerely he may personally believe that it is
irresponsible and wish that it be atypical). To the extent that Downs'
theory abstracts from the non-political and the non-economic it
20 Downs
obiter dicta with little more than a walk-on role in the Downsian
account of consumer rationality. They cannot be more: otherwise the
predictions deduced from the axioms would be without meaning.
Even the rational consumer, however, may rationally choose to
purchase on the basis of characteristics other than price, quantity and
quality, and one is inclined to assert that Downs is actually being
excessively modest with respect to the robustness of his rationality
axiom when he limits its scope in the way that he does. Voting on the
basis of tradition, for example, may itself turn out to be rationally
issues-related, as where a given party has over the years built up so
powerful an image of itself as the friend of trades unionism that the
unionist sees no need to invest time and other resources in acquainting
himself with precise policies and proposals; and a similar observation
may even be made, surprising as it may at first seem, concerning voting
on the basis of personalities and personal charisma. The reason is that
every election (like any other contract, explicit or implicit) involves the
institution of a monopoly of force for some period of time (long or
short; fixed, as in the United States, or variable, as in the United
Kingdom) of which Matthews writes as follows: 'During the tenure of
the authority of the contract, competition is suspended and to that
extent made less severe overall, though participants may doubtless be
influenced in their conduct by consideration of the next round (the
"reputation" factor). The duration of the time for which authority is
conferred never approaches zero, unlike that of a transaction, because
that would be inconsistent with the nature of authority itself.'22 Yet a
reference to time is a reference to change; the range of proposals in the
manifesto, limited in number at the best of times, can never embrace
the unforeseen contingency or the non-replicable emergency; and,
save in a nation of which every citizen is a full-time politician and every
issue is settled on the basis of a discrete referendum, much of the
authority that is legitimately exercised by the leadership is by its very
nature fiduciary authority, authority exercised on trust over the
agreed-upon life-span of the monopoly. The comparison of an
electoral victory to the victory of a runner in a marathon race is
therefore a misleading one, since in the latter competition the victory is
the proof of merit while in the former it is merely a licence to try. Given
the extent to which an electoral victory is analogous to the signature of
a blank cheque in favour of a favourite autocrat briefed to use his
discretion, it is then, of course, hardly irrational for the concerned
citizen to vote on the basis of personalities as well as (perhaps in
preference to) issues. It is, in short, where so much of the
job-description remains for the eventual appointee himself to specify,
22 Downs
highly rational for the concerned citizen to vote for what Downs
describes as 'the party whose leader has the most charming
personality' - provided only that the attractiveness in question is not
confined exclusively to politically-irrelevant characteristics such as the
chocolate-box good looks of the film star and derives principally from
politically-indispensable traits such as perceived strength of will,
clarity of objectives and general competence. This is not to say that the
individual voter will always make the right choice, only that it may be
at least as rational for him to try to do so on the basis of personalities as
it would be in the purest Downsian case where he would attempt to do
so on the basis of issues and little else.
Four or five years is a long time in politics, and that too has
significant implications for the assumption of calculative rationality in
view of the simple fact that, put bluntly, my consistency and my
transitivity are not for all seasons. Nor should it be forgotten how
frequently that ongoing alteration in tastes and preferences is itself a
function of governmental actions. Such endogeneity and malleability
of tastes may be associated with words (the cases of information,
exhortation, persuasion and propaganda, analogous to commercial
advertising and private-sector salesmanship even in the sense that
action is likely to provoke reaction from competitors in an attempt to
set the record straight), but it may also - perhaps more insidiously
because less clearly understood - be associated with deeds. As
Matthews explains, 'the implementation of policies may alter people's
preferences, in just the same way as consumers' preferences are
altered by the habits and aversions created by past purchases. If a given
policy is unwelcome both and before and after it is implemented,
deliberate adoption of it by the authority is clearly exploitative. But
the situation is less clear if it was unwelcomed beforehand but
welcomed in retrospect, or welcomed beforehand but regretted in
retrospect.'23 Precisely because the political contract is to so great an
extent a blank cheque, the deliberate implementation of preference-
altering policies, although without any doubt potentially sinister, is
nonetheless not 'necessarily sinister. In some areas the public may be
glad for governments to show "leadership", indeed expect it of them.
The difficulty is where to draw the line between leadership and
brainwashing.'23 That 'the public should have a choice as to who is to
wash their brains'25 is a sine qua non for political democracy in the
sense of Downs. That it is a sufficient as well as a necessary condition is
more debatable in view of the degree to which brains once washed then
remain washed because of the creation of a vested interest (frequently
Democracy and Consent 23
praise in Social Choice and Individual Values as the man 'to whom I
owe my interest in economics and particularly my interests in problems
of social welfare.'2 Arrow in turn was Downs' teacher at Stanford and
the source of 'many excellent ideas'.3
The Hotelling approach to differentiation based on characteristics is
in two parts. The first part - the theoretical part - is an elaborate
account of the extent to which each establishment has an absolute
monopoly in being itself: 'If a seller increases his price too far he will
gradually lose business to his rivals, but he does not lose all his trade
instantly when he raises his price only a trifle. Many customers will still
prefer to trade with him because they live nearer to his store than to the
others, or because they have less freight to pay from his warehouse to
their own, or because his mode of doing business is more to their
liking, or because he sells other articles which they desire, or because
he is a relative or a fellow Elk or Baptist, or on account of some
difference in service or quality, or for a combination of reasons. Such
circles of customers may be said to make every entrepreneur a
monopolist within a limited class and region.'4 The second part - the
empirical part - is an assertion that, in America at least, (and fully in
keeping with de Tocqueville's findings in that country almost exactly a
century earlier), the standardised has the edge over the unique, the
samey over the special, the agglomerative over the fissiparous. Many
customers might prefer to trade with the small rural shopkeeper
because he is conveniently local, but that does not mean that the
would-be shopkeeper is prepared to trade with them. On the contrary:
the greatest concentration of his potential customers being found in
the town, it is in the financial interest of the rational new entrant to
settle in the closest possible proximity to the old entrants, and to aim
(while not precisely duplicating their appeal lest there then remain no
alternative mode of competition to the beggar-my-neighbour destruc-
tiveness of the price-war) at maximising his trade by converging with
his fellow-sellers on the hump of the frequency-distribution where the
bulk of the buyers are situated. The odd Elk in the tails or Baptist at the
fringe is no doubt a fine person in his own right, but there is not much
money to be made from minorities, and that is why, in Hotelling's
explanation of things as they are, 'as more and more sellers of the same
commodity arise, the tendency is not to become distributed in the
socially optimum manner but to cluster unduly'.5 It is at this point that
Hotelling makes his declaration that the 'agglomerative tendencies'
which he had identified in the High Street are nothing short of
'strikingly exemplified' by the situation in the Shop of State: 'The
26 Downs
The second comment that must be made about the Downs model
and its explanation of convergence and divergence is that, like the
economic approach to consumer behaviour, the economic theory of
democracy treats tastes and preferences as exogenous, independent of
the process of want-satisfaction - whereas, a point already noted, it is
likely to be the study of the politician, analogous to that of any other
producer in this respect, to seek to mould and shape those attitudes in
the way that Mr Rodgers has in mind when he reveals himself to be an
ideologue with a definite view on the nature of 'the good life': 'I believe
that politicians should offer some vision and should raise the sights of
voters beyond their immediate objectives and expectations.'12 What
this can mean is that the humps, the modes and the medians are not
constant but variable, and that the reason for the shifting and the
regrouping is nothing less than the persuasive force of on-going debate
and discussion itself. This process of alteration and revision of rankings
is well described by Duncan Black when, taking a more microscopic
case than that of the nation as a whole, he shows how, 'for example,
trade union representatives who are deciding on hours of labour or
wage rates, may be influenced late in the meeting, after their
preference schedules have already been formed, by another speaker;
and their preference schedules may be formed anew. The comparison
used by our theory would now be, not between one recorded decision
and another, but between the decision reached after this speaker has
addressed them and the decision which would have been reached had
the representatives voted before his speech was made.'13 It clearly
matters who is allowed to speak before the vote is taken (and, by
extension, who is denied the opportunity) - and this manifestation of
power exercised by the chairman at the level of words is strongly
reinforced by the power that he exercises at the level of deeds. All
issues, after all, are not decided simultaneously, and - because,
'whether in politics or economics, complementary valuation is the rule
and independent valuation the exception'14 - the outcome of a
decision-making process often depends on the agenda, on the order in
which the single issues are taken: thus a consumer-citizen might vote
for policy B (an exceptionally high national budget) if it is put to him
after the approval of policy A (a costly programme of repatriation of all
coloured immigrants) but not before. Both through words and through
deeds, in short, opinions can be altered by forces operative on the side
of supply. The Downs model abstracts from such malleability - and
from the role played by the chairman who selects and orders the
speakers and the issues. It would probably be correct to identify the
30 Downs
property. The former commodity you may buy or rent. The latter you
may not have at any price. I retain the right to make no use whatsoever
of my vote: save in that minority of countries where the duty of the
citizen not to abstain has the force of law, there is no doubt that the
voter has the freedom to opt out of voting. I do not retain the right to
trade with you something which I hardly value at all (one vote) in
exchange for something which, subjectively speaking, I value more
highly (a sum of money): were I able to do this, then I, Mr A or Mr B,
could offer to sell you, Mr C, my vote on the trees question in exchange
for £100 (compensation for my loss of utility), plus £333 (my share in
the extra taxation - £1000 divided by 3 - which you generously agreed
to refund), plus, let us say, a surplus of £67 (a bribe or inducement
which you offer me out of the money you save as a result of settling for
less than the full £2000 that you were originally prepared to spend to
rid yourself of the arboreal inconvenience). An outside observer who
criticises Mr A or Mr B for spending one vote on £500 will be met with
the reply that such a decision is of the same nature as C's decision to
spend his money on the destruction of the trees, D's decision to buy gin
rather than food, or E's decision to budget resources for something too
unspeakable to mention. Property is property, A or B will say, and the
individual is the best judge of his own interest. Yet the fact remains
that while I normally retain the right to spend less than my one vote,
you can never acquire the right legally to spend more votes than the
one which is your own.
And it is here that our discussion of the two markets returns us to the
discussion of the two distributions with which this sub-section began.
In examining the second or politicised case we made the not unrealistic
assumption that A, B and C are absolute equals in political power, the
proprietors of a single vote each. In examining the first or
arbitrage-through-compensation case, however, we carefully avoided
the making of any assumption at all about the degree of equality or
inequality which obtains when A, B and C go to market. Yet the
principle of one adult/one (non-transferable) vote in the political
market has no precise counterpart in the market economy, where the
rule instead is different actors/different (transferable) incomes. If A, B
and C were equal in incomes and merely differed in their taste for
trees, some readers would no doubt be very much in sympathy with
that market automaticity which allows all three individuals sensitively
to equate subjective marginal cost and subjective marginal benefit - so
much in sympathy, in fact, that those readers might even wish to see its
extension to the political arena as well through an end to what they
Democracy and Consent 35
do so. The net result is that the non-seller loses utility; that C pockets
the difference; and that this is not what is understood by optimality in
the sense of Pareto. There is much to be said for individually-
negotiated compensation schemes. There is less to be said in defence
of a free market in votes. Whether there is anything at all to be said for
a free market in political services - the privatised situation in which the
rational consumer attends an auction at the Shop of Commons and
competes there to purchase the policies of his choice - must remain an
open question. Downs and others would no doubt regard such fully
entrepreneurial actions as unpatriotic and corrupt, mean and sordid.
They should perhaps be reminded that it is not from the benevolence
of the butcher, the brewer and the baker that we expect our dinner;
that the butcher, the brewer and the baker expect to be paid not in
power but in money; and that the very logic of the economic approach
to political democracy would seem to suggest that every politician not
only has but ought to have his price.
Choice/Voter A B C
First / g h
Second 8 h f
Third h f g
In such a situation, no alternative enjoys majority support and the
government party, whichever option it selects, is vulnerable to
electoral defeat. The strategy of the opposition party should, in such a
situation, therefore be to match the government on all other issues
(i.e. to wait for the government first to commit itself and then promise
an identical policy if elected), narrow the election to the one issue to
which the paradox of voting relates, and then defeat the government
by moving as follows: if the government picks/, the opposition picks h
(which B and C prefer to/), if the government picks g, the opposition
picks / (which A and C prefer to g), if the government picks h, the
opposition picks g (which A and B prefer to h). Given such a game,
there is no majority-pleasing policy whatsoever that the government
could employ in a bid to win the election. Thus does lack of consensus
devour its children. Only, however, if a number of rather restrictive
assumptions are made.
We must assume, for one thing, that there exists some significant
social problem with respect to which there obtain at least three
mutually-exclusive solutions - as would be the case, let us say, were the
issue to be unemployment and the options downward revision of
expectations, fiscal stimulus to total demand and emigration of surplus
population. Were the third alternative to be deleted, A, B and C would
have to make a choice from a restricted range of only two possibilities
and a majority-decision would be reached. Were, of course, a fourth
alternative as well to be on offer (early retirement, for example), then
a new ranking scheme could easily result in which it remained
Democracy and Consent 39
impossible for the incumbent to persuade any two of the three voters to
prefer the same one of the four options to its three counterparts.
Then we must assume that the differences between the options are
clearly specified and free of ambiguity - as would be the case, for
instance, where voters took their decision to float or not to float on the
basis of a single plank in an electoral platform, a single promise in a
whole manifesto. Yet the fact is that the normal election is not a
referendum on the policy-alternatives that might reasonably be
adopted to resolve a single problem (the problem, say, of
unemployment, where the policy-alternatives are those, considered in
the previous paragraph, of downward revision of expectations, fiscal
stimulus to total demand and emigration of surplus population).
Rather, the normal election is a multi-problem contest in which the
voter is asked not so much to make decisions relevant only to single
issues as to make choices among what Arrow calls 'social states', where
a 'social state' is to be conceptualised as embracing 'a whole bundle of
issues' and where in consequence 'the significant question is not the
existence of a majority on each issue but the existence of a majority on
the bundle of issues represented by the candidate over any other
attainable bundle.'16 Downs is enough of a social realist to appreciate
the normal election is concerned with the bundle rather than with the
singleton. Parliaments, he concedes, do indeed proceed seriatim,
voting the first bill before the second and the second before the third.
Not so electorates, however; and any argument would therefore be
badly in error that rested, say, 'upon the voters considering each
road-repair bill as an isolated act, separate from other such bills, rather
than considering all repairs at once as part of a unified program.'17 Not
just road-repair bills, moreover, but all bills, since what most interests
rational voters evaluating the record at discrete intervals is not the
balance of net costs and net benefits with respect to a single measure
but rather the balance with respect to the whole package - and this
every politicians knows: 'He knows the voters will consider his
performance as a whole . . . His survival in office is at stake, and
politicians place a high value upon survival in office.'18 The difference
between Downs' broader approach to 'performance as a whole' and
the narrower approach that he adopts when explaining how a rational
opposition might make use of the paradox of voting in such a way as to
defeat a rational incumbent is not, as it happens, great so long as the
political parties offer similar packages on all issues (the environment,
law and order, support to opera and ballet, race relations) save one
(perhaps unemployment, the illustration given above). The real
40 Downs
difference arises where the parties differ on many issues; since there is
then no clear and unambiguous competitive strategy that the
opposition can employ in order, Arrow-like, to vanquish the
incumbent. This is not to say that the opposition has no chance of
defeating the incumbent by means of well-worn strategems such as the
remixed package and the redifferentiated product, only to say that in
such circumstances the paradox of voting cannot figure significantly in
any strategy that it might choose to adopt.
Another assumption that underlies the Downsian usage of the
Arrovian paradox is that of majority voting - obviously so, since there
is no point in employing a majority-pleasing electoral strategy if the
voting rule is to be unanimity of consent. The counterpart of every
pleased majority is, however, the displeased minority, and it is felt
concern for the position of the minority that has caused the political
economists of the Virginia School such as Tullock (who gives the
instance of the compulsory deportation of all Jews to Israel) to express
serious reservations about the employment of the majority rule.
Downs for his own part is a strong defender not only of the majority but
of the simple majority (of a voting-rule, in other words, that selects as
its cut-off point nothing more ambitious than the nearest whole
number above 50 per cent). His defence is based on his belief (which
the Jews compulsorily deported to Israel would probably not share)
that the tail ought not to wag the dog nor the minority be in a position
to tell the rest of us what to do. He defends his conviction that simple
majority is more in keeping with the ideal of equal citizenship than is
augmented majority in the following manner: 'Any rule requiring
more than a simple majority for passage of an act allows a minority to
prevent action by the majority, thus giving the vote of each member of
the minority more weight than the vote of each member of the
majority. For example, if a majority of two-thirds is required for
passage, then opposition by 34 per cent of the voters can prevent the
other 66 per cent from carrying out their desires. In effect, the opinion
of each member of the 34 per cent minority is weighted the same as the
opinion of 1.94 members of the 66 per cent maj ority. All rules of voting
other than the majority rule have this same defect.'19 Downs is
therefore personally very much in favour of that kind of voting-rule
which is also the precondition for the instabilities of the Arrovian
paradox to manifest themselves in the political arena, and with respect
to which Tullock has issued a not unexpected warning: i t may be that
the problems posed by Arrow and Black will eventually be solved, but,
until they are, arguments for simple majority voting rest on a perilous
Democracy and Consent 41
respect for a party which seems not to have much respect for its own
manifesto: if I voted for you because you told me in the course of your
campaign that your bigotry matched if not exceeded my racialism, I
will feel shocked and cheated if you subsequently redifferentiate your
product in favour of unregulated immigration purely in order to make
electoral capital out of an Arrow problem which you have correctly
identified. While you, the producer, may well intend, once elected, to
re-rat (and so repatriate the aforementioned immigrants, as you
originally undertook to do), I, the consumer, may well lose confidence
in your conviction and expect you to re-re-rat, should a new Arrow
problem appear on the horizon. The conclusion that must be reached is
that brand-loyalty in oligopolistic political competition may be
significant but it is not infinite; and that tinkering redefinition on an
ongoing basis may indeed win the support of marginal floaters, but
perhaps only at the expense of alienating existing purchasers of a
commodity now signally altered in its specifications. This constraint is
regrettably absent from most models of changing horses in midstream
in an attempt to capture the rent to opportunism. It is neglected, for
example, by William Nordhaus, in his theory of the political business
cycle and his assertion that the incumbent is likely to alter his economic
policies halfway through a Parliament: 'Immediately after an election
the victor will raise unemployment to some relatively high level in
order to combat inflation. As elections approach, the unemployment
rate will be lowered.'23 It is neglected, similarly, by Anthony Downs,
who in his account of the paradox of voting chooses to assume that
there is no Phillips-like trade-off between plasticity and conviction.
Should, however, it be the case that the would-be voter-pleaser stands
to lose at least as much on the swings as he gains on the roundabouts,
then he would have no rational choice but to consider carefully if it is
indeed worth his while to win the battle but lose the war.
The final assumption that underlies the Downsian approach to the
paradox of voting is that of heterogeneity of voter preferences. We
must assume, in other words, that voters (or, more realistically, groups
of voters) A, B and C genuinely differ radically in their attitudes and
opinions. The possibility that this could happen cannot, of course, be
ruled out altogether, and a society could presumably exist in which the
population was splintered into three camps of more or less equal size
on an important issue such as unemployment. Intuitively, however,
one would expect there normally to obtain a relatively high degree of
overlap of attitudes and bunching of opinions in a relatively
homogeneous society with a single central value system and a single
44 Downs
Information is never completely free in view of the fact that the time
needed to absorb it is without any doubt a cost. Much information is
nonetheless free in the sense that no pecuniary marginal cost must be
incurred in order to acquire it.
Which is not to say that free information is free of class-bias or that
50 Downs
for which their successors in office will then be able to claim the credit).
The second is societal - that today's poor hope to be tomorrow's rich
and are thus marginally less intolerant of inequality than they would
have been in the absence of so optimistic a bias to their uncertainty (the
rags-to-riches image of the open society clearly benefiting the
relatively privileged at least as much as it does the relatively deprived).
The third is political - that wealthy individuals are able to harness
pecuniary motivation to the chariot of fiscal moderation (in forms
ranging from campaign contributions to offers of future employment
by way of the occasional packet of notes or gratuitous trip to Bermuda)
in order in this way, following the exemplary precedent of the butcher,
the brewer and the baker, not to beg but rather to buy the requisite
political influence for themselves.
The Downsian possibles of (economic) growth through (political)
suicide, unquenchable optimism breeding unrealistic aspirations and
the putting of the money where the mouth is are by no means the only
reasons why redistribution stops when it does (the most obvious factor,
that most of us if situated behind a thick Rawlsian veil would probably
regard total levelling as simply unfair, is not mentioned), and no
account may in addition reasonably be regarded as complete which
ignores countervailing forces such as left-wing political ideas or the
power of militants in parties and unions. Nor is it entirely satisfying to
identify redistribution of income with the progressive income tax per
se: the State supplies benefits as well as imposing costs, after all, and it
is not the council-house tenant or the addict in receipt of social work
who is mostly likely to have three children at university, to be the
recipient of a grant to new industry in a development area, or to
require the services of the State-supplied export credit guarantee in
order to boost his income. It is, one is compelled to say, far from
obvious that democratic governments do in fact have an in-built
tendency to redistribute income from rich to poor.
Even if that prediction were indeed to constitute a testable
hypothesis subsequently proven true, moreover, the same can hardly
be said of Downs' explanation of the root causes of the phenomenon:
he attributes moderate levelling to majority pressures from below,
another thinker would explain it in terms of a rational investment
made by rich risk-averters in the survival of the capitalist system, and it
is all but impossible in practice to discriminate between the alternative
hypotheses. The same observation must be made about Downs' first
prediction: he says that economic policy will be biased towards
producers and away from consumers, but not only are the roles of the
54 Downs
60
Organisations and Interests 61
3.1 METHODOLOGY
3.1.1 Self-interest
yields utility, but it is emotive and affectual in nature and not in its
essence linked to the five specific goals which Downs explicitly defines
as egoistic. Downs' definition of egoistic may thus justly be regarded as
embracing only a sub-set of those purposive activities which the
average person would treat as self-interested. The advantage of such a
limitation of scope is that the theory does not degenerate into a
tautology of the form of 'I do what I like because I like what I do'. The
disadvantage is that the demarcations made are frequently arbitrary
and often also ambiguous.
Ideological commitment is a case in point. Downs says that the
attachment of an official to a particular programme or policy (the
attachment of the nuclear physicist in the Atomic Energy Commission
to rearmament or disarmament, for example) 'could be caused solely
by personal identification (self-interest), or solely by conviction
concerning the objective importance of the program (altruism), or by
both'15. The word 'conviction' betrays the ambiguity. A bureaucrat
who did not believe that his personal activity was in some way in line
with the public interest would find it difficult to develop any real
attachment to his work: there cannot be many classroom teachers who
are also committed de-schoolers sharing fully Ivan Illich's belief that
'learning is the human activity which least needs manipulation by
others',16 or who are willing to take into account Illich's warning that
'people who have been schooled down to size let unmeasured
experience slip out of their hands'.17 A bureaucrat who did not rapidly
come to identify with the purposes of his bureau would not only find
himself compelled to lunch alone but would also reveal himself as
being remarkably insensitive to new ideas: a bureaucracy develops
what Galbraith has called 'bureaucratic truth' (he gives the instance of
the American superpower mystique, founded 'on official convenience
and belief. . . rather than on the underlying reality')18 and many have
expressed their concern at the ideational capture which is so often the
fate of the new indoctrinee. That indoctrinee comes to identify
personally with the function of his bureau as he perceives it to be - that
is self-interest in the sense of Downs. He also comes to believe in the
objective importance of the activities performed by his bureau to the
wider society beyond the time-clock and the tea-trolley - that is
altruism. Yet both his self-interest and his altruism are in truth
emanations of one and the same cause, namely his ideological
commitment. The advantage of the demarcations which Downs seeks
to make is that they are bulwarks against the tautologisation of theory.
That they are frequently arbitrary and often also ambiguous is a
66 Downs
their openness to others that they most decisively part company with
their narrower cousins, the zealots.
Fifth and last is the statesman, the bureaucratic type which more
than any other resembles the textbook image of detached service to
externally-imposed guidelines not of the actor's own inspiration. Here
as always, of course, the pursuit of accurate predictions dictates that
allowance be made for individual idiosyncracies; and while many
statesmen are known to be lazy (in the sense that they 'espouse very
broad views but undertake little action' and 'make good critics but
poor achievers'),26 many others are known to be active (in the sense
that they deliberately lobby on behalf of personal and public interest,
albeit not to the extent of actually entering into conflictual situations
not compatible with compromise). Exceptions can be cited but the rule
is the rule, and it is none other than the Weberian criterion of
conditioned impersonality and 'obedient compliance'. As Weber puts
it: 'The professional bureaucrat is chained to his activity by his entire
material and ideal existence. In the great majority of cases, he is only a
single cog in an ever-moving mechanism, which prescribes to him an
essentially fixed route of march. The official is entrusted with
specialized tasks and normally the mechanism cannot be put into
motion or arrested by him. . . . Once established and having fulfilled
its task, an office tends to continue in existence and be held by another
incumbent.'27 The 'professional bureaucrat' in the theory of Max
Weber is the 'statesman' in the theory of Anthony Downs - the
standard and the normal character-type in the work of the former
authority, only one possibility among five, however, in the work of the
latter. Nor indeed even the most significant; and Downs comments on
how frequently it is the case that 'statesmen are found at the lowest
levels because men who enter bureaus and consistently evidence
statesmanlike behavior are rarely promoted. . . . It is our ironic
conclusion that bureaucracies have few places for officials who are
loyal to society as a whole.'28 However ironical this result may appear
to the Downsian, it is bound to appear even more ironical to the
Weberian. This latter will hardly be pleased with the suggestion that
the selfless servant of the national interest as communicated to him by
the supra-bureaucratic leadership is less likely to win promotion and
exercise influence than is, say, the irresponsible opportunist or the
persistent obsessive - and will respond, acknowledging that we are
here dealing with motivational and subjectively-based hypotheses
which are virtually impossible to test, by citing the impassioned
defence of Verstehen which Gordon Tullock himself enters in
70 Downs
corner. On the other hand, it might not be. All things considered,
there is much to be said in favour of settling for Mildred.
Downs shares the concerns of both Stigler and Simon with the
difficulties of applying the norm of calculative rationality to
decision-making procedures characterised by incomplete information.
An Economic Theory of Democracy, as we have seen, does not
hesitate to introduce Stigler-type marginal calculations such as would
almost certainly account for Simon's hardly enthusiastic reception of
that work, were it not for the fact that Simon explicitly states that he
does not rate very highly Downs' use even of the maximizing
framework: 'While it employs the language of economies', Simon
observes of Downs' book, 'it limits itself to verbal, nonrigorous
reasoning which certainly does not make any essential use of
maximizing assumptions . . . and which largely translates into the
economic vocabulary generalizations that were already part of the
science and folklore of politics.'47 Inside Bureaucracy adopts a more
cautious, more guarded, more Simon-like approach to the dynamics of
collective choice in conditions of considerable ignorance about
present-day conditions, radical uncertainty with respect to future
outcomes. That which is 'supremely rational' is thereby transmuted, in
the language of Simon, into that which is merely 'reasonable' - but
searching and sampling, even without the ambitious standards of
optimising and maximising, remain behavioural constructs that are
absolutely central to the theories advanced by Downs concerning the
operations of institutions.
Thus, in the Bureaucracy as in the Democracy case, it is made clear,
some information is less costly than other kinds of intelligence
(conversation with friends or watching television, for example) and
some data is accumulated as a by-product of other modes of activity
(such as reading newspapers and journals in connection with one's
work). Given that time is never costless, nonetheless it would be fair to
say that 'all men are continuously engaged in scanning their immediate
environment to some degree' and that 'this combination of
unprogrammed free information streams and habitually programmed
scanning provides a minimum degree of constant, "automatic" search.
Every official in every bureau undertakes such search regardless of
how well satisfied he is with his own current behavior or that of his
bureau.'48 Dissatisfaction with the status quo, it may confidently be
predicted, is likely to cause such officials rationally to choose to invest
still more intensively in the search for scarce information. Nor is the
collection of data the end of the story; for the decision then remains to
78 Downs
be made of how best to act upon the information that has been
collected. And there is more. Since it is in the nature of information
appertaining to the human condition to alter 'continually', the
bureaucrat must face up to the fact that no decision made can be
regarded as anything other than provisional, and that he is compelled
by the logic of his situation perpetually to redefine 'the locus of his
equilibrium position' in order thereby to reflect 'his recent experience
regarding what is really possible'.4y Rationality, one is tempted to
observe, is to Downs a flow and not a stock.
A concluding word by way of summary is now required. The
approach which Downs adopts in Inside Bureaucracy is that of
methodological individualism, in that the principal focus of his
investigations remains the acting individual's conscious pursuit of his
self-prescribed objectives, not the passive adaptation of the fully-
flexible lump of clay to the externally-imposed constraints of a
structure regarding which no atom ever expressed a reaction. The
approach is essentially a deductive one, relying for the generation of
robust predictions with real-world relevance upon the methodology of
logical inference from sound axioms. The behavioural a prioris which
Downs employs are those of self-interest and calculative rationality.
They are as familiar to every student of exchange as they are likely to
be regarded with suspicion by virtually every student of authority. The
former will search for and find abundant evidence in the political
market of the interested and rational trading of the quid for the quo
that Adam Smith encapsulated for all time in the dictum 'Give me that
which I want, and you shall have this which you want. . . . Nobody but
a beggar chuses to depend chiefly upon the benevolence of his
fellow-citizens.'50 The latter will not deny that there is much in the
behaviour of bureaucrats which reminds him far more of the Fall (in
the sense of Adam) than it does of Pflicht (in the sense of Kant), but he
will assign primary predictive power nonetheless to the concepts of
duty, obedience, commitment and, above all, loyalty, about which
Max Weber wrote as follows: 'Entrance into an office, including one in
the private economy, is considered an acceptance of a specific
obligation of faithful management in return for a secure existence. It is
decisive for the specific nature of modern loyalty to an office that, in
the pure type, it does not establish a relationship to a person . . .
Modern loyalty is devoted to impersonal and functional purposes.
Behind functional purposes, of course, 'ideas of culture-values' usually
stand.'51 The ongoing debate between Smith and Max, between the
principle of exchange and that of authority, is unlikely to be resolved
Organisations and Interests 79
before tea-time, let alone before lunch. The most that can be said is
that it seems to be relatively clear in which camp the impartial
spectator ought to situate Anthony Downs.
which are properly its own would simply be impossible without the
support of that administrative staff which is known as a bureaucracy.
Responsibility and responsiveness are not, in Downs' perspective,
in any way intrinsically incompatible with the essence of the bureau;
but he also shares the popular apprehension concerning the extent to
which the benefits might be accompanied by costs. Downs does not
believe that the monster is about to enslave its maker and treats as a
gross exaggeration the idea that bureaucrats consistently repress the
choices of individuals (including individuals who, as citizens and
voters, hold property-rights in some at least of the bureaus, namely
those bureaus which are situated in the public sector). What Downs
does believe is that the bureaucratic mode of organisation is
encumbered by certain disadvantages which, while not constituting
insuperable barriers to responsibility and responsiveness, impose
definite impediments nonetheless. Those disadvantages form the
subject-matter of the three sub-sections which now follow, dealing,
respectively, with distortion of information-flows, bureaucratic
inertia, and lack of co-ordination.
and bargaining consume time and other resources and may therefore
not be cost-effective where outcomes are unknowable) and by the
social conventionalist with a repugnance to kaleidoscopic innovative-
ness (who is much reassured by statements such as the following, made
by Cyert and March: 'As a result of organizational precedents,
objectives exhibit much greater stability than would typify a pure
bargaining situation. The 'accidents' of organizational genealogy tend
to be perpetuated.') 17 Anthony Downs would be the last to deny that
cost-effectiveness and institutional stability are valuable advantages
indeed. His point is simply that excessive attachment to past practices
can prove as unwholesome for a bureau as it is unhealthy for an
individual; and that bureaucratic inertia is accordingly to be regarded
as a genuine threat to the responsibility and responsiveness which
citizens have a right to expect from their administrators.
One of the main causes of excessive conservatism in a bureau is the
natural and normal human propensity for people, complain as they will
of the boredom and frustration which they associate with being stuck in
a rut, in fact to derive a certain satisfaction from patterned, structured
conduct: 'When a person has experienced a certain utility income from
some set of variables for a given amount of time, he begins to structure
his behavior regarding those variables around that level of utility
income. The idea is very similar to Duesenberry's concept of long-run
consumption levels, or Friedman's permanent income hypothesis.'18
Few things are more habit-forming than forming habits - whence
Downs' inference that, once a bureaucrat has become accustomed to a
particular utility-income derived from a habitual pattern, that
bureaucrat will tend (at least initially) to regard any gap between
actual and preferred performance, any disparity between the achieved
and the aspired-to, as a transitory deviation which can reasonably be
ignored rather than as a permanent alteration which requires rational
decision-making followed by a revised course of action. Bureaucrats,
like other people, Downs argues, experience kinks and discontinuities
in their utility-functions; and this psychological predisposition to
reason away the need for change is, accordingly, a significant cause of
bureaucratic inertia.
Most of all, needless to say, where the key posts in the bureau are
dominated by conservers in whom the antipathy to change is
particularly marked, the desire to hold on to such security and
convenience as they already possess is particularly strong. As noted in
the previous section, some of these persons are genuinely mediocre,
with good reasons to be less than optimistic about improving their own
Organisations and Interests 87
As can, needless to say, the slow growth of the bureau (or, worse
still, any contraction in its size), particularly where stagnation follows
hard on the heels of a period of rapid recruitment: given that 'the
higher the rate of personnel turnover in a bureau, the lower the
proportion of conservers therein',23 the probable attitudes and
expectations of a significant 'age lump' that can no longer realistically
hope for early promotion such as obtains in the fast-growing
organisation and that in addition faces only very limited outside
opportunities for advancement and enhancement, are hardly those
that foster dynamism and a high valuation of novelty. Put in other
terms, the problem is that the amount of inertia in a bureau reflects in
no small measure the proportion of climbers to conservers contained
within it; and that promotion postponed, like promotion blocked,
contributes in no small measure to the rendering of a bureau
conserver-dominated.
So does a sound appreciation of the economic costs of change; for
the simple fact is that the learning of the bureau's established
structures, patterns and practices is not a free good but rather an
investment of time and other resources on which the bureaucrat wishes
to see a satisfactory rate of return. Clearly, 'this past investment
represents a form of "sunk costs" in his life which induces inertia
therein. Changing his behavior patterns involves losses in utility now
derived from it and costs in setting up a new pattern to replace it.'24
The greater the investment, the greater the incentive to avoid
innovation, the greater the expected reward that will be required to
induce the rational official to make major changes in his behaviour-
patterns, the greater the time-lag before the self-interested maximiser
accepts that it is no longer economic to 'wait to see whether the change
is likely to last, and if it is large enough to offset the costs of shifting
those patterns':25 no investor who wishes to survive as such can afford
to bear 'the costs of restructuring his larger behavior patterns in
response to every change in his utility income',26 and the bureaucrat is
precisely such an investor. The Downsian bureau being nothing other
than the sum of its bureaucrats, it is no surprise that the pursuit of value
for money renders it no less inflexible: 'The larger the costs of getting
an organization to adopt a new behavior pattern, the greater will be the
organization's resistance to it, other things being equal.'27 Small
changes may be made in response to pressures, internal or from
outside. Profound and far-reaching ones will not be made unless the
expected benefits outweigh the sunk costs. Bygones in the Downsian
world are, apparently, not forever bygone. A Downsian bureaucrat,
apparently, never forgets.
90 Downs
example, city planners are notorious for designing master plans that
call for absurdly unrealistic behavior on the part of other agents (such
as massive expenditure on parks and nearly perfect law enforcement).
We will refer to this too broad approach as the superman syndrome.'™
Grandiose and impractical policy formation of the kind exemplified by
town planning that takes no account of wider ramifications illustrates
nothing so much as the potential for conflicts, contradictions and
inconsistencies that exists within the loose federation that is a single
bureau (let alone a beehive of bureaus). Such conflicts, contradictions
and inconsistencies, such collective confusion and organisational
irrationality, are endemic to the structure: given the self-interest and
the calculative rationality of the individuals who make up the system, it
is only to be expected that 'officials will tend to consider those
alternatives that benefit their own interests before those adverse to
their interests'.39 The fact is, in the real-world bureau, that 'officials
always use some of whatever discretionary powers they have to benefit
themselves and the bureau sections to which they are loyal rather than
the bureau as a whole';40 and that it is precisely this always, this
ever-present threat that the actions of the parts may diverge
significantly from the goals of the whole, that renders indispensable
the policing and planning function of the coordinators and the
administrators.
Their task is not an easy one in a world where the official upon whom
the supervisors are dependent for raw data and expert opinion tends to
search for and evaluate information in the first instance in the light of
his own bias and temperament: 'His perception apparatus will partially
screen out data adverse to his interests, and magnify those favoring his
interests.'41 A slippery animal who applies the theory of rational
choice to the preparation of the agenda, who exaggerates the
importance of information that is to his taste while entirely concealing
the existence of intelligence incompatible with his objectives, who
drags his feet when asked to execute an order with which he disagrees
but enthusiastically throws himself body and soul into those
programmes which appeal to him, the most one can say of the official is
that his power cries out to be countervailed; and that it is the difficult
task of the coordinators and the administrators to do the countervail-
ing.
In view of the divisions and conflicts within the bureau, there is
clearly a premium on selecting those policy-measures with respect to
which consensus is most easily won and on setting to one side any
course of action that is likely to prove contentious. One characteristic
Organisations and Interests 95
the economy, the smaller the realm of liberty of the individual citizen.
A Downsian might reasonably be expected to draw that inference.
What is important to note is that Downs himself does not: 'Unlike
some of the severest critics of bureaucracy, we do not contend that
most bureaus are so ossified they should be abolished.'1 What Downs
does instead is to indicate ways in which the performance of the bureau
might be significantly improved in order that the costs of the
bureaucratic mode of organisation be reduced without simultaneously
impairing the very genuine benefits with which it is associated.
Downs' prescriptions and solutions fall into five categories, of which
the first - Political Control - demonstrates the extent to which he is a
political economist and the fifth - The Moral Dimension - bears
witness to the fact that he is in private life a man of strong ethical and
religious conviction. The second category of recommendations for
reform is headed Market Control, the third Internal Reorganisation,
and the fourth Conflict Resolution. Five categories is many categories;
and that is why this section on Accountability and Action - and this
chapter, therefore, on Organisations and Interests - ultimately leave
the reader far more optimistic about the viability of bureaucratic
activity in general, State intervention in particular, than the earlier
discussion of self-interest and calculative rationality, of distortion of
information-flows, bureaucratic inertia and lack of coordination, had
led him to expect he would be.
budget that its functions generate political support or meet vital social
needs.'2 External funding carries with it external control, and this
means that bureaucrats cannot have things entirely their own way.
No rational shopper can afford to spend at random, and the same
holds true of the self-interested sovereign in the State sector:
'Politicians at the head of the government. . . are just as responsible
for raising money as for spending it. They permit only that total
amount of spending that they believe will produce more votes (in a
democracy) or support (in a dictatorship) than the corresponding
amounts of fund raising will lose. This creates an ultimate check on
government spending which is transmitted downward to each
bureau. ' 3 The existence of this 'ultimate check', this ceiling limit on the
fiscal total, then forces each cell in the organism both itself to be
economical of scarce resources and to struggle actively with other parts
of the same whole for a larger share: 'There is no accurate measure of
the comparative benefits of different spending acts, or the willingness
of recipients to pay for each act. Therefore, each official thinks that if
he fights hard enough for his programs, he may obtain enough funds to
improve them, or at least avoid cutbacks. ' 4 Officials may well be driven
by the logic of their organisational goals to press for an expansion in
their budgets, but not so the politicians who are their paymasters:
'Most government bureaus have politicians as their ultimate
sovereigns, and politicians (unlike officials) are just as sensitive to the
cost side of government activity as to the benefit side. Hence
politicians are much more reluctant to expand the total size of the
government budget than bureaucrats.'5
Politicians are much more reluctant to countenance a rise either in
total public spending or in the micro-budgets of individual ministries,
but the historical evidence demonstrates clearly the distinction
between reluctance and refusal: 'The recent expansion of bureaus in
democracies has occurred largely in accordance with the desires of
major nonbureaucratic institutions therein. Consequently, we may
presume that these institutions do not believe the overall bureaucra-
tization of society has been excessive, or they would not continue to
support them.'6 Those major nonbureaucratic institutions are
parliamentary majorities, cabinets and ruling parties, and they,
dependent as they are upon the support of rational voter-citizens for
the continuance of their mandate, simply cannot afford the luxury of
failing to expand where a felt need remains unsatisfied - or, indeed, of
expanding in an area where producer-interest is powerful but
consumer demand non-existent: 'Every government seeks to establish
98 Downs
informed. Furthermore, there are so many voters that each knows his
vote is unlikely to affect the outcome; thus a rationally calculating
attitude leads him to political ignorance. But every legislature is small
enough so there is a significant probability that an individual's vote
may affect the outcome.'" Downs never entirely reassures the friend
of democracy with respect to the former implication, that involving the
pressure group State. With respect to the latter, that involving rational
apathy on the part of the voters and a consequent carte blanche on the
part of the leadership, he is, however, forthcoming as well as
reassuring: 'The constituents of the individual are interested in how he
has represented them; hence he has a strong incentive both to vote and
to become informed about their desires.'12 More confident than
logical, one fears; for a model that incorporates rational apathy cannot
also incorporate rational involvement without leaving itself open to
certain very obvious criticisms.
The second shortcoming has to do with information-imbalance, both
as between the politicians and the bureaucrats (leaving the elected
leader in some cases with no choice but to rubber-stamp in total
incomprehension the expert advice of his specialist appointees) and as
between the ministerial heads of discrete departments (each anxious to
feather his own nest, each hoping for a better perch). The net result of
such information-imbalance is an imbalance in public spending: 'The
more legislators emphasize specialized knowledge, the less they
emphasize evaluation of the government budget as a whole. Thus the
overall budget tends to emerge as the accidental outcome of a number
of specialized decisions. This increases the legislature's ability to
control the behavior of the individual bureaus in detail, but decreases
its ability to develop a well-coordinated program.'13 A legislature is,
needless to say, under that much more pressure to expand a given
sphere of activity where information concerning its recent successes
has been widely disseminated and has captured the public imagination:
'A bureau must periodically come up with impressive results if it
wishes to sustain its growth. NASA's staging of dramatic events at
well-spaced intervals illustrates this concept.'14 A legislature will,
therefore, logically speaking, be under that much less pressure to find
money for a sphere of activity which, however worthy in itself, is also
boringly technical, or the untried response to a rapidly-changing
environment, or surrounded by the impenetrable wall of official
secrecy - or, indeed, seldom in direct contact with consumer-citizens
able to collect information by means of a personal sampling of the
wares: 'Excessive rigidity in such bureaus as the State Department,
100 Downs
AID, and the military services, therefore, may persist for extensive
periods.'15 Faced with the poorly-mixed bundles of policies that
eloquently testify to the multiplied injustices of unequal information
that is also unequal power, the most the Downsian democrat can offer
by way of consolation to his anxious compatriots is the reassuring
reminder that information in non-democratic societies is more
deficient still: 'The suppression of most open expressions of
dissatisfaction tends to isolate the regime from accurate knowledge of
what the governed really think or desire.'16 Dissenting opinions are
suppressed, administered prices conceal micro-shortages and micro-
gluts, their bureaucrats are at least as secretive, as manipulative and as
unresponsive as are our own; and thus it is that the Downsian democrat
is able to conclude by way of consolation that the one-eyed man has
much to be thankful for when placed side by side with his Ruritanian
cousin. Few things can be worse than to be born in Ruritania. That
having been said, information-imbalance holds no great attraction
either.
The third shortcoming has to do with incrementalism and with the
tyranny of the status quo of which it is cause and effect. The problem is
that untried alternatives have uncertain payoffs, any departure from
convention breeds conflict by upsetting a way of life, the act of
changing is itself beset with costs. The solution known as incremental-
ism is to base this year's budget on last year's practice, to treat this
period's experience not as a unique one-off but as a part of a series
which has a logic of its own. As Wildavsky says: 'Once enacted a
budget becomes a precedent: the fact that something has been done
before vastly increases the chances that it will be done again.'17
Economically speaking, of course, such a procedure does have the
undeniable advantage of prolonging the useful life of a given
investment in search and decision-making - an investment which, in
Downs' view, represents a sunk cost such as in and of itself would tend
rationally to produce inertia. The sheer stability associated with the
perpetuation of the traditional 'good enough' will in addition have a
strong appeal to all those who believe themselves to be in possession of
a vested interest (material or intellectual) in the 'done thing - not least
politicians in governments and conservers in bureaus: 'Incumbent
politicians, together with conservers, have an interest in preserving the
status quo, for they wish to sustain those elements of it that put them
into office.'18 Economising and satisficing, habituation and perpetua-
tion, all of these are characteristics of muddling through by means of
incrementalism which are not without their attractions. Those
Organisations and Interests 101
Once upon a time Jack was, despite extensive advertising in the best
Sundays and the intervention of a suspicious gentleman calling himself
a 'headhunter', the sole applicant for the post of water-carrier. He fell
down on the job, broke expensive equipment, frightened the office
cat, demanded the payment of a vastly-inflated fee in cash - and
carried insufficient water. Nothing could be done, a bad water-carrier
being infinitely preferable to the unthinkable alternative. Things
changed, however, when Jill offered to perform Jack's job and to
perform it better. Jill entered into competition with Jack. Jack was
forced by the logic of his situation to carry more water and/or to carry
water more cheaply: he did not want to lose out to Jill. Jill, meanwhile,
was forced by the logic of her situation to step up her carrying and step
down her charges: in the kingdom of the water-carriers, she reasoned,
it is the two-fisted water-carrier who is queen. Jill was aggressive and
pushy, Jack was indolent and careless; and no one who is
self-interested and calculatively rational is likely to want to leave his
life's savings in a plain brown suitcase in the charge of either. That,
however, is not the point: just as every skunk knows that beautiful furs
can come from foul-smelling beasts, so every economist knows that
competition is capable of converting private vices into public virtues.
Competition, as in the case of Jack and Jill, raised the productivity of
the producer and cut the cost to the consumer. These benefits are
worth having in an economy where citizens are not prepared to carry
water for themselves.
Anthony Downs is fully aware of the significant benefits that accrue
to the competitive system. Thus it is that he welcomes competition
among bureaucrats with something approaching the same enthusiasm
that the representative social actor would reserve for competition
among water-carriers: 'The competitive struggle for power and
significance among officials provides one of the major ways in which
society discovers and defines its basic policy alternatives. Self-interest
leads men to make their search for new ideas, more evidence, and
104 Downs
better policies far more intensive than if they were motivated solely by
an "unbiased" desire to serve society.'24 Given the process of higgling
and bargaining which, as we have seen, itself and itself alone generates
the precise mix of goals adopted by the bureau, one is tempted to add
that the unbiased altruist actually enjoys a positive disadvantage in the
competitive struggle for influence and resources unless and until he
learns to wheel and deal in defence of his principles with at least the
same degree of proficiency in the arts of manipulation as is
demonstrated by the most amoral of his colleagues. Be that as it may,
Anthony Downs uses the construct of competitive struggle not only as
an explanatory variable in the account he provides of why bureaus
behave as they do but also as a policy variable in the proposals he
makes for improved checks on bureaucratic abuse. Downs makes two
specific proposals with respect to control via competition. To these we
shall add a third. The bulk of the discussion in this section is devoted to
the third. These things happen.
one report on the same or a similar topic from members of his own
staff: unless the subordinates collude and pre-reconcile differences,
and always assuming that their biases, interests and data-bases are not
identical, such competition among bureaucrats to produce accurate
reports in exchange for anticipated rewards is likely (apart from
breeding enmity in place of collegiality) to foster responsible attitudes
with respect to truth-telling.
The top man himself, moreover, should he happen personally to be
the product of the system, is in a strong position to make his own
contribution to the unscrambling of cumulative noise: 'Every general
was once a lieutenant and remembers the type of distortion he used
when he forwarded information to his own superiors.'26 In a strong
position, that is, provided that schoolboy games have not altered since
he was a lad (where stagnation is the norm, in other words, dynamism
the exception); and that the general once a lieutenant is enough of a
psychologist to be able to read the personality-types of duplicitous
characters who are also devious (to know his climbers from his
conservers, in other words, his creepers from his crawlers) - and,
obviously, that he himself has acquired enough distance from the
distortions of his youth to be in a position to provide countervailing
power to bureaucratic bias (as opposed to providing refinement and
reinforcement of that bias prior to passing it upwards to his own
superiors in a manner eminently likely to boost morale and win him the
approbation of his staff). Such 'provided thats' are restrictive. Not,
however, impossibly so; and for that reason the top man might himself
have a personal contribution to make to the generation of dependable
intelligence.
Competition between sources of information has undoubted
potential. Also, sadly, certain potential deficiences. One of these
involves the over-provision of specialist information, leading as a
consequence to the employment of wastefully time-consuming
screening devices in order to separate the wheat from the chaff.
Another involves the under-provision of technical intelligence, as
where a knowledge-hoarding bureau, not keen to compete, refuses to
divulge non-replicable information because of a strict policy of official
secrecy. Over-riding both considerations is the serious problem,
previously mentioned, of definition of terms and therewith the
establishment of non-problematic success indicators: where competi-
tion between sources of information entails the asking of different
questions as well as the processing of different answers, the would-be
reformer is in danger of becoming as paralysed by the wide range of
Organisations and Interests 107
(c) Privatisation
care for the poor, and support to young children. Not one of these is
non-problematic - the first because of the feedback effect (which is
unknown) of the compensation on the unemployment itself, the
second because of the complex of difficulties associated with the choice
between subsidising the patient and subsidising the institution, the
third because child benefits can so easily have perverse consequences
(as where a given tax-allowance yields greater 'fiscal welfare'37 to the
richer father paying progressive income tax at the higher marginal rate
than it does to the poorer father who pays at the lower). Other
transfer-payments may be more problematic still. Support to the arts
or to the religious festivals of ethnic minorities, for example, are bound
to provoke a degree of controversy about public versus private which is
not easy to reconcile with the complacent attitude towards the
bureaucratised option which Downs is so eager to adopt.
Fourth, the regulation of monopolies (including allegedly natural
monpolies such as telecommunications and electric power) and the
defence of the public against its own ignorance with respect to the
technical properties of, say, food, drugs, and cigarettes): 'To protect
themselves from harmful exploitation by producers in such instances,
consumers in a democracy often have the government establish
regulatory or inspection agencies which must be insulated from market
pressures.'38 That such agencies are in fact established is not, of
course, in dispute. Whether they are genuinely demand-led is,
however, another matter; and it is somewhat of a suprise that the
theorist of bureaucratic self-interest and calculative rationality does
not recognise the possibility of special pleading in the expansion of
bodies of the very existence of many of which the vast majority of
citizens are totally unaware. Nor is it obvious that such agencies defend
the interests of the consumer as well as would a more effective degree
of competition. This point is made with some force by Milton
Friedman when, comparing the postal services and the railways with
television sets and computers, he says: 'The shoddy products are all
produced by governments or government-regulated industries. The
outstanding products are all produced by private enterprise with little
or no government involvement.'39 Friedman also records that, in the
1970s (a decade in which 'economic growth in the United States slowed
drastically'), 'the number of government bureaucrats employed in
regulatory activities tripled'.40 Friedman acknowledges the extent to
which his own thinking on State intervention in the mixed economy has
been influenced by 'a fresh approach to political science that has come
mainly from economists.'41 Friedman mentions the names of Becker
and Buchanan, Stigler and Tullock - and Anthony Downs.
Organisations and Interests 111
short one - and Downs does admit that some at least of the activities
cited could, theoretically speaking, be hived off to the private sector:
'Private firms could undoubtedly carry out through voluntary quid pro
quo transactions many of the service functions now entrusted to
government agencies. Provision of electric power or first-class mail
service are examples of such potentially marketable services.'44 Some
at least of the activities currently being performed by bureaus could,
Downs concedes, at least theoretically speaking, be performed by
firms. His tantalising admission is, sadly, not followed up, but followed
instead by the following: 'Nevertheless, shifting certain marketable
services from government agencies to private firms would not
eliminate the need for a significant number of large nonmarket-
oriented organizations, that is, bureaus.'45 It is difficult to explain why
Downs moves so rapidly from the 'now entrusted' to the 'would not
eliminate' that he finds no time to dwell upon the intermediate case of
the 'would certainly reduce' that forms the centrepiece of the
argument of every pragmatist who has ever defended the privatisation
of hospital catering while simultaneously opposing the privatisation of
hospital doctoring.
The logic of his omission would seem to lie in the cross-subsidisation
of non-economic by economic benefits: 'For example, the Post Office
Department provides subsidies to several activities (such as Rural Free
Delivery) that are not self-supporting on a voluntary quid pro quo
basis, but produce external benefits regarded by Congress as
significant.'46 A Congress genuinely committed to competition and
genuinely concerned about over-bureaucratisation would, one would
have guessed, have opted unhesitatingly for privatisation accompa-
nied by carefully earmarked supplementation in preference to the
indiscriminate cross-subsidisation to which Downs refers; while his
specific illustration (which is one of so-called natural monopoly) raises
complex questions about how permanent a high-profit position can
ever be, save where it is protected by State and law from the
intervention of ingenious interlopers - complex questions, it must be
recorded, with respect to which Downs never entirely satisfies the
reader interested to learn more about the pros and cons of
privatisation as compared with nationalisation, competition as
compared with State supply.
Even if the cross-subsidisation and the natural monopoly objections
could somehow be countered by the free marketeer, there is a further
warning which Downs would wish to issue to those who say they can
imagine a world without public bureaus. That warning involves
Organisations and Interests 113
that are chosen.'55 Each person hired has, it would appear, a marked
propensity to rank the mink-lined curtains, supernumerary staff,
overpriced meals and other side-payments made to the devil upon
whose cooperation he is forced every day to depend, above the high
profits and maximal efficiency which the silent devil who holds the
equity but cannot command a bribe would himself, if asked, confess he
wished to see. Each person hired does not, it must be added, have
equal skill in rent-seeking through bluff and feint - nor, indeed, equal
opportunity to derive supra-functional benefits from the comfortable
cushion of lags and frictions which Cyert and March term
'organizational slack' and of which they write as follows: 'Because of
. . . frictions in the mutual adjustment of payments and demands,
there is ordinarily a disparity between the resources available to the
organization and the payments required to maintain the coalition. This
difference between total resources and total necessary payments is
what we have called organizational slack. Slack consists in payments to
members of the coalition in excess of what is required to maintain the
organization.'56
It is exceptionally difficult to make out a strong case in favour of
organisational slack, just as it is difficult to defend with any real
sincerity the incidence of x-inefficiency, differential openings to seek
excessive renumeration, rewards of agents ranked above objectives of
principals. That is an important reason why privatisation of
bureaucracies accompanied by competition between purveyors may
well prove a far more powerful solvent of organisational abuse than the
approach of Anthony Downs to the employment of this expedient
would lead the reader to suppose. The point is that an APQT bundle
which raises average unit costs by virtue of unnecessary executive
travel, or a thick layer of institutional fat such as insulates idleness
from the pursuit of competence, is only likely to survive in the long run
where the consumer has no reasonable alternative source of supply.
Privatisation accompanied by competition is therefore the enemy of
bureaucratic self-indulgence and careless indolence, and a step in the
right direction of organisational behaviour orientated towards the
revealed preferences of sovereign consumers: the logic of natural
selection, the pressure of aggressive rivalries, the survival-motive,
these forces have a strong tendency to see to that. As Milton Friedman
explains it, the position is this: 'Unless the behavior of businessmen in
some way or other approximated behavior consistent with the
maximization of returns, it seems unlikely that they would remain in
business for long. Let the apparent immediate determinant of business
behavior be anything at all - habitual reaction, random chance, or
Organisations and Interests 117
economises on the scarce resources of time and energy and in that way
contributes to the attainment of economic efficiency). Statesmen are,
presumably, statesmenlike when rotated, zealots are difficult at the
best of times, and the attitude of advocates is particularly interesting:
'The longer an advocate remains in a given position, the more likely he
is to espouse policies based upon a magnified view of the relative
importance of that position. Conversely, if advocates are frequently
rotated, they develop more detached views of each job.' 60 This lesson
would appear not to have been lost upon the Foreign Service, since
Downs, writing of diplomats, has this to say about a phenomenon
which in a not-dissimilar area of bureaucracy is known as 'regulatory
capture': 'If U.S. officials remain in any given nation for long, their
increasing attachment to its culture may cause their goals to shift
toward those prevalent in that nation. If such a centrifugal shift
occurred everywhere, there would be an enormous decline in goal
consensus within the State Department as a whole. Fear of this
outcome is one reason for the State Department's frequent rotation of
its overseas personnel.'61
Almost as dangerous as the bureaucratic structure per se, it would
appear, is the tyranny of the smaller bureaus which comprise the
whole. Frequent rotation at least has the advantage of reducing the
individual's attachment to the parts and of thereby causing him to look
at the larger organisational interest. No one but an organisation man
would, of course, assert that that larger organisational interest is the
same as the public interest: to say that rotation draws the bureaucrat
away from the path of sin is not to say that it returns him to the path of
righteousness, only that it helps to minimise the harm that he is capable
of doing.
Even without redesigning, even without reorganising, there is quite
a simple internal reform that might be introduced by a leadership
hostile to abuse, and that entails the adoption of the by-passing
strategy - the strategy, in other words, where officials by-pass the
normal hierarchical structure and communicate directly with other
officials several layers removed from themselves on the organisational
chart. Such a device circumvents the distorted communication
associated with multiple filtering, allowing a top decision-maker, for
example, to 'obtain information directly "from the horse's mouth", or
to transmit complex orders directly to those who have to carry them
out'.62 The contact might be once-for-all or recurrent; it might be
initiated by an inferior (to speed up a process being delayed by
conservers, let us say) or by a superior (keen, for example, to acquire
120 Downs
widening, after all, there all too often goes overload, and with
overload the loose reign which is the lower level's delight: 'Officials
who have wide spans of control cannot spend much time supervising
each of their subordinates and these consequently have a great deal of
discretion. . . . Thus, paradoxically, many organizations with low
vertical message distortion tend to use vertical communications
channels less intensively than those with high vertical distortion.'67
The flatness reduces the loss (a benefit) but also the control (a cost),
and the most one can say is that the control-loss will be the less, the
more the functions involve routinised activities which can be reported
upwards using quantitative measures and objective indicators: in such
cases, clearly, 'centralized control can be maintained in spite of wide
spans of control because of the relative ease of checking performance
through these indexes'.68
Not in all cases, however, is there scope for decentralisation and
devolution of responsibility, despite the saving of time and other
resources which such action brings with it: in some cases paper and
decisions must be passed up through a tall hierarchy to the officials at
the top rather than being effectively dealt with at the intermediate or
the lower levels. Should interdependencies within the bureau be
exceptionally complex, for example, then 'the taller its hierarchy is
likely to be' - 'if the relationships among these activities are sufficiently
predictable to allow intensive specialization'.69 If, of course, they are
not, then a competition develops between tallness (in order to cope
with complexity) and flatness (the friend of uncertainty). The outcome
of that competition is unknowable a priori, but Downs is keen
nonetheless to venture a guess, that the bureau 'will normally have a
flat hierarchy even though its task involves detailed interdependencies
among specialized activities'.70 Tall or flat, the crucial point is that
structure matters in any discussion of bureaucracy; and that internal
reorganisation represents the third of the five categories of
prescriptions and solutions which constitute the Downsian reply to
bureaucratic abuse.
Conflict exits, both within bureaus (top versus bottom, say, or zealots
versus conservers) and between bureaus (scarce resources and
differing objectives being the most volatile of all social science
122 Downs
combinations); and conflict need not be a bad thing. Within the team,
after all, conflict has a unifying impact, the struggle against a common
enemy helping to promote an esprit de corps and an internal solidarity
which might well serve to keep productivity high despite the disruption
to inertia of some new departure; while within the society as a whole
conflict might be no more divisive and no less beneficial than the
standard case of economic rivalry. Not all conflict need be a bad thing
and much of conflict is undeniably good and healthy, Where, however,
conflict undermining charter and constitution twists organisations and
collectivities down by-ways which it was never intended that they
should follow, then, clearly, in those circumstances, most reasonable
members of the community would accept that the functioning of the
social organism had turned malign and that effective social action
waited upon the adoption of proper modes of conflict resolution.
One important mode of conflict resolution, in Downs' perspective,
is concord based upon preannounced, multi-period regulations such as
defuse the conflict before ever it emerges, precisely because they
ensure unanimity of consensus on the nature of due process: 'People
whose basic philosophic outlooks are completely contradictory can
nevertheless cooperate quite successfully in segmental relationships so
long as they agree upon the specific rules of procedure required. Thus
the sources of goal divergence in bureaus spring mainly from
differences of opinion or beliefs about segmental relationships rather
than about basic philosophic, religious, ethical, or emotional
orientation.'71 Such specific rules of procedure, promulgated in
advance of the game being played and subsequently adhered to by the
totality of the contestants, provide a normative structure in the form of
good processes rather than uni-valued end states; and therewith a
shared framework of guidance and guidelines that may be drawn upon
with equal legitimacy by all parties to a dispute, provided only that all
genuinely rank peaceful co-existence above the zero-sum nastiness of
the bellum omnium contra omnes. As the distinguished proceduralist
Buchanan has put it: 'We require rules for living together for the
simple reason that without them we would surely fight.'72 Applied to
the Downsian bureau, the pre-existence of rules for living together
obviously has a valuable contribution to make to the resolution of
potentially conflictual matters. Promotion is a case in point, where
formal and impersonal mechanisms employing clearly-specified
criteria undeniably lend legitimacy to a decision which could otherwise
all too easily be disruptive of internal order. Even greater legitimacy
would result, one would suspect, were the consensus to specify the
Organisations and Interests 123
much to be said for internal promotion, since this at least ensures that
key posts will be occupied by persons who have already been screened
by their superiors and found to be committed to continuity. A similar
line of reasoning would clearly legitimate the personal approach to a
friend or colleague outside the bureau; or appointment reflecting
nepotism, tribal loyalty, the common religion (all cases where
apparently spurious and non-rational characteristics reveal themselves
to be eminently rational for the purpose of selection that reflects
consensus); and the family background of the applicant ought also,
logically speaking, to be carefully inspected. It is in this connection
that left-wing intellectuals such as C. Wright Mills and Ralph
Milliband draw attention to the interlocking elites which they believe
to be the norm in advanced capitalist societies. They situate the State
bureaucracy in a matrix of birth and privilege which advocates of
recruitment on grounds of ability, narrowly defined, will hardly find
congenial. Congenial or not, Milliband argues, recruitment on the
basis of criteria other than merit, narrowly defined, is in practice the
order of the day: 'Those who control and determine selection and
promotion at the highest level of the state service are themselves most
likely to be members of the upper and middle classes, by social origin
or by virtue of their own professional success, and are likely to carry in
their minds a particular image of how a high-ranking civil servant or
military officer ought to think, speak, behave and react; and that
image will be drawn in terms of the class to which they belong.'81
Selective recruitment on grounds of background and image is, in the
sense of Milliband, an integral part of the control-mechanism that is, in
the sense of Marx and Engels, the modern State: 'The executive of the
modern State is but a committee for managing the common affairs of
the whole bourgeoisie',82 the earlier authors had written, and
Milliband would add that this celebrated conclusion could hardly be
expected to hold true in a society which appointed its administrators on
grounds of technical competence and little else. Downs, it would be
fair to say, makes a case for selective recruitment which has little to do
with the perpetuation of a ruling class, and far more to do with the
stifling at birth of situations which might one day become conflictual.
That a more-than-average element of conservatism might produce
integration cannot be denied by anyone with an openness to the
principle of interchangeable parts. Far more debatable are the
implications of conservative replication and the integration of the
ongoing whole for the efficient functioning of the administrative
structure. That the past might come to precommit the future is
128 Downs
no more than its name suggests, a mode of analysis and not a matrix of
conclusions; and that Anthony Downs, at any rate, sees no
contradiction between the fragmented individualism that constitutes
his methodological framework and the voluntary adoption of the
ethical discipline with which the following section on the moral
dimension will be directly concerned and with which the present
section on conflict resolution comes to an end.
The Downsian monad makes his own decisions but he does not do so in
an ethical vacuum of his own choosing. No doubt many a bureaucrat
would optimally attain self-specified goals such as rapid career-
advancement by means of self-seeking strategems such as the
undetectable assassination of his rivals, the unexpected betrayal of his
friends, the unverifiable falsification of his evidence - and yet intuition
suggests that the representative individual, egoistic though he may be,
would nonetheless hold back from employing strategems such as these
because of a voice within that calls out to him to resist temptation lest
the price of excessive self-love be a painfully spoiled self-image. To
argue thus is not, abandoning the economist's approach to bureaucra-
cy, to retreat into the more traditional constructs of self-sacrificing
altruism, public service and the common good, only to say that shared
values can and do figure prominently in the bureaucrat's utility-
function and that it would be a gross over-simplification to take the
office-holder's objectives as being pay, perks and promotions, and
little else. The fact is that a social consensus which strongly condemns
options such as assassination, betrayal and falsification easily becomes
an integral part of the individual's consciousness; and where this is the
case, where the sensitive are compelled by conscience to conform, the
tension between the social and the individual in some measure
disappears. Buchanan, with Tullock, delimits the duality in the
following dictum: 'It is not from the benevolence of the bureaucrat that
we expect our research grant or our welfare check, but out of his regard
to his own, not the public interest.'89 Downs transcends the duality
through his appeal to goal-consensus: where both the society as a
whole and the sub-section of that society that resides in a given bureau
are united, say, in the condemnation of bribery, there is every
likelihood that the individual police officer will himself have
internalised that condemnation, and will in that way have made the
public interest in some measure congruent with his own. To act in
Organisations and Interests 131
141
142 Olson
4.1 METHODOLOGY
4.1.1 Self-interest
desire for the collective good and the most efficient means of getting it,
will always bring about the achievement of the group goal.'1 Given
self-interest, the opposite is, logically speaking, more likely to be the
case.
Olson places a great deal of emphasis on self-interest, but he also
concedes that a good case should not be pressed too far and that
'economic incentives are not. . . the only incentives'.2 He is aware, for
example, of the motivational force that inheres in belief and
belonging: 'Many nations draw . . . strength and unity from some
powerful ideology, such as democracy or communism, as well as from
a common religion, language, or cultural inheritance. ' 3 And elsewhere
he seems to suggest that other-regarding attitudes can be inculcated
and social pressures harnessed, even in very large ('latent') groups, via
the mass media: 'If the members of a latent group are somehow
continuously bombarded with propaganda about the worthiness of the
attempt to satisfy the common interest in question, they may perhaps
in time develop social pressures not entrely unlike those that can be
generated in a face-to-face group, and these social pressures may help
the latent group to obtain the collective good.'4 Olson points out that
an organisation must first exist (and, presumably, have attained some
minimal size) if it is to be able to finance such propaganda; but, given
that, his idea both of you watching me and of me watching me does
open the door to a somewhat wider perception of self interest than is
standard practice among economists, by introducing the case where
people act as //altruistically, in order thereby to purchase utilities such
as social acceptance and self-approbation. In such a case (because of a
desire, say, for prestige, respect or friendship) people act in such a way
as to be conspicuous contributors to the public good. Their behaviour
is fully compatible with the self-interest axiom and Olson clearly says
as much, pointing out that the very concept of internalised moral
norms has connotations of costs and benefits: 'Even in the case where
moral attitudes determine whether or not a person will act in a
group-oriented way, the crucial factor is that the moral reaction serves
as a "selective incentive". If the sense of guilt, or the destruction of
self-esteem, that occurs when a person feels he has forsaken his moral
code, affected those who had contributed toward the achievement of a
group good, as well as those who had not, the moral code could not
help to mobilize a latent group. To repeat: the point is that moral
attitudes could mobilize a latent group only to the extent they provided
selective incentives.'5
all) - but Olson's main point is clear, that collective provision at the
national level is likely to mean a supply of collective goods in the
determination of which self-interested and powerful corporate bodies
exercise influence disproportionate to their size and membership.
There is accordingly no reason for the parts to add up to a coherent
whole, or for national plan to reflect national interest, given that not ail
citizens, in the modern state, are equally well-placed to win the
concessions which they believe they require.
Self-interest and calculative rationality point, in the case of the
latent group, to individual abstention from collective action - in its
most literal form, to individual abstention from the act of voting:
'Though most people feel they would be better off if their party were in
power, they recognize that if their party is going to win, it will as likely
win without them, and they will get the benefits in any case.'21 Yet
collective goods are provided, even in non-market situations where
groups are large; and Olson, without departing from the fundamental
axioms of his model, is able to account for this phenomenon in terms of
two explanatory variables.
The first is coercion. In this case, and recognising that an
economising man 'has no incentive to sacrifice any more than he is
forced to sacrifice',22 each is compelled by authority to do his share.
Thus it is that some democracies make voting obligatory and that all
nations (democratic or not) deny members of the community
individual freedom of choice where payment of taxes is involved.
Olson extends his theory of coercion from the very large latent group
represented by the nation to smaller (but still latent) groups such as the
professional association in law or medicine, where membership in the
association is often a sine qua non for practising the profession.
Whether he would be prepared to extend his theory of authoritarian
compulsion from laws and entry-restrictions to embrace informal
social sanctions and the tyranny of the raised eyebrow is, as we have
seen, a possibility which he would indeed entertain, albeit with
considerably greater reluctance. Logically speaking, however, coer-
cion is coercion, however it is institutionalised, and that is the
significant point with respect to the predictive power of his model.
The second is the provision of 'selective incentives'. Here what
happens is that an organisation supplying a collective good (say,
political lobbying on behalf of an industry or an occupation taken as a
whole) also provides a stream of private goods which are separable
from the collective good and made available exclusively to members of
the group who have taken an initiative to become members of the club
Free Riders and Free Markets 157
told him (and they may not have told him the truth) that they joined
primarily in order to ensure continued provision of the public good:
the contributions of others, they seem to have reasoned, are
undeniably unpredictable, but the subscription to the CBI is low and
the gamble cost-effective nonetheless.26 Marsh then has this to say
about what he regards as Olson's exaggerated instrumentalism: 'One
might ask why any interest group continues to attempt to supply the
collective good if potential members only join to obtain selective
benefits. Why don't interest groups merely supply selective
incentives?'27
The criticisms both of Barry and of Marsh are directed in essence at
Olson's picture of man as a self-interested and a purposive being
seeking rationally to deploy scarce means in order optimally to satisfy
determinate wants (whatever these wants may in practice be). Neither
author would wish to deny that the individual does get involved in the
activities of prediction, calculation, rank-ordering and what Becker,
defining rationality, describes as the 'consistent maximization of a
well-ordered function, such as a utility or profit function'.28 What both
authors would want to suggest, simply, is that there is much in Fred
Hirsch's contention that any model which 'neglects individual
objectives that are associated with group values or group processes'
must by virtue of its very narrowness prove 'an inadequate explanation
of collective action'.29 Mancur Olson, as we have seen, would be
prepared to accept that such objectives can and do exist - objectives, to
name but three, not unconnected with identification (with a class, a
party or a nation as with a family or a church), attachment (where
commitment is the polar opposite to instrumentality), and a sense of
interconnected fate (as opposed to a balance-sheet of interlocking
interests). What he would add, however, is that a theory which
explains too much is no better than one which explains too little; and
that, to be specific, the incorporation of any driving force but
rationality of choice based upon personal self-interest tends to make
the theory of collective action tautologous, non-testable, and useless
for practical purposes. Motivation cannot be inferred from action and
is desperately difficult to discover at the best of times. Olson's
contention is, in view of the intense complexity of such motivation,
essentially a very modest one - that free riding is a real-world
phenomenon for the occurrence of which his theory is able to account.
Those critics who propose an alternative picture of man may be right or
they may be wrong, he would argue, but the fact remains that they
provide no alternative explanation of why in large groups a single
160 Olson
Consider the arresting case of two suspects, Jack and Jill, who are
guilty of a serious crime and known to be guilty. Being self-interested
and calculatively rational in their work, Jack and Jill took care to leave
behind no fingerprints, footprints, bits of clothing or other shreds of
evidence which could be used against them to secure a conviction. The
police have no option but to hope that one or both of the prisoners will
confess.
Jack and Jill are self-interested and calculatively rational, but so are
the police. That is why they put the two prisoners in separate cells,
interrogate them separately about the crime, deny them any
opportunity of communicating with one another - and offer each the
incentive of going completely free if he (or she) agrees to break ranks
and confess. The police do not need two confessions to convict two
criminals of a single crime and so they make clear that the concession is
open to one and only one defector. If both confess, neither goes
completely or even partially free and both serve the full sentence. If
neither confesses, neither is convicted - of the serious crime. But Jack
and Jill, as luck would have it, are also guilty of a less serious crime; and
for this second crime the police do have evidence sufficient to convict.
That being the case, the possibility of going completely free becomes
particularly attractive: even the shorter sentence for the less serious
crime, it is clear, is unlikely to be ranked by either Jack or Jill as
anything but inferior to no sentence at all.
Having presented each prisoner with the menu of choices, the police
Free Riders and Free Markets 161
then opt to play a waiting game and to give both Jack and Jill adequate
time to reflect on alternative scenarios and strategies such as might be
appropriate to a situation characterised by radical uncertainty and
interdependent outcomes. For Jack, the ideal payoff to his gamble
would be for him to confess while Jill refused to defect. For Jill the
position is essentially the same save that she would like the roles to be
reversed. Each has a private incentive to deceive the other, since in the
game which they are playing the prize goes to the nasty partner while
the virtuous partner receives the penalty. The police, meanwhile,
aware that Jack and Jill are both experiencing a strong temptation to
behave as individual self-interest would normally dictate, hope that
each will confess, which is to say that both will confess, which is to say
that neither will go free, which is to say that both will serve the full
sentence that is the proper punishment for the serious crime which
they committed. The police, most of whom would probably like to
believe that cheaters never prosper, will no doubt find it grimly
appropriate that both prisoners make an equal contribution to the
generation of what each would unquestionably recognise as his or her
own worst possible payoff. In some cases at least, it would appear, the
policeman's lot is a happy one. Not so that of the political economist
who said that 'It is not from the benevolence of the butcher, the
brewer, or the baker that we expect our dinner, but from their regard
to their own interest': his well-known eulogy of self-seeking conduct is
bound to have as hollow a ring to it for Jack and Jill as the echo of their
footsteps along the corridors of Pentonville and Holloway. After all,
they will reason, had they only ignored the advice of the Scotsman and
decided instead to act from benevolence - or as if from benevolence -
their situation would be vastly improved. Each would still be in prison,
but serving the shorter sentence for the less serious crime. Each would
prefer going free to serving the shorter sentence but would rank the
shorter sentence above the longer one. Each was driven by individual
self-interest to try for the first-best outcome and the direct result of
such selfishness is that both ended up with the third-best pay-off
instead. Each should therefore have refused to confess to the more
serious crime, served the shorter sentence for the less serious crime,
and accepted that second-best is preferable to third-best where
first-best is unattainable, //first-best is unattainable, of course - and
each knows that in certain circumstances the prize is there to be won.
Jack and Jill cannot both enjoy first-best. Either Jack or Jill, however,
can win the prize that both covet, imposing on the other the penalty of
third-best. Both prisoners have strong incentive to cooperate. Both
162 Olson
And yet the fact is that people do exist who restrain their dog from
fouling the footpath, who take the trouble to cast one vote among
many, who volunteer for military service in time of war and shop for
housebound invalids in a blizzard or a flood, who donate blood to
benefit unknown strangers and leave tips in restaurants they are never
likely to revisit, who tell the truth when selling a used car that the
vendor knows to be intrinsically as appealing as a rotten lemon, who
are prepared to assist a confused old lady to cross the road or to jump
into an icy canal to rescue a drowning child, who respond to public
appeals by saving water in a drought and energy in a balance-of-
payments crisis, who join a boycott by refusing to buy the agricultural
produce of a country with whose policies on racial issues there is
widespread discontent, who work diligently even when shirkers cannot
be indentified, who voluntarily declare all their sources of earnings for
purposes of income-tax even when contributors to the cash-in-hand
economy cannot be traced, who make gifts to churches and charities,
do not use public swimming pools while receiving treatment for a
possibly contagious disease, and never drop litter even when they are
absolutely certain that no one is watching. Such persons do exist,
however difficult it is to explain their behaviour-patterns in terms of
theories derived from the assumptions of self-interest and calculative
rationality. He who tells the truth is acting against his own self-interest
- since he could leave it to others to produce the public goods of
truth-telling and promise-keeping while, acting as a free rider on the
general atmosphere of trust and honesty, himself proceeding to
dispose of his own brakeless wreck at a vastly inflated price. He who
saves water in a drought is acting irrationally - since his wheat may
wither, his cattle may cease to give milk, his children may go hungry,
and still the net value of his sacrifice be no more than a drop in the
bucket. Yet such persons do exist, and if Jack and Jill are both among
them, then the prisoner's dilemma ceases to exist: neither confesses,
neither expects the other to confess, neither goes completely free, both
serve the shorter rather than the longer sentence, and students of the
Scotsman, rendered speechless by the apparent triumph of coopera-
tion over egoism, resolve in future to draw upon their Socrates
exclusively in connection with topics such as the theory of value on
which his opinions are crystal-clear.
Political economists such as Olson are able to derive their
observations and predictions concerning the probable direction of
collective action with a certain degree of confidence. That confidence
is not, as it happens, shared by all political economists. Doubters will
164 Olson
4.3.1 Convention
emerge, and for Jack and Jill to orientate their behaviour towards one
another with reference to established rules, ongoing processes, and
stable conventions. Such conformity to precedent undeniably restricts
their individual freedom spontaneously to take new initiatives. No one
but the most unaccountable of bookkeepers would, however, wish to
focus exclusively on the costs of convention without mentioned the
benefits.
The first and most significant of these benefits is coordination of
expectations and actions. Thus it is the convention to shop with pounds
in Britain, with dollars in the United States: both currencies are legally
available in both countries but merchants in each country have clearly
got into a rut which it is in the self-interest of would-be trading-
partners to respect. Similarly with market-days (each chooses Friday
because of the convention that all choose Friday). Similarly with
syntax, slang, spelling, jargon and accent (where he who wishes to
communicate and be comprehensible would be well-advised to opt for
the normal in preference to the idiosyncratic). Similarly with dress
(since the 'done thing' provides valuable assistance in selecting the
uniform proper for a military parade, a cocktail party, or a meeting of
the university convocation). Similarly with the right-of-way at an
intersection and the practice of driving on the left-hand side of the road
in a country such as Britain (where, as Sugden puts it, 'the rule that we
should drive on the left is self-enforcing': 'To drive on the right in a
country in which people normally drive on the left is to choose a quick
route to the hospital or the cemetery'). 1 In all of these cases the
adoption of a common convention (and, by implication, the rejection
of all alternatives and rivals to it) has the valuable property of serving
as a basis for legitimate expectations and reasonable predictions.
For the purpose of such standardisation, such convergence, such
imaginative anticipation, moreover, the medium is the message and, in
terms of actual content, one rule is as good as another. It is the rule and
not the content, after all, that ensures the requisite coordination of
expectations and actions. Thus it is, as Thomas Schelling explains, that
'any key that is mutually recognized as the key becomes the key':
'People can often concert their intentions or expectations with others if
each knows that the other is trying to do the same. Most situations -
perhaps every situation for people who are practiced at this kind of
game - provide some clue for coordinating behavior, some focal point
for each person's expectation of what the other expects him to expect
to be expected to do.' 2 What is important for purposes of social
orderliness is not the precise content of the convention that causes us
166 Olson
and reasoning from analogy. The fact that they are pre-existent to the
present and handed down from the past has the additional attraction to
authors such as Rawls and Buchanan, Harsanyi and Schelling, that a
particular decision made under their good guidance will have an aura
of fairness about it.5 Aura or no aura, however, the availability of
pre-existent conventions undeniably reduces the quantum of time and
effort that must be invested in making a concrete decision on a
particular issue - on which plane to save in an airport-emergency
where one must crash, for example, or on when to call off an expensive
search for a small craft lost at sea. Such procedural precommitment
permits of a saving of scarce resources and is in that way a valuable
benefit conferred by convention.
Convention is conservative, and that is its advantage. It permits Jack
and Jill, detained in separate cells without any opportunity for
personal communication, nonetheless to orientate their strategies
towards one another through reference to background knowledge and
practice; while it allows Romeo and Juliet, lost in New York City
without any prearranged meeting place, each to form the expectation
of most probably meeting the other at the place most frequently
associated in the surrounding society with the conception of people
meeting - namely, Grand Central Station.6 Convention also serves as
the star that guides the sailor in the case of Firm A and Firm B who,
aware that oligopolistic collusion via private dinner-parties is strictly
prohibited by law, rely instead on an established system of price
leadership and implicit territoriality which has performed tolerably
well, time out of mind. Their reliance on the tried-and-tested norms of
the status quo is fully rational: the prisoners cooperate, the lovers
meet, the competitors connive and all are demonstrably able to
manage their own respective interactions with success precisely
because of the conservative nature of convention which enables them
to extrapolate future practices from past.
Such extrapolation, needless to say, would become impossible in a
rapidly-changing environment; and it would for that reason be correct
to say that, just as the conservatism of convention imposes blinkers on
the kaleidoscope of infinite possibilities, so the dynamism of change
itself significantly restricts the efficacy of traditionalised practices. It is
in the rapidly-changing environment that the farmer nearest the source
is most likely to seize disproportionate amounts of irrigation water for
himself; the self-interested myopic to graze whole herds upon the
commons irrespective of the long-run consequences for himself and
others; the too-clever-by-half schoolmaster to question our spelling of
Free Riders and Free Markets 169
4.3.2 Morality
The shared convention, like the rules of hygiene, derives its legitimacy
from its efficacy - from the fact that, once established, it is in the
personal interest of each and every member of the group to adhere to
it. The appeal is to individual utility, the content is ethically
indifferent, and the unique action-clause is the rational perception of
self-interested man that the shared convention per se is infinitely
preferable to the normative confusion and combative beastliness
which, in the view of thinkers such as Buchanan, is bound to reign in its
absence. Given the fearful storm which is the alternative, any port is
welcome haven - in the view of thinkers who eulogise the shared
convention per se.
The approach of the moralist is somewhat different. No moralist
would deny that the ought-to-be can coincide with the is - or conceal
the fact that he himself would very much like to live in a society in
which this supremely desirable congruence had come to hold sway.
What the moralist would say, however, is that the concept of is-ness is
fundamentally different from the concept of ought-ness; and that the
latter is qualitatively superior to the former in every respect. The
moralist would accordingly wish to see his society's dilemma of
collective action resolved not simply through reliance on the shared
convention perse but on the shared moral convention in particular. He
would seek therefore to distinguish carefully in his own mind the is
from the ought-to-be and to search assiduously for potential sources of
ethical legitimation.
One such source is adaptation to environment as if guided by an
Invisible Hand. It is in a sense less bruising to man's self-respect and
pride in achievement if illustrations of spontaneous development and
automatic adjustment are drawn from fields of study other than the
170 Olson
life would disappear with it, since it would no longer have any
objective.'27
Durkheim would not hesitate to accept that isolated man is perfectly
capable of formulating conventions (the case, say, of Robinson Crusoe
choosing to lie on the beach in such a spot as to make the incoming tide
his alarm-clock). What Durkheim would deny is that isolated man is in
and of himself capable of converting those conventions, once
formulated, into specifically moral conventions, or of investing his
possibly very sensible rules of conduct with any genuinely ethical
legitimation. That task, Durkheim argues, can only be performed by
the authority of all over each - by society sui generis, an entity as
different qualitively from the individual persons and personalities who
make it up as a cake is different from a cupboard full of ingredients.
Thus Robinson Crusoe, Durkheim reasons, can as an individual
decide that drinking alcohol or smoking cannabis is not for him, but
cannot as an individual convert those actions into contraventions of the
moral code. The reason is simple: Crusoe is alone and without the
indispensable sounding-board of that shared approbation or shared
outrage which magnify the strength of the individual's perceptions for
no other reason than the fact that those sentiments are held in
common. The model is the football crowd or the political
demonstration (each whole capable of engendering in the discrete
parts feelings far more powerful than the single individual would have
rationally expected the matter at issue to produce); and, in
Durkheim's perspective, the crowd and the demonstration have a
great deal in common with the modern society where questions of
morality are concerned. Consider the case of a crime committed in a
closed community: 'Crime brings together honest men and concen-
trates them. We have only to notice what happens, particularly in a
small town, when some moral scandal has just occurred. Men stop
each other on the street, they visit each other, they seek to come
together to talk of the event and to wax indignant in common. ' 2 8 Their
individual reason, in such a case, may provide sound arguments
against cannibalism by consent or the allocation by auction-sale of
High Court judgements, but it is nonetheless their social solidarity
which alone has the power to transform the casual conversation into
the collectively-binding ought-to-be.
As in the small group, so in the large; and it is therefore Durkheim's
advice to the student of ethical legitimation that he should 'denounce
as a shallow ideal that narrow commercialism which reduces society to
nothing more than a vast apparatus of production and exchange',29
Free Riders and Free Markets 175
4.3.3 Sentiment
Consider the case of Romeo and Juliet, two young Mantuans who
become involved in collective action. Each was, no doubt, an
eminent'y attractive property on the marriage-market. Their families,
however, were not on good terms because of some long-forgotten
slight from which they, like the rest of us, derived great pleasure from
remembering. Romeo should, in the circumstances, rationally
speaking, have ranked collective action with Rosaline over collective
action with Juliet; while Juliet ought, upon mature reflection and in the
clear light of logic and calculation, to have opted to indulge in
collective action not with Romeo (who was Montague and thus the
bearer of a bad name) but with the Count Paris (who was not a
Montague, although the bearer of a name which to an impartial
auditor does not sound significantly better). Neither party in the event
behaved in a manner likely to recommend itself to the attention of the
personnel officer of a large departmental store in need of a chief buyer,
and both are obviously much to blame for ultimately provoking
unprecedented woe that could have been prevented had they only paid
more attention to marginal cost and marginal benefit at the initial
planning stage, but their conduct (however naughty it may appear to
the certified economist) is nonetheless comprehensible and explicable:
Romeo and Juliet were in love. Being in love, Romeo and Juliet acted
on the basis of unthinking impulses and emotive stimuli such as would
178 Olson
4.3.4 Sanctions
Adam Smith stated that it is not from the benevolence of the butcher,
the brewer or the baker that we expect our dinner. While one is
tempted to point out that one's butcher happens also to be the local
secretary of the Save the Children Fund, one's brewer organises trips
to the seaside for old-age pensioners, and one's baker doubles as a
sidesman in the village church where his son sings treble in the choir,
the lesson is clear enough - that it is self-love and not altruism which is
the prime mover in the economic market.
Life in the marketplace is not, however, the whole of human life, nor
self-love the sum total of the human sentiments; and few authors have
in fact done more to broaden the conception of human nature insofar
as it relates to collective action than did the Scottish eclectic himself.
Smith's point of departure is man's attachment to society itself: 'Man
. . . has a natural love for society, and desires that the union of
mankind should be preserved for its own sake, and though he himself
Free Riders and Free Markets 189
was to derive no benefit from it. The orderly and flourishing state of
society is agreeable to him, and he takes delight in contemplating it.'58
Man is sentimentally attached to society itself, he is keen to play his
own small part in it with the utmost propriety, and he is therefore
exceptionally sensitive to the reasoned judgements made of him by
well-informed others: 'Nature, when she formed man for society,
endowed him with an original desire to please, and an original aversion
to offend his brethren. She taught him to feel pleasure in their
favourable, and pain in their unfavourable regard. She rendered their
approbation most flattering and most agreeable to him for its own
sake; and their disapprobation most mortifying and most offensive.'59
It is evidently to nature herself that we are indebted for the fact that the
butcher does not jump the queue in order to bag the tenderest lamb,
that the brewer turns down his radio so as not to disturb his sleeping
neighbours, and that the baker goes to Weight-Watchers in an attempt
to harness laughter and praise to the plough of calorie-control. It is just
as well that nature makes no charge for the service which she renders to
collective action. We as a collectivity could never afford to pay her
what she is worth.
Social sanctions relate to shared conventions which they reinforce.
They are specific to a particular reference-group, whether large (the
nation, the race, the world) or small (the couple, the partnership, the
family). Where standards are undisputed and peers are sensitive, there
such sanctions are likely to be particularly effective. We condemn the
thoughtless man who carelessly drops litter in a public park for
polluting a common amenity which is not his private property. We
ostracise the intelligent woman who inexplicably refuses to marry an
intelligent man for reducing our country's potential stock of gifted
children through her irresponsible love-affair with an oaf. Doctors
refuse to share a table at a conference-dinner with a surgeon suspected
of prescribing dangerous drugs or of carrying out unnecessary
operations purely for pecuniary profit. Workers in a factory dispatch
to Coventry or some equally dreadful place an associate who only
returns to his bench when the foreman is actually supervising - but
reward with respect and the warmth of fellowship a team-mate who is
known not to be so diligent that he carries on working when the rest of
us go on strike; whose craftsmanship is qualitatively of so high a
standard as to reflect credit upon his brothers in the trade or mystery;
who always buys his round of drinks in a pub and who enjoys a
phenomenally healthy position in the blood-donation chart which we
have publicly posted on the notice-board in the canteen. We tax or
190 Olson
not invest in future tips beng paid to other drivers by means of a rude
word now (i.e. where there are no informal social sanctions), and does
so because he has internalised the social norm that such a tip is a
legitimate entitlement-and because, in the circumstances, he does not
want to see himself as the driver undeniably will, namely as a man who
has shown abnormal and unjustifiable meanness. Similarly, Mrs B tells
the whole truth in applying for life-insurance despite the fact that the
company only asks explicitly about her debt position (never more than
a few thousand on a single credit-card), her involvement in dangerous
sports (nothing but whist with the exception of hang-gliding and
parachuting), and her medical history (basically just the near fatal
accident two years ago when the Flying Scotsman suddenly presented
itself on a railway-line where she had chosen to have a lie-down): the
company knows nothing about the drink and the drugs, the
carelessness and the risk-addiction, but Mrs B knows and, voluntarily
declaring that she is accident-prone, she demands that a surcharge be
levied by the company lest the average premium ultimately be raised
by her reticence and the cost of her secrecy then have to be paid by the
healthy and the safe - a burden of guilt which no sensitive conscience
would wish to support.
Mr A is Jack, Mrs B is Jill. Each, within the confines of his or her
prison cell, will evidently experience a strong temptation to cooperate
rather than to defect. Each clearly wants to enjoy a good self-image
and to evade the discommodity of a spoiled identity. Both Jack and Jill
are model prisoners and a genuine credit to the corporate standards of
the shoplifters' guild; for both demonstrably manifest through their
behaviour-patterns the extent to which they are subject to social
sanctions operating both in the Mile End Road and within the confines
of his or her own mind. Their real dilemma, one is tempted to point
out, is that they will to that extent remain prisoners even after the Yard
has set them free. Too much socialisation is arguably as bad as too
little; and perhaps Jack and Jill might delicately be advised to take
their repressions and their guilts to a psychoanalyst (assuming one
could be found who did not deliberately exaggerate their neuroses in
order, being self-interested and calculatively rational, to keep them
longer as his patients). Looking on the brighter side, however, at least
Jack and Jill are likely to vote.
recognised that some people pay an arm and a leg for a ticket but that a
whole life is too much to spend on a single song. The rational Ulysses
survived - a state of affairs which must have bred within Penelope the
same gratitude towards the members of Ulysses' crew that any
representative wife would feel today towards a group of friends who
pocketed the car-keys of an inebriated spouse to prevent him
prematurely from meeting his siren. Penelope was right to feel
gratitude, but wrong to direct it towards the agents when it was in this
case so clearly the principal himself who deserved the praise. It was
Ulysses himself who consciously re-designed the parameters of his
environment in such a way as to make it subserve his authentic desires
and not his fleeting whims - as did Penelope herself, it must be said,
when she deliberately burnt the combination to the safe in which were
stored the chocolates and the alcohol. A few seconds on the lips, a few
years on the hips, she reasoned; and a woman cannot be too careful
when married to a man with more than a passing interest in sirens.
Most of us are familiar enough with the precommitment of
individual action that is exemplified by the hiding of the chocolates and
the alcohol, the contracting for binding in preference to drowning.
Few of us will in the circumstances have any difficulty in grasping the
nature of precommitment of collective action, democratically imposed
- the Olson case of coercion - so close is the latter case in its essentials
to the former. In the individual case, each of us, operating in isolation,
either acts as his own or opts personally to employ his own Dr Jekyll. In
the collective case, all of us, operating in unison, decide collaborative-
ly to hire a shared Dr Jekyll (the State, for example) and equip him
with all the legal sanctions he will require if he is effectively to carry out
our will. The two cases are in all but scale the same. Both reflect the
same rational aspiration to enter into binding commitments in advance
lest one subsequently becomes Hyde-bound by default. Most of us will
probably prefer the made-to-measure tailoring of the former case to
the mass-produced alternative of the latter one. Few of us, however,
would wish to assign to the collective case no legitimacy at all.
One mode of collective precommitment is typified by the
democratic imposition of licensing hours - a prudential move by all to
block off outlets for the undeniable temptations experienced by each
to spend more of his time and money in public houses than he would in
a sober moment rationally have chosen to do. Where licensing hours
are imposed in a non-democratic manner what they reflect most often
are the crusading attitudes of a ruling elite with respect to the
preferences and behaviour-patterns of the rank-and-file. Where
196 Olson
demand). In both cases it is possible for any given generation (or any
given capitalist) to eat its cake and have it, but all generations (or all
capitalists) cannot simultaneously achieve this goal.'77 Such inter-
temporal inflexibilities are a cause of expense in enforcement as well as
of resentment of injustice. They are an important reminder of the
undeniable fact that the considerable benefits potentially conferred
upon the collectivity by the good Dr Jekyll do not come cheap. Social
sanctions and the self-policing strategy are less expensive. They may,
however, be less effective. Or more effective. To establish the truth we
have no alternative but to question Jack and Jill. Jack and Jill joke that
they are not articulate because they have never enjoyed the benefits of
what Alfred Marshall called 'life in a residentiary university of the
Anglo-Saxon type' ,78 Then, keeping their own counsels, they return to
watching television.
4.3.5 Formalisation
With respect to the game of self against self, what this means is that
the weak-willed smoker, no longer able to shelter under the reassuring
blanket of State prohibition of all shops selling cigarettes within a
radius of 100 miles of the town centre, will have to purchase his own
protection by means of relocating his place of residence in such a way
as never to pass within 100 miles of the nearest emporium vending the
demon weed. Personal protection will be purchased in a similar
manner by the weak-willed but rational executive who ensures
(despite the inevitable delays and wastage of staff-time) that each of
the company's cheques bears several signatures besides his own; or by
the employee who asks that he be assisted to live up to his own highest
ideals via the substitution for the fixed salary (a system which he says
he finds an inducement to idleness) of payment by results in the form of
piece-rates, bonuses and commissions (a system which he says he finds
a trigger to that conscientious assiduity which was in him all along) - or
by the policeman who, inspired by the example of Ulysses bound (not
drowned) and of Penelope slimmed (not ginned), personally requests
frequent rotation and reassignment in a conscious attempt to insulate
himself from the temptations of the bribes to which the bobbie in the
rut is more likely to exposed. All of these instances refer to the game of
self against self and illustrate in what way individual precommitment
could be purchased by those individuals who individually demand such
precommitment - and (in contrast to the public good of collective
precommitment) by those individuals exclusively and by no others.
With respect to the game played against the non-ego opponent, the
position insofar as the purchase of protection against akrasia is
concerned is in its essentials no different. Thus weak-willed
oligopolists may sincerely lament the abolition of State-sponsored
price-controls (the privatisation, in other words, of the public good of
administered values) but nonetheless prove inventive enough to think
up a private sector expedient capable of delivering an equivalent
dosage of precommitment - as where each firm redesigns its product in
such a way as to make it unattractive to the other firms' principal
customers; or where the competitors buy large blocs of shares in one
another's equity in order to generate the countervailing power
requisite to return the industry to the inertia which it had previously
enjoyed. The free rider, due to privatisation, might actually cease to
ride free - as where donors know that one pint more or one pint less
makes little difference to the national pool of blood for transfusion
(and therefore vote with their feet to keep their vein firmly at work),
Free Riders and Free Markets 205
lost greater or less than the value of the product which contamination
of the stream makes possible.'84 Consider an airport which, at the cost
of noise-nuisance to its neighbours, facilitates the transport of foreign
tourists to that pub and of that drug to foreign markets, and in that way
assists home consumers to purchase imported commodities in
quantities not limited by exchange controls: 'It is all a question of
weighing up the gains that would accrue from eliminating [the] harmful
effects against the gains that accrue from allowing them to continue.'85
It is in the circumstances, Coase says, by no means an easy task to
identify guilty parties and innocent victims, or to decide towards whom
to to direct one's compassion. Of course the doctor is wronged where
the confectioner's machinery, operating on the other side of the party
wall from his surgery, causes so much noise and vibration as to render
consultations difficult if not impossible. But so too is the confectioner
wronged if made subject to an injunction compelling him to donate
tranquillity at the expense of his profits and perhaps of his business
(and thus of his nation, should we then 'secure more doctoring at the
cost of a reduced supply of confectionery products').86 To avoid
harming the confectioner would inflict harm on the doctor. To avoid
harming the doctor would inflict harm on the confectioner. The doctor
would not have been disturbed by the noise if the confectioner had not
worked his machinery. The machinery would have disturbed no one if
the doctor had employed the room in question as a laundry-room
rather than as a consulting room. Clearly, therefore, 'if we are to
discuss the problem in terms of causation, both parties cause the
damage'.87
The case is one of 'a problem of a reciprocal nature'.88 The solution,
in Coase's view, is in two parts. The first part is proper specification,
the precise definition of property rights; and that task is the
responsibility of Parliament and the law courts. The second part is the
opportunity to trade and bargain, to exchange a proportion or the
whole of those rights for a quid pro quo enjoying a higher subjective
valuation; and the function of arranging such mutually-satisfactory
swaps is normally delegated, in the non-planned market economy, to
the decentralised pricing system. The two-part mechanism means that
each player has two opportunities to win the prize, each opportunity
involving a different arena of social life. Thus, even if the judge were to
rule in favour of the doctor, the confectioner might then offer to
purchase from the doctor the right to continue to operate his
machinery - and the doctor might be happy to sell this waiver if the
bribe being paid by the confectioner were 'greater than the loss of
208 Olson
210
Collective Action and Economic Growth 211
5.1.1 Asymmetry
and this despite the undeniable strength of their common interests, are
simply not able to band together effectively in order to pursue
mutually-advantageous objectives or to block the machinations of the
powerful - who, for their own part, would all the while be involved
self-interestedly in 'choosing policies that, though inefficient for the
society as a whole, were advantageous for the organized groups
because the costs of the policies fell disproportionately on the
unorganized.'4 This unbalanced outcome can hardly be regarded as
Pareto-optimal in the sense of economics, or as just in the sense of an
ethical theory which associates fairness with impartiality. No other
outcome can, however, reasonably be anticipated in the asymmetrical
society where some individuals are fortunate enough to be in groups
and others unlucky enough to be on their own.
5.1.2 Stability
The result appears paradoxical: sales rise as the nation grows more
prosperous (save in the case of an inferior good), and it would seem
logical to assert that the group best serves its members' interests by
helping to boost national efficiency so as thereby to increase the size of
the national pie. The crucial point is, however, the importance of being
unimportant: each organisation normally representing only a small
percentage of national growth-producers, it must, if rational, be aware
of the extent to which free riders can fiddle while others work. The
rational organisation will in the circumstances, recognising that it
comprises less than 100 per cent of the nation and thus enjoys less than
100 per cent of the benefits accruing to its costs, deliberately eschew
the growth-producing scenario in favour of the redistribution-of-
shares strategy from which it promises itself the greater advantage. A
union representing, say, 1 per cent of the workers in a given industry
knows that it would have to make that industry at least 100 times more
efficient if its members (allowing for the 99 per cent of non-members
who reap where they never sowed) are to get back at least as much of
the productivity-gains as they contributed. The order is tall where the
group is small, and it should come as no surprise that such a union
therefore goes for the protective tariff or the make-work policy in
preference to the conscious contribution to the public good of
economic growth. Such a union reasons that it has no incentive to
make sacrifices for the whole industry (to say nothing of the whole
nation) but a considerable incentive to sacrifice the interests of the
whole to the interests of the part (the social costs imposed by the small
being small in any case). Such a union, in short, well illustrates Olson's
depressing conclusion that 'the great majority of special-interest
organizations redistribute income rather than create it, and in ways
that reduce social efficiency and output'.12
Inefficiency and slower growth result from the activities of
interest-groups that are so overtly 'distributional coalitions' in
purpose. So too do the ungovernability and social divisiveness which a
popular obsession with reallocating instead of with producing is bound
to breed and foster. Conflict over shares and the struggle to skew are
thus properly to be blamed not only for the waste of resources that
purely reallocative competitiveness invariably embodies but also for a
zero-sum nastiness that is in itself a public bad: 'The familiar image of
the slicing of the social pie does not really capture the essence of the
situation; it is perhaps better to think of wrestlers struggling over the
contents of a china shop.'13 One coalition lobbies government for
tax-concessions and subsidies, another erects entry-barriers that limit
Collective Action and Economic Growth 217
not therefore his wish 'to argue for the abolition of common-interest
organizations': 'The hypothesis that most common-interest organiza-
tions will have an adverse effect on rates of growth of national product
does not mean that such organizations are undesirable. They may
perform services that are not properly counted in the national income
statistics. For example, they ensure a more pluralistic political life and
thereby protect democratic freedoms. Labor unions make employees
feel less subject to arbitrary actions of particular supervisors.'22
Olson's illustrations do not, one is bound to say, entirely support the
distinction between economic and non-economic that he is drawing.
Unions, by reducing alienation at work and providing an outlet for
participative altruism, may well make precisely the productive
contribution suggested above; while democratic pluralism is as much
an economic as a political construct - literally so, as in the clearest
Galbraithian case of the monopsonist retailing chain facing a
monopolist manufacturer across the bargaining table; less directly so,
as where the Consumers' Association, the National Union of
Mineworkers, the National Farmers Union, the Association of
University Teachers, the Claimants' Union and the Royal College of
Physicians each strives to convince non-market rent-dispensers such as
elected politicians and appointed bureaucrats that its worthy members
and not its pleading rivals are in truth the most special of the special
cases.
Olson the economist tends to regard lobbying itself as a deadweight
element in the use of resources, its legislative outcomes more likely
than not to be reflected in slower economic growth; and draws
attention with conspicuous reservations to 'the fact that in the
provision of collective goods in democracies, the owners of inputs have
a say in determining how much is produced and in what way. Through
their political power, teachers, military men, contractors, construction
companies and others have an influence on the process of production
that probably reduces efficiency.'23 Olson the political economist,
however, tends to accept that it is in the very nature of democratic
pluralism for group to vie with group for non-market advantage and
administered privilege; and to focus his reservations not on the system
of bloc bargaining per se but simply on the imbalance in the chorus of
complaint, on the sad fact 'that some interests are well organized
(unionized laborers, doctors, farmers, the military-industrial com-
plex) whereas others (consumers, peaceniks, pollution victims, and
non-unionized white collar workers) are not', and that this inequality
of power 'leads to an inefficient mix of public outputs'.24 Meanwhile,
224 Olson
there is a third Olson, Olson the concerned citizen who believes that
problems of externalities and public goods become ever more
important 'as population grows and the economy expands', as
'urbanization and congestion increase': 'In the crowded urban
environment, there is a new type of interdependence that rarely
existed in the rural environment. If a frontier farmer should leave his
garbage in his yard, it would be nobody's business but his own. But if
the urban resident does this, there is a problem for the whole
neighborhood. The frontier community did not need to worry about
pollution, but the modern megalopolis does. Zoning laws are
relatively unimportant in the country, very significant in the city.'25 As
we grow, this third Olson is arguing, so we grow more interdependent,
so therefore does coordinated collective action increase in importance
relative to spontaneous individual action, so therefore do public policy
and State intervention come rationally to be demanded by enlightened
voters only too aware that without compulsion few of us would be
prepared to shoulder burdens from which it is others who derive the
benefits: 'We have no incentive to curtail those activities that bring
losses to others, but no cost to ourselves; and no incentive to undertake
activities that bring a gain to society, but no reward in the marketplace.
These activities must therefore be carried on by governments.'26
Always assuming that Olson the concerned citizen is correct in
predicting an increasing involvement of the State as economic growth
progresses, the onus must then shift to Olson the political economist to
propose improvements in the consultative mechanisms such that all
interests and interest-groupings are given a voice in the pluralist
democracy which is their own - the environmental lobby, certainly,
which speaks for beauty, but also the consumers who want cheap coal
and the miners who fear redundancies. Olson the economist never
denies that the outcome of these debates between coalitions can prove
to be a faster rate of economic growth (as where, say, pensioners
demanding minimum-cost eggs and cheaper chickens successfully rout
sentimental feather-bedders for whom battery farming and the
associated economies of scale are, strangely, not good enough): his
point is simply that mutual-benefit groups do not normally have this
beneficial impact. Olson the concerned citizen alters the fabric of the
discussion by reversing the line of argumentation: his point is not that
more groups mean less growth but that more growth means more
State. Since more State to the democratic pluralist normally means
more groups - 'they ensure a more pluralistic political life and thereby
protect democratic freedoms', as an exceptionally eminent pluralist
Collective Action and Economic Growth 225
and democrat has so succinctly put it - the task assigned to Olson the
political economist (that of reconciling the interests of discrete
coalitions and promoting the representation of the invisible and the
inarticulate) is, clearly, as valuable as it is daunting.
Should growth slip in the interests of consultation, of course, then
the theorist of organisations can always console himself with the
thought that the groups may in fact be performing 'services that are not
properly counted in the national income statistics', that we as a
community are in effect buying the services of democratic pluralism
and paying for them out of wealth we would have accumulated had we
selected some other political regime instead. Statistics, here as
elsewhere, present real problems.
The standard example in the literature of under-reporting and
imputing is the voluntary substitution of leisure for work. The case of
'income earned by not earning income' is not, however, the only
instance of a situation where national income statistics 'don't tell us
what we need to know': "They leave out the learning of our children,
the quality of our culture, the advance of science, the compatibility of
our families, the liberties and democratic processes we cherish.'27
What is needed for a proper estimation of national wellbeing are
socio-economic indicators that pick up the success of policies adopted,
and not merely the cost of inputs employed: 'We need information
about the condition of our society; about how much children have
learned, not about the time and money used for schooling; about
health, not about the number of licensed doctors; about crime, not
about the number of policemen; about pollution, not about the
agencies that deal with it.'28 The national income statistics in that way
too let us down, by relying too heavily on the measuring rod of money.
And there is more: 'They even misconstrue or neglect many values that
can readily be measured in monetary terms. When the criminal buys a
gun, or the honest citizen buys a lock, the national income rises. When
a smoke-spewing factory is constructed near a residential area, the
expenditures on that factory add to the national income, but so do the
expenses of additional house painting and cleaning forced on the
nearby householders by the soot from the factory.'29 The national
income statistics, in short, are, by Olson's own admission, a
not-entirely satisfactory index of national welfare or perceived
prosperity; and for that reason Olson's correlation of the growth in
groups with the growth of the GNP leaves the reader intrigued by what
he has been shown but also curious as to how he ought to react. The
null hypothesis is that the non-measured is so very important relative
226 Olson
5.1.8 Exclusivity
5.1.9 Complexity
over time. Olson makes the most that can be made of such proof as can
be found. It will be the task of this section to examine, under five
headings, the principal illustrations that Olson cites in support of his
argument.
is, there is one snag: it means that the evidence presented by the
mischievous totalitarian and by Olson himself must be treated as being
a priori of equal value. The epistemological sceptic welcomes such a
conclusion as proof positive that social science theories cannot
convincingly be falsified. The positive scientist returns to the drawing
board.
The second problem involves the relationship between political
upheaval and economic upheaval. Olson consistently argues as if the
former were a good proxy for the latter. Other observers will argue,
however, that the two modes of disruption are somewhat less
intimately linked - as where, say, the replacement of one ruling elite by
any other leads not to the disruption of existing groups and coalitions
but to the reinforcement of their privileges, the new rulers wanting not
so much to challenge the old economic order as to enlist its support in
the defence of the new political regime. Such encouragement to
interested organisations is particularly likely to obtain where their
activities are believed to have contributed significantly to the healthy
rate of economic growth already being enjoyed by the nation: where
powerful unions given legislative protection are believed to have
promoted high productivity of labour, where influential cartels
sheltered by tariffs and stimulated by entry-restricting patents are
believed to have placed themselves in the vanguard of risk-taking
innovation and technological advance, it would be the study of the new
set of citizen-pleasers not to threaten but rather to placate such
valuable allies in the pursuit of progress. Since Olson treats it as all but
axiomatic that pressure-groups resist change and are seen to frustrate
growth, he does not regard it as necessary to make a significant
theoretical distinction between those wars and revolutions which
threatened growth-furthering groups and those upheavals which
reinforced them. Even within the confines of his own model, however,
there is no reason to think that every major non-economic dislocation
will represent a serious breach with the economic status quo. Some will
(the case of the revolution where, in the interests both of economic
growth and political stability, the pillars of the ancien regime are
deliberately destroyed). Some will not (the case of the palace coup
where the faces at the top are changed but the overall structure of
interlocking elites and interests remains unaltered). The student of the
disruption-prone economy such as that of France would in the
circumstances be well-advised not to generalise as Olson does but
rather to proceed pragmatically, case by case.
Third, Sweden. The Swedish experience is a surprising one,
Collective Action and Economic Growth 235
had to elapse before the disruptions of war were able at last to confer
upon the South a relatively rapid pace of advance in a nation where the
overall rate of economic growth was slow. Low wages and the absence
of restrictive associations cannot, clearly, be the whole story:
'Something kept the rapid industrialization that occurred after World
War II from happening earlier', Olson himself has observed, 'and we
should not be completely confident of any explanation of postwar
southern growth until we know what it was'.18
Reflecting further on the question of delayed impact, Olson has
offered this account of the missing link in the chain of causation:
'Perhaps the most important reason why the South did not
industrialize faster between the Civil War and World War I I . . . is that
transportation costs were too high, at least in the earlier part of this
period. Transportation costs were not crucial for industries like
textiles, and the textile industry and some others like it had in fact
moved South earlier than other industries. Industries that needed to be
near the larger markets, which were not in the South, or which needed
to be near raw materials, often could not move South, and especially
not to rural parts of the South, to take advantage of the lower wages.
By the 1930s transportation costs had already fallen significantly, but
there was naturally very little investment in new plants anywhere
during the depression.'19 Other economists, finding it less convincing
than does Olson to explain growth in the 1960s with reference to the
disruption of cartelisation fully a century earlier, have pointed to other
causal variables which, in their view, account at least as well for
observed facts. Some of those variables are indisputably regional in
nature (the availability of surplus labour in low-productivity
agriculture, for example, such as permits of significant shifts in local
employment-patterns without simultaneously precipitating either a
noticeable fall in the output of the donor-sector or a noticeable rise in
the industrial remuneration).20 Other causal variables are, however,
potentially national (not primarily local or even state), as Frederick
Pryor has made clear in his critical assessment of Olson's thesis: 'The
relatively greater importance of defense industries in the southern and
western states (the "newer" states) had a strong impact on growth
during the decade of the Vietnam War, which Olson examined.
Further, given the locational pattern of committee chairmen in
Congress and the federal funds flowing to the states for the
construction of growth-inducing social-overhead capital, it is not
unusual that the southern and western states grew faster.'21 There is, it
would be fair to say, some disagreement as to the causes of rapid
240 Olson
growth in the South of the sixties, and as to the extent to which Olson's
thesis in fact explains that experience. What is not in doubt is Olson's
personal conviction that stagnation and stability are just around the
corner, that the normal American pattern of cartelisation and slow
growth will ultimately reassert itself even in today's fast-growing
regions - and that, 'in that sense, the South will fall again'.22
most or all of the gains from free trade without joining a customs union
simply by reducing its own barriers unilaterally, and would indeed
often gain much more from this than from joining a customs union.'24
The customs union by itself was not the principal reason for the
formation of the EEC. Nor did the subsequent trade creation
represent the principal cause of the rapid economic growth to which
the creation of the Community rapidly led. The principal cause in
question was the disruptive impact upon the distributional coalitions of
the process of jurisdictional integration. Cartelisation is impeded
internationally by differences in language and culture, as well as by the
larger pool of competitors to which the abolition of tariffs, quotas and
exchange-controls gives access. Lobbying is discouraged by the
difficulties of securing special-interest legislation on a supranational
basis: clearly, 'if a Common Market could put the power to determine
the level of protection and to set the rules about factor mobility and
entry of foreign firms out of the reach of each nation's colluding firms,
the economies in question could be relatively efficient'.25 Price-fixing
is challenged by multi-national competition, and the same may be said
of wage-fixing as well: a union which succeeded in imposing inefficient
working-practices or an abnormally high level of pay upon home
producers would be rewarded not merely with redundancies as foreign
interlopers captured its markets, but perhaps also with wholesale
shut-downs as domestic capitalists transferred their resources
elsewhere within the single j urisdiction. All of which leads Olson to the
conclusion that the formation of the EEC contributed significantly to
the economic growth of the Six (the number of members in the years to
which his evidence refers) in a manner which would not easily be
identified by the non-institutional, non-dynamic methodology of the
textbook neo-classical.
economist conjecturing that girls are married out in order to limit the
size of the group that shares in the assets and the benefits. Other
theorists will no doubt wish to bring to the analysis of inter-
generational mobility a logic that is less material and more spiritual in
nature. Their right to employ an alternative logic simply cannot be
denied them even by the most enthusiastic of Olson's followers; for the
truth is that there is no known way of collecting the requisite evidence
on historical motivation.
Second, apartheid in South Africa. As in the case of caste, for
apartheid too Olson finds an economic explanation. Mine-owners
needed labour and sought to recruit it from low-waged pools such as
indigenous Africans and indentured Asians. Well-paid white workers
resented this competition and there were strikes, leading to colour-bar
acts and apprenticeship-rules such as, by excluding non-whites from
skilled employment, raised pay for those allowed access to the trade
and grade: thus did left-wing unionists make common cause with
racists and conservatives in an attempt to pass on to the consumer the
burden of their benefits. The blacks were not pleased with these
arrangements. Neither, however, were the employers, all too aware of
the extent to which discrimination and demarcation kept wages
artificially high, eroded their profit-margins, and made it difficult for
them to keep up with foreign competitors. Employers in South Africa
are fully aware of the fact the 'employers could profit by hiring the
low-wage victims of discrimination', that 'firms that refused to do so
would eventually be driven out of business by their lower-cost
competitors',29 and that the apartheid system is simply another case
where distributive inequities and allocative inefficiencies are brought
about by the power of interest operating in non-free markets. Like the
consumers and the blacks, it would appear, the employers in South
Africa are led by the logic of their economic situation to demand an
end to the group privileges of the white workers - and the white
workers vociferously to defend the rigidities, the inflexibilities and the
barriers from which they derive such outstanding rewards.
Visible differences, whether in South Africa or in any other society,
both result from in-breeding and serve to encourage its perpetuation:
'It will be far easier for a racially, linguistically, and culturally
distinctive group to maintain a multigenerational coalition. The
linguistic and cultural similarities will reduce differences in values and
facilitate social interaction, and . . . this reduces conflict and makes it
easier to generate social selective incentives.'30 Endogamy and racial
purity are valuable tools in the hands of a special-interest group bent
244 Olson
ployed and the employers is the workers with the same or competitive
skills.'38 Existing workers have accordingly formed themselves into
cartels, lobbies and similar organisations devoted to the exercise of
collusive pressure in defence of present-day privilege. Members of
each coalition have a strong incentive to defend the public good of the
non-competitive wage; the unemployed, impressed by the artificially
inflated levels of remuneration, are motivated to be exceptionally
choosy; and the stagnation that is engendered by the rational calculus
both of the ins and of the outs is accentuated by the crowded agendas
and decision-making lags of all large groups.
Clearly, 'it takes a special-interest organization or collusion some
time to go through the unanimous-consent bargaining or constitutional
procedures by which it must make its decision';39 and to the
inconvenience of postponement must be added some acknowledge-
ment of the cost of change. Time invested being a scarce resource, it is
only to be expected that groups will economise via rigidity in nominal
values, delegating to the residual accomodation of real variables the
onerous task of the sensitive response. Collective bargaining
agreements in the United States are normally concluded for three
years at a time, spot values in competitive markets need last but a few
seconds: 'Wage flexibility appears to be particularly great in
temporary markets where organization is pretty much ruled out, as in
the markets for seasonal workers, consultants, and so on.'40 Faced
with the choice between low pay and no pay when recession reduces
demand, it is at least arguable that workers will rank rationing by price
above institutionalised rigidities. So apparently, does Mancur Olson,
whose conclusion on the Keynesian approach to stabilisation policies is
unambiguous: 'Since inadequate demand is not the main or ultimate
source of involuntary unemployment, continuous, fast-changing
demand management with fine tuning does not make sense.'41 Even if
the authorities had the knowledge and the techniques requisite for the
adjustments, Olson is arguing, what is really needed is not so much an
increase in total demand as a decrease in the power of special-interest
organisations to impose the tax of fixprice - and therewith of slow
growth - on the national collectivity of which they are a part.
Olson says of his Rise and Decline of Nations that 'the present book is
an outgrowth of The Logic of Collective Action and in large part even
Collective Action and Economic Growth 247
an application of the argument in it'.' Indeed it is; and it will be the task
of this section to demonstrate the relationship between the more
empirically-orientated investigation into the impact of distributional
coalitions upon differences in growth-rates on the one hand, the more
abstract and theoretical account of the formation and cohesion of
groups of different sizes on the other. Our conclusion will be that
Olson's insightful blend of the game-theoretic orientation with the
historico-developmental approach, his synthesis of the cultural values
of the sociologist with the State intervention of the political scientist
and the cost-benefit individualism of the orthodox economist, makes
his work genuinely novel and original - and valuable, even were it
nothing else, as a useful corrective to the over-simplified theories of
competitive equilibrium that so often divert the attention of the
non-institutional economist from an appreciation of the real issues.
Olson at one point asks the following question: 'Why complain
vociferously about the rapidly increasing and harmful influence of
government and the perniciousness of labor unions, but then build
macro models on the assumption that the economy is essentially free of
governmentally or cartelistically set prices, or is even perfectly
competitive?'2 Economists whose primary concern is real-world
relevance and not merely elegance of expression are morally bound to
answer Olson's important question, even if they themselves do not
happen to accept the specific theoretical alternative that forms the
substance of his two contributions to the theory of collective action. It
is with the integration of those two contributions into a unified whole
that the two parts of this section are concerned.
rheumatism'9 which freedom of trade does not touch, and these it must
be the task of public policy to make less inflexible and more
responsive. The labour market is an obvious instance of such an area;
and that is why Olson, reflecting on the unhealthy mix of ingredients
(ranging from minimum wage laws to social conventions stigmatising
wage-cutting unions by way of the settled level of aspirations and the
economic cost of revising decisions) that combine to produce the
unwholesome dish of involuntary unemployment, is moved to declare
that 'the most important macroeconomic policy implication is that the
best macroeconomic policy is a good microeconomic policy. There is
no substitute for a more open and competitive environment. If
combinations dominate markets throughout the economy and the
government is always intervening on behalf of special interests, there is
no macroeconomic policy that can put things right.'10 There is in the
circumstances a certain irony in Olson's declaration that 'macroecono-
mic policies by definition apply to the whole of an economy - a good
macroeconomic policy is a public good for the relevant economy':'' a
good macroeconomic policy in the sense of Olson is, after all, nothing
other than a good microeconomic policy, where a good microecono-
mic policy is nothing other than the elimination of special-interest
legislation such as benefits the parts while victimising the whole.
The perspective of the nation as a club thus serves ultimately
strongly to recommend State intervention with a negative sign to the
attention of a rational collectivity bent on the acquisition of the public
good of rapid economic growth - as is borne out by the historical
evidence on progress without direction; 'If the analysis in this book is
right, the growth in Germany and the United States before World War
I was more the result of a widening of product and factor markets than
it was of any special promotion or plan.'12 Olson on the public good of
rapid economic growth is clearly in favour of competition rather than
control - an author, in effect, who would seem to be all but echoing the
views of the celebrated Scotsman who wrote as follows about the
wealth of nations: 'Every system which endeavours, either, by
extraordinary encouragements, to draw towards a particular species of
industry a greater share of the capital of the society than what would
naturally go to it; or, by extraordinary restraints, to force from a
particular species of industry a greater share of the capital of the
society which would otherwise be employed in it; is in reality
subversive of the great purpose which it means to promote. It retards,
instead of accelerating, the progress of the society towards real wealth
and greatness; and diminishes, instead of increasing, the real value of
the annual produce of its land and labour.'13 Olson on the public good
252 Olson
does have its own social life, the desire for the companionship and
esteem of colleagues and the fear of being slighted or even ostracized
can at little cost provide a powerful incentive for concerted action.'19
Even, therefore, if the small group does happen to have the edge over
the large one in areas such as frequency of interaction and
homogeneity of membership that keep down the costs of colluding, it
would evidently be wrong to write off all latent groups as powerless - as
incapable, in other words, of entering into distributional coalitions
aimed at redistribution of income rather than at growth of production.
The large group alongside the small, it must be concluded, is to be held
responsible for that over-indulgence in transferring to the detriment of
creating which is so significant a cause of slower economic growth in
the more stable political democracy.
The Logic of Collective Action complements the Rise and Decline of
Nations by providing a theoretical explanation for the decline and rise
of groups. The earlier book also complements the later one by
reminding the reader of the extent to which the public good of growth
might be under-provided not because of excessive grouping but
because of that inadequate coordination which results when groups fail
to form. This central paradox of collective action is well illustrated by
Olson's example of 'how involuntary employment, and also deep
depression, can occur even when each decision-maker in the economy
acts in accordance with his or her best interests':20 individual
self-interest and individual rationality evidently do not bring about the
full employment payoff despite the fact that it is generally regarded as
optimal by all, and for this failing not so much the strength of
decision-makers as their dispersion and discreteness is very much to
blame.
Olson, it is clear, could have proposed the banding together of
isolated atoms into nationwide encompassing unions as a means of
accelerating the speed of decision-making (in response, say, to a
deflationary stimulus) and of reducing what monetarists call the
'natural rate' (by ensuring that relative pay is not affected by cuts in
absolute rates); and, a national and permanent prices and incomes
policy being capable as well of delivering the same mix of flexibility
and coordination, he could even have opted for the strong social
democratic option of increased State direction such as he is only too
pleased to champion in the case of externalities such as congestion and
public goods such as defence. Olson could have opted for dirigisme.
Where groups and growth are concerned, however, the fact is that he
opts instead for the free market - hardly Pareto-optimal in the
Collective Action and Economic Growth 255
259
260 Hirsch
intrinsic utility yielded by the thing consumed but also on its symbolic
function within the consumer's reference-group; for 'a part (but only a
part) of satisfaction from positional goods relates to their scarcity as
such, implying criteria of status that are inherently comparative'.2
Both Veblen's theory of 'conspicuous consumption' and Duesenber-
ry's 'relative income hypothesis' refer to cases of social scarcity and
remind us that economic growth need not imply increased happiness to
the extent that relative rather than absolute deprivation is concerned.
The concept of interdependence applies not simply to consumer
goods, moreover. Top jobs too, for instance, are a scarce social
resource, for they serve as desirable means to the socially-valued end
of high status: 'Even if you don't like performing as the boss, you may
still want to show that you can, that you can have and do what others
cannot have and do'. 3
Second, interdependence of decisions made. Turning from consid-
erations of social status to those involving purely individual utility, we
once again encounter the problem of social scarcity, a dimension of
excess demand over supply related not to the production of final
utilities but to their absorption: 'The value to me of my education
depends not only on how much I have but also on how much the man
ahead of me in the job line has. The satisfaction derived from an auto
or a country cottage depends on the conditions in which they can be
used, which will be strongly influenced by how many other people are
using them'.4 Private consumption has in truth an inevitably social
dimension in that the sum of individual decisions made differs
substantially from that outcome that might reasonably have been
anticipated had we focused exclusively on individual actions in
isolation; for 'what each of us can achieve, all cannot'.5
The implications of the adding-up problem are as follows:
Firstly, reduction in amenity-value. Whilst I as an individual might
be able to drive my car on a congestion-free highway to my weekend
retreat surrounded by unspoiled countryside, I might nonetheless as a
social actor be unable to do so where in a growing economy more and
more people have cars and crowd the roads in an attempt to reach
similar retreats in countryside progressively more overbuilt and
aesthetically less pleasing.
Secondly, inflation. Economic growth is accompanied by a rise in
the price of positional goods as part of the process of allocating limited
supplies in conditions of excess demand. This in turn means a
regressive windfall gain to current owners of scarce commodities, who
acquired them before rising standards of living and the massification of
Social Limits and Collective Action 261
supply of material goods per hour worked means that 'time becomes
scarcer in relation to goods',1 men are under pressure 'to do more
things in - and at - the same time' ,2 and time-saving goods and services
are developed as a means (a form of defensive consumption) of
economising on the scarce resource of time. Since more time is needed
for consuming more material goods, and since a further quantity of
time is wasted in 'the scramble to acquire larger shares of fixed
availabilities',3 there is a decreased quantity of time available for the
time-consuming activities of sociability and friendliness (including the
search element of starting contacts which may not 'pay off).
Second, a market economy enlists and legitimates individual
self-interest and focuses it on monetary exchanges. Commercial
advertising, for example, directs its appeal to the consumer's greed
rather than to altruistic concern for the welfare of unknown strangers
('Commercial advertising comprises a persistent series of invitations
and imperatives to the individual to look after himself and his
immediate family; self-interest becomes the social norm, even duty');4
and the blandishments of advertisers are reinforced, albeit for
different reasons, by the consumerist movement of Ralph Nader and
others (where 'the individual is urged to secure maximum value for
money for himself or herself. The approach is to the individual as
maximising consumer, rather than as cooperating citizen').5 Simul-
taneously, at the same time as material prosperity and consumption
increase in importance, so contact, concern and sociability reveal
themselves to be inferior goods; for they 'do not, by their nature, have
the character of private economic goods: which is to say that the costs
and benefits of specific actions do not fall primarily on those
undertaking them.'6 In a closely-knit community, bonds are those of
reciprocity and mutual aid (as where gift and counter-gift directly
imply one another, even if in the long run rather than the short run -
the case, for example, of a lifetime friendship) and/or affects (as
where, for emotional reasons, the partner's happiness adds to one's
own rather than being irrelevant to it in the way that the exchange
model presupposes). In a more loosely-articulated and mobile society,
however, the gift is unlikely directly and bilaterally to yield a
return-gift to the donor (since one has increasingly to deal with
unknown strangers), contacts are in general too casual to generate
lasting ties of mutual sympathy and genuine concern, and people find it
tempting - and rational - to behave in the manner of free-riders with
respect to public goods and to seek to take without giving.
The implications of moral decline are as follows.
264 Hirsch
which can only be dealt with on a collective basis, the very selfishness
which gave birth to those externalities is now acknowledged to extend
to the political market as well, at least in the Downsian economic
approach to political institutions that was examined earlier in this
book. According to that approach, the consumer shops for a political
leader with desired characteristics (which nowadays, as already noted,
are increasingly likely, in the Hirschian model, to include a preference
for the individual and the specific as opposed to the collective and the
general) and the producer seeks to match policies supplied to policies
demanded purely so as successfully to compete in the marketplace for
votes (with the result that, precisely because it is in the interests of each
citizen to do what is not in the interests of all, politicians will fear to
tackle the adding-up problem lest this harm their personal promotion
prospects). More generally, corruption and abuse of power are to be
expected from politicians interested exclusively in the maximisation of
their own utility; for honesty and a sense of responsibility repose on
moral absolutes which both pre-date exchange society and are the
precondition for it, but which are increasingly being threatened by the
utilitarian perspective and the substitution for morality of rational
self-interest. Should judges and politicians truly come to regard
themselves as merchants selling their services to the highest bidder,
then the 'logical error'16 in the utilitarian system becomes immediately
apparent: in a world where there are no higher values than
market-determined costs and benefits, there the market system itself
becomes unstable - since even private property itself is then not
secure from 'the first entrepreneur to be able to raise enough credit
to buy the judge'.17
Early liberalism (the liberalism, for instance, of Adam Smith) 'was
predicted on an underlying moral-religious base'18 which constrained
self-interest by ethics as rigidly as others have said it ought to be
constrained by laws and the police. Christianity, for example, enjoined
altruistic behaviour, and this was a good thing: 'While such
cooperation can, in some cases, be replaced by coercive rules, or
stimulated through collectively imposed inducements to individuals'
private interests, this will rarely be as practicable and efficient as when
it is internally motivated'.19 Christianity, moreover, provided external
legitimation for absolute values, such as devotion to duty, restraint of
passion, service to the collectivity, truthfulness and honesty, and these
values then become public goods for the whole community - a useful
spillover benefit since they are also 'necessary inputs for much of
economic output'20 in a mobile, anonymous, large-scale society where
Social Limits and Collective Action 267
measure of the 'bads' associated with, say, pollution; and yet, just as
'expenditure on extra laundry services made necessary by a smokier
atmosphere'5 only negates a previous deterioration in individual
welfare and merely restores the status quo ante, so additional
education acquired solely 'so as to safeguard one's access to a
particular job at a time that general education expansion is raising the
level of required credentials'6 ought also to be netted out of value
added so as to avoid double counting. All human activities do not yield
satisfaction to oneself (the case of defensive consumption in the form
of, say, extra time wasted in getting to work, the concomitant of the
need to dwell in increasingly distant suburbs so as to enjoy constant
benefits in terms of amenity); some activities generate dissatisfaction
for others (the case of road-congestion); and a reconsideration of the
link between statistical value added and psychic pleasure supplied
(involving the development of additional social indicators) is urgently
needed.
More generally, such knowledge as we have concerning social limits
to economic growth ought to be more widely disseminated, so that
members of the public come to appreciate the threat to individual
welfare implied by the new adding-up problem and the decay of the
moral nexus. One by-product of such awareness is in turn likely to be
greater scepticism with respect to salesmanship, and this is a healthy
development. After all, 'to the extent that marketing and advertising
appeal to individuals to isolate themselves from . . . group or social
effects - to get in ahead or to protect their positions - they are socially
wasteful. They are then also socially immoral on the mundane level of
the morality concerned with social stability and consistency. If all are
urged to get ahead, many are likely to have their expectations
frustrated.'7
At the level of action, there is a need for explicit central coordination
of objectives in the field of positional goods, where the discrete,
decentralised, piecemeal, marginal adjustments of the market
mechanism simply cannot take into account the interactive effects of
combined decisions and where each individual in consequence ends up
with a social environment significantly different from that which he
would have preferred. One course of action which the State can take is
land-zoning so as to restrict access to the countryside for purposes of
constructing new suburbs (and thus to prevent suburban sprawl and
protect scenic beauty). Another course of action is social provision of
goods and services in areas where all individuals benefit but no single
individual can make the relevant rational decisions, as in the case of
Social Limits and Collective Action 269
awoke to find Jill eating fish and chips on his previously secluded
beach, of Tom's declaration when his breakfast toast came with the
traffic jam caused by Dick and Harry racing about on noisy Vespas and
crowding the streets of the City with the hoipolloi. No one wants to be
included in a crush. But, then, no one wants to be excluded from the
benefit that caused the crush. There's nowt so queer as folk.
In cases where positional goods do exist, action does itself in some
cases generate the necessary reaction and set into motion, without
State intervention, forces tending automatically to check the abuse.
Hirsch himself gives two examples. The first concerns roads where,
should access be left unregulated, 'the increased supply then entails a
reduction in quality, in the sense that a congested road is of lower
quality than a clear one, which is a restraining influence on demand.
The classical example of this process in economic literature is the
crowding of a new highway that proceeds to the point at which travel
along it is no faster than on the old road.'12 The second concerns top
jobs and associated differentials: 'Some responsiveness in relative
salary levels to shifts in potential supply and demand undoubtedly
exists. The greater expansion in supply of college graduates in the
United States in the 1950s and 1960s eventually led to a surplus, and
between 1969 and 1973 the excess in average mean income of male
college graduates over high school graduates was reduced from 50 to
41 per cent.'13 Hirsch himself, as is shown by these two examples, was
evidently aware of the power and potential of self-regulating
corrective mechanisms unaided to diminish the attractiveness of
positional goods. One might well wish to point out that allocation by
price would fulfil the same function with respect to beaches and roads;
and that entry-charges more closely attuned to supply and demand
could even reduce waiting-times at the Tower of London.
More fundamentally, perhaps, any reference to homeostasis raises
important question concerning a possible elasticity of substitution of
material for positional goods. On the one hand we have the
mass-produced article, cheapened by economies of scale and
improved out of all recognition by the dynamic of competition and the
Schumpeterian entrepreneur in a genial mood. On the other hand we
have the positional good, its price rising more rapidly than the rate of
inflation, its amenity-value sinking as the trickle-down of chauffeur-
driven limousines increasingly prevents any from trickling past. In
such a situation (although Hirsch does not explore this possibility),
many if not most consumers would be tempted to substitute the
loft-conversion for the Rembrandt original, the complete video-
Social Limits and Collective Action 279
library of Doris Day films for the tranquillity of the country cottage, to
an extent that would have been inconceivable had relative prices
remain unaltered in the face of changes in the respective relationships
between supply and demand. The automaticity of the self-regulating
mechanism will not, needless to say, have the force of the self-evident
ought-to-be for all observers - many of whom will warn, as Schelling
puts it, that equilibrium emphatically does not mean that 'something is
all right': 'The body of a hanged man is in equilibrium when it finally
stops swinging, but nobody is going to insist that the man is all right.'14
Desirable or not desirable, a realignment of relative prices as between
the material and the positional sectors undeniably generates very
strong temptations indeed to alter one's expenditure-patterns. Should
those temptations then be translated into actions, the conclusion to be
reached is that the market system already provides its own
turning-points on a more extensive scale than is envisaged in the work
of Hirsch.
Naturally, it might be objected that the existing system involves
waste and frustration, and is for those reasons less acceptable on
philosophical grounds than would be the administered alternative. Yet
Hirsch's approach both to waste and to frustration is in truth
problematical.
Regarding waste, Hirsch is compelled by the logic of his arguments
to say why this is a bad thing, but only implicitly does so - when he
rejects Galbraith's idea of the 'revised sequence' and defends
economic growth in terms of consumer sovereignty, non-manipulated
authentic desires, and genuine non-satiety. Such a defence of
economising on the grounds of perceived scarcity does, of course,
close the door to the argument that a viable alternative to recklessly
expanding supply might be ascetically reducing demand (possibly via
social control of advertising, on which Hirsch blames - not without
internal inconsistencies - at least part of our contemporary commodity
fetishism). Slower growth is an established policy-option in the
economics of depletable (natural) resources but it is not an option
which Hirsch is able to incorporate in view of his acceptance that even
Crosland's 'working-class constituents' should not be denied their
holidays in Majorca, let alone their Vespas, merely because of the fact
that growth makes ever more acute the problem of positionality.
Indeed, Hirsch, writing not in the environment of 'You've never had it
so good' which was that of Crosland and Galbraith in the 1950s and
1960s but against the more sombre backdrop of high unemployment,
deindustrialisation, and the revolution of falling expectations which
280 Hirsch
was the experience of the mid-1970s, might usefully have said a good
deal more about the extent to which slow growth is itself an
independent cause of waste - as where, say, the girl graduate
compromises on a secretarial post because slow or zero growth means
ceteris paribus that the supply of attractive jobs is not as great as she
had anticipated. The Hirschian world is perhaps best understood when
seen as a world made up of precisely such compromises, as a
transitional world in which utilities previously assumed to be material
(paid employment, let us say) now rapidly become positional in the
wake of some unexpected economic shock (the fourfold rise in the
price of OPEC oil in 1973, for example), a sad world in which people
have not yet learned to live with slower growth or faced up to the fact
that their prospects are somewhat less enticing than previous
experience had led them to expect. Slow growth causes waste, both in
the case of the girl graduate who takes a job which underutilises her
skills and in the case of the school-leaver who is unable to find a job at
all; and the stagnation is exacerbated where the macroeconomic fall in
total demand occurs at the same time as a microeconomic upheaval in
the techniques of production. Even where automation accompanied
by technological change ultimately creates as many jobs as it destroys,
there is no doubt that old human capital must be scrapped and new
human capital installed. That being the case, it is bitterly ironical that
Hirsch, rather than focusing on the potential of training and re-training
schemes for reducing wastage of human capital and stimulating the
rate of economic growth, should have had far more to say about the
paperchase and the screenings - about education as waste, in other
words -than he did about the personal liberation and the proper start.
Few readers will be entirely in sympathy with Hirsch's reluctance to
draw a clear qualitative distinction between that waste which he
associates with the process of competitive educational upgrading and
that waste which he identifies with the cost of reaching increasingly
distant country cottages. Both the extra year at university and the extra
hour on the motorway are, by Hirsch, impounded in the 'deadweight
element'15 of defensive consumption, and yet few readers will be
entirely willing to accept that the two phenomena are not significantly
different. No one regards the extra hour on the motorway as anything
other than a means to an end which cannot come too soon - but many
students regard the extra year at university at least in part as a valued
consumer good and a liberating experience in its own right. No one,
moreover, would say that the extra hour on the motorway was likely to
make his nation better-off at some time in the future - but many
Social Limits and Collective Action 281
educators and economists would say that the extra year at university
contained a significantly greater productivity-boosing component than
would, to take an instance at random, the well-known practice of all
standing at once on tiptoe. A growth-conscious government anxious to
reduce waste would do well to tax rather than to subsidise the quaint
but uneconomic custom of tiptoe-standing. A growth-conscious
government anxious to reduce waste would be foolish indeed if it
applied the same measures in the case of education.
Regarding frustration, Hirsch presents us with an image of a human
nature so flawed that even a white rabbit, were he to retrain as an
economist, would have no option but to declare that mankind only gets
what mankind deserves. It is one thing to complain of physical
crowding, the rabbit will point out, and quite another to bemoan the
fact that one has been overtaken in the status-stakes by a better or a
luckier contestant. An extra hour on the motorway, an extra year at
university - persons who suffer these unwelcome disamenities, these
frustrating diswelfares, are the innocent victims of the tyranny of small
decisions and the legitimate object of social endeavours orientated
towards releasing them from their unexpected prison. The expensive
Angora cat bought to impress, however, the hideous diamond
necklace designed to out-dazzle the Joneses', the inconvenient rural
retreat acquired exclusively as a means of putting pecuniary prowess
on public display - persons who enter into zero-sum games of which
these counters are the chips, the rabbit will say, are in a somewhat
different position where frustration is concerned; for persons who are
attracted into struggles for dominance by jealous emulation and
aggressive competitiveness ought to have the foresight to realise that
they might lose as well as win, whatever the rules of the game and
however small (or large) the prize. Put in other terms, the white rabbit
will conclude, where positional goods are sought as status symbols
rather than exclusively because of their own intrinsic properties and
characteristics, the prison in which mankind is trapped is one which is
endemic to the human condition. Fred Hirsch himself says as much,
speaking of top jobs - a commodity which is in demand precisely
because its consumption is conspicuous rather than promiscuous.16
Jack will want to defeat Jill, Jill will want to defeat Jack, and for that
reason the frustration of the victim - the counterpart to the distinction
of the victor - is a function not of sustained economic growth so much
as of flawed human nature. As John Gray correctly points out, there
are therefore 'certain truisms about positional goods. It is clear that
any imaginable human society will contain some positional goods.
282 Hirsch
Proposition 13),'but they could make life uncomfortable for all.'27 The
appeal is at the level of interest and the incentive to act nothing
significantly more self-denying than the purchase of insurance: it may
well be that 'it is the haves who expect too much',28 but the reason for
them voluntarily to revise their expectations downwards is simply that
it is they (and not the have-nots) who would stand most heavily to lose
'if society broke down'.29 The rational consumer buys a burglar-alarm
in order to protect his stylish sports-car. The rational citizen votes for
comprehensive schooling in order to protect his country cottage. Each
spends a little to protect a lot and makes in that way an intelligent
investment in the future of the mixed economy which is in the one case
remarkably similar in intent and function to the other.
Given the apparent 'rejection' and even the 'violence' of the
have-nots, however, the risk-averting reader is bound to wonder
whether the Hirschian guns are really pointed in the right direction and
whether the specific policy-inferences Hirsch draws are in effect
relevant to the needs of a society which he seems to regard as moving
ever nearer to anarchy than to the middle ground. It is not, one
suspects, the two-income couple in their twenties who, appalled at the
price of country-cottages within striking distance of the City,
demonstrate their felt exclusion by means of casual mugging. Nor is it
likely to be the middle manager passed over for a top job carrying a
multiple-digit salary (and therewith the status symbols which large
sums of money can buy) who stones police-vehicles and sets fire to
shops. If the seeds of the 'violence' which is but the tip of the iceberg of
'rejection' are to be found, it is indeed rather misguided to look for
them at all in the middle-class world of positional goods rather than
plunging boldly into the darkest England of absolute deprivation - of
the unemployed and the low-paid, the badly-housed and the physically
handicapped, the ghetto black and the forgotten pensioner. While the
unmarried mother is spectacularly under-represented in the statistics
on armed robbery, the same cannot be said of the dead-ender from a
rat-infested slum dwelling whose principal hope ceteris paribus of
entering the acquisitive society is by means of a part-time job in a
hamburger restaurant. If, therefore, the objective is genuinely to
combat the 'violence' and even the 'rejection' of the have-nots, what
would seem to be called for is a wide range of proposals aimed at
granting the poorer members of the community heightened access not
so much to the positional as to the material sectors of the economy -
proposals such as improved State housing schemes, higher pensions
and other cash benefits, more and better social workers, selective
Social Limits and Collective Action 285
choice to enjoy the sight (if not the possession) of our limited national
stock of positional goods such as Rembrandt originals which by virtue
of the charges become ever more the preserve of the privileged.
Fortunately, the Lady of the Manor, in an integrated and consensual
society such as was Britain in the 1950s and 1960s (Hirsch's own
formative years), is likely to come to his aid and to manifest 'violence'
at the polling-station against the candidate who committed this act of
injustice against the poor and the powerless. Indeed, Hirsch would
argue, the very integration and consensus which provoked this defence
of public goods provided in the public sector is a direct product in no
small measure of the feelings of fellowship which those institutions
themselves help to promote. The model is the National Blood
Transfusion Service, which mobilises free gifts for unknown strangers
and in that way both emanates from and fosters the common bonds of
belonging - a school for altruists, in effect, and thus a fine school
which, in Titmuss's view, must not be allowed to be crowded out by the
expensive and nasty substitute: 'The commercialization of blood',
Titmuss wrote, 'is discouraging and downgrading the voluntary
principle. Both the sense of community and the expression of altruism
are being silenced.'38 The commercialisation of blood, Titmuss
warned, is not a thing apart but rather, and insidiously, the thin end of
the wedge: 'It is likely that a decline in the spirit of altruism in one
sphere of human activities will be accompanied by similar changes in
attitudes, motives and relationships in other spheres.'39 A wedge of
self-interest and calculative rationality, he had stated in his early
Fabian pamphlet of 1959 on The Irresponsible Society, which is a
veritable stake pointed directly at the heart of the body politick: 'More
prosperity and more violence may be one of the contradictions in a
system of unfettered private enterprise and financial power oblivious
to moral values and social objectives.'40 Neither Titmuss nor Hirsch, it
must be stressed, was resistant on principle to the market capitalist
system, and both quite rightly welcomed the important contribution
which it had made and was making to the economic growth which inter
alia augmented State revenues without the need to put up tax rates.
Simply, each made a clear distinction in his own mind between that
which properly belonged in the realm of Mammon and that which
properly belonged in the realm of community; and each therefore
staunchly opposed the transfer (partial or complete) into the private
sector of those goods and services of which the true home is in the
public.
Hirsch opposed the commercialisation of the State-owned museum;
290 Hirsch
and there his model was Titmuss on the gift of blood. He also opposed
the commercialisation of the private-sector public good of sociability;
and in this second instance of formalisation - that of individualisation,
as opposed to that of privatisation - his references to the country-club
and the dartboard show him to have been influenced by Scitovsky on
'the lively, social atmosphere of pubs'.41 There are, Scitovsky had
written in 1976 (with, it must be added, that considerable degree of
naivety which is the rootless intellectual's normal travelling-
companion in his ongoing search for a home), 'innumerable pubs
thickly strewn all over London and dotting the English countryside.
Every noon and evening you will find all of them full of people and
animated talk. Socializing rather than drinking is clearly most people's
main occupation there, although a half-pint of beer is to talk as a bed is
to making love - one can do without but does better with.'42 People go
to pubs in England, Scitovsky had revealed, most of all because of
psychological imperatives such as cause them to seek there the twin
stimuli of novelty and togetherness which are also enjoyed in places of
communal conviviality by their cousins across the Channel ('The
French do much of their talking in cafes')43 but which are sadly
inaccessible to their brothers across the sea: even the physical layout of
the American bar, Scitovsky had indicated, is anti-social, 'conducive
to the ordering and silent consumption of one's drink, not to
conversation',44 for the fact is that the American bar is designed in such
a way that the customers face the barman and do not have to face one
another. Hirsch was obviously impressed by this symbolic denial of
human gregariousness45 but evidently saw in it not so much the
indelible shadow of the Puritan hostility to idle chat (that having been
Scitovsky's own explanation) as the invisible hand of acquisitive free
enterprise, which had taught the practical and rights-minded
Americans to purchase no more of personal relationships than they
rationally required and to target their interactions at self-selected
groups with specific interests in common. Scitovsky's pub was to
Hirsch the private-sector equivalent of Titmuss's bloodmobile, the
co-bibulous community the comprehensive school of the responsible
adult. The country-club, on the other hand, was to Hirsch the
private-sector equivalent of the national museum with the user-
charge , the collective facility that encouraged the Lady of the Manor to
come in while making absolutely clear to Henry Dubb that he did not
warrant inclusion.
Hirsch opposed the commercialisation of the State-owned museum
and drew specific policy inferences such as indicate that, with respect
Social Limits and Collective Action 291
to that public-sector public good and to others like it, the bitter
medicine of direction is unambiguously to be ranked above the
individualistic alternative. He also opposed the commercialisation of
the private-sector public good of which spontaneous sociability may be
taken as a case in point; but here, the enemy in this case being not
privatisation but individualisation, Hirsch carefully resisted the
temptation to mobilise the powerful instrumentality of State direction
in an attempt to build political dams against encroaching formalisa-
tion. Brothels could be closed in order to discourage the substitution of
sex exchanged for money for love exchanged for love. Country-clubs
could be required to generate a membership-list statistically
representative of the surrounding community. Bad Samaritans who
refused to assist confused old ladies to cross the road could be fined for
polluting and littering, broadly defined. Much could clearly be done to
defend even private-sector publicness by means of State direction.
Hirsch, however, first and foremost a moderate social thinker strongly
committed to 'primary liberal values', preferred to leave the war
against individualisation to be waged by the socially responsible moral
attitudes of an integrated community.
The very same moral attitudes, one is bound to reflect, which
underlie his explicit recommendations for State intervention as well.
For public goods provided in the public sector - since without an
other-orientated ethos the member of the country-club who lives in an
elegant suburb is likely to resent and resist the collective provision of
parks and schools in inner-city ghettoes populated by colourful
characters with whom he himself would not want to drink even a
half-pint of beer. For the planned development of the rural
environment - since without a shared conviction that beautiful
surroundings are a part of our nation's wealth and must be defended,
the slum tenant inhabiting a sub-standard property rendered
artificially expensive by the cessation of building for letting consequent
upon state controls will resent and resist the capital gains made by the
rich from the sale of their country-cottages once zoning schemes had
artificially boosted the price of their positional good. For shared
transport in preference to individual transport - since without a
widespread desire collectively to alleviate the common blight of road
congestion, the privileged classes are likely to resent and resist
overcrowded buses that must be waited for, commuter-carriages
where one's fellow-passengers smell of garlic and wet dog and talk far
too loudly, and are likely to call instead for more and wider roads, for
high tolls to ration access to fast lanes, for taxes on vehicle-usage so
292 Hirsch
Top jobs stand at the very centre of the discussion. They are positional
goods in their own right, both in the strictly physical sense (the notion
of superordination being inseparable from that of hierarchy) and in the
sense of conferring social status (it being generally assumed that it is
the cream, not the scum, that rises to the top). They are in addition the
means to the end represented by yet other positional goods; for the
simple truth is that they are frequently exceptionally well remunerated
relative to the average within the society as a whole as well as within a
single organisation. Positional goods in their own right, the gatekeeper
via superior incomes to yet other positional goods, top jobs constitute,
within the framework of the Hirsch model, a problem which simply
must be solved if societies as they become richer are not also to become
more divided, more polarised and more antagonistic.
The problem is one of popular legitimation and, specifically, of the
need to find some 'conscious justification of the distribution of
economic rewards' ,46 The man-made solution is the planning of wages
and salaries (accompanied, perhaps, by directives influencing the
absolute and relative levels of those other forms of income - rents,
interest, dividends, profits - about which Hirsch has somewhat less to
say than he does about earnings from labour). Incomes policies
embodying information collected via large-scale attitudinal surveys
and imposed via demand-led democratic politics are undeniably
regarded in some quarters as the most socially-sensitive means for
institutionalising, in the vital area of who gets what, the requisite
perceptions of what most people most regard as just desserts and
merited rewards. Not, however, in all quarters; and certainly not by
classical liberals committed to the adoption of the individualistic,
non-administered alternative wherever possible. Such liberals would
point to the existence of a natural solution, alongside the man-made
solution, to the problem of popular legitimation of economic rewards;
Social Limits and Collective Action 293
and would argue that, taking but restraint away, the invisible hand of
the free market would then establish differentials based upon supply
and demand such as would be far more likely than any other
policy-instrument to provide the justification needed to defuse
potentially explosive social tensions and resentments. Hirsch,
elsewhere so much the social democrat, was here more nearly the
monetarist; for it was the natural and not the man-made solution that
in the event had the greater appeal for him.
Whether automaticity is indeed widely perceived to equal social
justice is, of course, the key question to which no one can be sure of the
answer. Supply and demand tells us nothing about need (a point which
advocates of transfers to the poor in work via the negative income tax
are quick to make). Nor do market valuations come pre-corrected for
inherited status (and therewith the unearned advantages of informal
education, familial expectations and gifted ownership of non-human
resources). Then there is the eternal conundrum of the rent of ability
(a cause of considerable cleavage between the intelligent and the
talented on the one hand, the diligent but the plodding on the other).
The unique requirements of the unskilled labourer with the disabled
wife, the intergenerational transmission of class and privilege, the
genetic endowment which permits the idle layabout to command
higher earnings than the exhaustively-trained surgeon provided only
that the former was born with an outstanding bass voice - these
variables muddy the clear waters of supply and demand and suggest
that, to some members of the community at least, justice is simply not
seen to be done where differentials are determined by that which the
traffic will bear and by no other standard of right and wrong.
Hirsch would no doubt be surprised to find any widespread rejection
of the market mode of legitimation. The market embodies, after all, a
set of Buchanan-like constitutional rules and there is intuitive logic in
associating fairness with a veil of unknowledge so impenetrable that no
participant can predict in advance of play if he himself will be awarded
the disabled wife or the outstanding bass voice. The market
represents, moreover, a network of coordinated contracts and
structured flexibilities such as improve allocative efficiency and
stimulate individual effort - and thereby boost the rate of economic
growth. Negatively speaking, finally, the natural solution obviates the
need to rely upon the man-made alternative - and since, as Hirsch puts
it, 'the controllers usually have a large handicap of relevant
information',47 perhaps this too is good grounds for expecting that
market will generate popular legitimation of income-differentials
294 Hirsch
where plan will not. Expecting is not the same as finding, however; and
the simple fact is that no one knows with any degree of certainty what,
precisely, it is that breeds the 'conscious justification of the
distribution of economic rewards' that represses bitterness and fosters
attachment.
Assuming that automaticity and legitimation are widely accepted,
however, as being organically linked, then Hirsch's suggestion that
differentials should be set by the unimpeded forces of supply and
demand is likely to prove an eminently attractive one. Most persons
have, after all, at some stage in their lives reflected that top jobs seem
to carry with them top status, top power, top fringe-benefits and top
satisfaction as well as top pay; and have even gone so far as to wonder if
many recipients of so generous a package might not in practice actually
be over-compensated relative to the minimum reward which would
just retain them in the post. Few persons can, of course, do much more
than reflect and wonder: given the present-day paucity of hard facts
concerning marginal rewards and executives' surplus, no one is
capable actually of proving that senior staff are currently overpaid (as
Hirsch would assert) rather than underpaid (as the incumbents
themselves have been known to hint). A major complication in this
context is the important fact that no two persons are identical; that
each of us has an absolute monopoly in a unique bundle of
characteristics; that you and I are not as perfectly interchangeable, as
effortlessly substitutable, as would be, let us say, two Treasury Bills of
the same denomination and maturity-date. Yet no serious advocate of
of the Dutch auction method of reducing payment for the performance
of a top job up to the point at which the marginal supplier is just willing
at that rate to supply his labour, would deny that the technique is an
acceptable one in economic terms only where lumps of labour are
homogeneous. Insofar as they are not, however, the danger exists that
as incentives are pared away the best brains and skills might drop out of
the relevant market altogether, opting perhaps for less arduous
employment, or to start their own business, or to go abroad. There is
no a priori reason to assume that the man or woman just willing to
accept a top job at a low rate of pay is also the person most likely to
perform it with maximal efficiency (although, naturally, there is also
no a priori reason to assume the opposite); and to the extent that
human potential is widely differentiated rather than highly standar-
dised the choice the community might have to make could well lie not
between Tweedledum and Tweedledee but between the well-paid
accountant on the one hand, the second-rate accountant on the other.
Social Limits and Collective Action 295
and that if a free labour market means an end to their pooled power
then they will strongly resist any move to introduce a regime of
automaticity where there now reigns administration. Hirschian man
withdraws frustrated and saddened at this demonstration that market
capitalism once again appears to breed its own transcendence - in this
case an anomic collective consciousness born of liberal individualism,
as to Smith the eventual evaporation of investment opportunities, to
Ricardo the unstoppable diminution of returns in agriculture, to Marx
the development of the revolutionary proletariat, to Schumpeter the
bureaucratisation of the entrepreneurial spirit.
Hirschian man attributes the increasing selfishness of the union
leaders to the evolutionary displacement of pre-capitalist by capitalist
values. This essentially sociological diagnosis is profoundly depressing
(in the sense that it is not easy to turn back the clock of historical
determinism). It is made more depressing still by the insistence of
thinkers such as Veblen that conspicuous power and dominance put on
show are today themselves valued ends having much of the character
of true positionality. Scitovsky in particular appears to adopt a
psychology of behaviour able so easily to incorporate the aggressive
risk-lovers of the original bellum as to suggest that peaceloving
introverts do indeed have grounds for concern with respect to the
blood lust of zero-sum confrontationalists. Novelty and challenge are
preferred to boredom, Scitovsky says; 'danger and the fear of danger
are exciting; excitement within limits is pleasant'56 - and economic
growth does nothing to cordialise the incessant search for stimulus:
'The idle rich born into that state or reaching it young are prone to take
up dangerous sports and become involved in reckless adventures. . . .
Perhaps the increasing violence of our increasingly affluent society can
be similarly explained.'57 If an under-socialised union leader is not
likely to heed Hirsch's plea for freedom of markets in preference to
administered values reflecting power-positions, it is not easy to see
why an aggressive union leader should do so: red in tooth and claw and
green with envy, he will present himself as the captain of a team out to
win and will make rude suggestions concerning the future develop-
ment of the pre-capitalist values to which a reply is not easily found by
Hirschian man without speaking in the very code which he seeks to
eradicate.
The vested interest of powerful unions is an obstacle to the
institutionalisation of automaticity in the labour-market. So too,
needless to say, is the vested interest of the well-paid; but to them
Hirsch is at least in a position to direct his appeal not to a benevolence
Social Limits and Collective Action 299
anonymous national society one does not have at all times a vested
interest in a good reputation or feel vulnerable to informal sanctions;
one does have a vested interest in conformity to the dominant value
system of commercialism by, wherever possible, rationally acting the
free rider; and one is increasingly aware that a society unable without
prohibitive expense to enforce its laws and statutes in so many areas of
social life (shoplifting and fare-dodging, to name but two) is not likely
to be conspicuously successful in reforming conventions and practices
involving, let us say, greater courtesy shown to strangers and a
diminution in spitting in public places. It is anomie rather than the rush
hour that presents the greatest threat to late utilitarianism.
Hirsch's justification of cooperation in terms of as if is thus in a
significant sense as depressing as the disease he identifies. It speaks the
language of the enemy insofar as it focuses on right conduct rather than
moral intent (I am asked not to litter lest I be littered upon, not because
the voluntary imposition of such an externality is illegitimate in itself).
It seeks to replace pre-commercial by mercantile ethics through its
attempt to derive normative constraint from self-interest (I am asked
to assist a stranger in distress as a form of social insurance against the
risk that I should myself one day be in a similar situation). In addition,
it is unenforceable: I am asked not to push my way to the head of a
queue comprised entirely of old ladies I am never likely to see again
but am also informed with the greatest of clarity that the rejection of
expediency on my part bears no personal return whatsoever while any
conspicuous selfishness will attract no punitive sanction. Above all, it
is internally inconsistent: I am asked to donate my own as if here and
now in implicit exchange for the collective as ifs of unknown others at
unnamed times and unspecified places - which is to say that I am asked
to show confidence in the rule-governed other-directedness of seers
who correctly recognise a sucker but simply will not allow a nice guy to
finish last - which is to say that the shared moral conventions are still in
force. Not needed when it is viable, not viable when it is needed, the as
if is not a genuine substitute for the authentic ought-to-be. Nor is the
authentic ought-to-be anything less than indispensable if the
evolutionary processes that throw up social limits to economic growth
are significantly to be smoothed by means of a remoralisation of social
usages. Three authentic ought-to-bes, as it happens most of all.
major one provided that there exist adequate defences of the common
culture in the form, if not of a common religion, then at least of
common educational institutions and very common television
programmes.
All in all, therefore, the ought-to-share is health-giving normative
medicine which could with great profit be taken by a body politick
experiencing a bout of social limits. Whether the community will do so
is a separate matter. You can lead a nation to medicine and you can
make it drink - but only if you are either a charismatic prophet or a
bloodthirsty dictator. Within the more mundane constraints of
democratic normality, the probability that the syrupy linctus of the
sharing propensity will eventually be swallowed must remain
indeterminate at best: Clarence has a Rembrandt, Richard wishes to
acquire one, you propose that Clarence and Richard should share one
and the same Rembrandt by means of situating it in the National
Gallery, and it does not require the wisdom of Solomon to grasp that
your final seat might not be upon the Woolsack but rather in the butt of
Malmsey.
(b) Honesty
judge, however, few of us would expect from the seller of the used car,
whom most of us would probably expect actually to exploit our inferior
knowledge of the quality of his vehicle by playing up its good points
while papering over its shortcomings. Knowing the troughs of our own
ignorance as well as the peaks of other men's greed, most of us tend
therefore to discount claims made as exaggerated, to trim the vendor's
asking price smartly - and thereby, however, unintentionally, either to
cheat truth-telling vendors (by underpricing their fine and trustworthy
cars on the assumption that the normal vendor is an unrepentant liar)
or to drive them out of the market altogether in a manner which
Akerlof has described as a special case of 'Gresham's Law': 'Dishonest
dealings tend to drive honest dealings out of the market. There may be
potential buyers of good quality products and there may be potential
sellers of such products in the appropriate price range; however, the
presence of people who wish to pawn bad wares as good wares tends to
drive out the legitimate business. The cost of dishonesty, therefore,
lies not only in the amount by which the puchaser is cheated; the cost
also must include the loss incurred from driving legitimate business out
of existence.'76 Since bad would not drive out good were truth-telling
and honest reliability to be the norm, the inference is that the
economic welfare of the community is diminished by the lack of
personal morality in the market for used cars in precisely the same way
as the standard of High Court verdicts would be debased were they to
be auctioned off in High Street premises to high-income shoppers. The
inference is that personal morality has no close substitutes in the
marketplace for used cars.
An inference, as it happens, which not all economists would be
prepared to draw. Some would point to functional equivalents in the
form of legal sanctions imposed where the vendor's exaggerations
exceed pre-specified bounds (the model being the Weights and
Measures and Sale of Goods Acts which exist to contain the potential
depredations even of the most venal of publicans and greengrocers).
Others would stress the valuable work performed by the established
car-entrepreneur with a reputation in iterated transactions to defend
which is in itself a consumers' guarantee: the dealer-expert trades in so
many used cars that he becomes accustomed to detecting quality-
variations, and indeed earns a monopoly-rent precisely because of the
confidence which his skill in the proportioning of price to product
comes to command. The law, of course, is not always in a position to
adjudicate (as in the case of disputes where one party swears the
gaskets were faulty before sale and the other party swears they were as
Social Limits and Collective Action 309
of the Reform Club in office hours has at least this to recommend it,
that it is, on economic grounds alone, unambiguously superior to any
viable alternative.
The private market, obviously, cannot be expected to provide
insurance against the contingencies of default and failure: to do so
would be positively to invite the substitution of destabilising and
irresponsible practices for soundness, prudence and good manage-
ment. Nor are legal requirements on the nature and distribution of
assets (whatever might be their role in normal times) of any great value
in the panic conditions of threatened bankruptcies: the whole
economy would be disrupted by the collapse of a banking giant (even if
in truth a giant lemon) and this fact is sufficient in itself to blackmail the
central bank into relieving the scoundrels. The blackguards might even
take precautionary action through mergers in advance of premeditated
naughtiness being committed, acting on the not unreasonable
assumption that a concentrated and oligopolised industry is better
placed to bully the central bank (by means of the dreaded threat of
'your money or my life') than would be a banking industry comprised
of a large number of tiny institutions. Concentration without the
eyeball-to-eyeball pressures of gentlemen upon gentlemen, cartelisa-
tion with and because of those pressures - the invisible hand of
competitive capitalism hardly gets a look-in. The problem being 'the
dependence of well-functioning markets on certain individual
behavioural characteristics, such as telling the truth and keeping one's
word', the cartelised mode of provision of these 'collective
intermediate goods' is undeniably the best attainable in present-day
conditions - since, as is no great secret, 'co-operation is technically
easier to organise in a small group of like-minded individuals and
institutions than in an open group'.81 In present-day conditions,
however, and not in those vastly superior conditions which would be
ushered in by a remoralisation of social usages: then shared moral
conventions would constitute moral capital accessible to all, and
large-group competition among perfect gentlemen would become an
eminently desirable possibility.
(c) Justice
2.1 Methodology
315
316 Notes and References
16. Arrow, Social Choice, op. cit., pp. 109 and 109n.
17. A. Downs, 'In Defense of Majority Voting', Journal of Political
Economy, Vol. 69. 1961, p. 195.
18. Ibid.
19. Ibid., p. 192.
20. G. Tullock, 'Reply to a Traditionalist', Journal of Political Economy,
Vol. 69. 1961, p. 203.
21. Arrow, Social Choice, op. cit., pp. 29, 30.
22. A. Bergson, 'On the Concept of Social Welfare', Quarterly Journal of
Economics, Vol. 68, 1954, p. 239.
23. W. Nordhaus, "The Political Business Cycle', Review of Economic
Studies, Vol. 42, 1975, p. 184.
24. M. Olson, 'Evaluating Performance in the Public Sector', in M. Moss
(ed. ), The Measurement of Economic and Social Performance (New
York: National Bureau of Economic Research, 1973), p. 358.
25. Ibid.
26. Ibid.
27. Plamenatz, Democracy and Illusion, op. cit., p. 184.
2.3 Policies Demanded
1. ETD, p. 270.
2. ETD, p. 261.
3. ETD, p. 267.
4. ETD, p. 268.
5. ETD, p. 270.
6. ETD, p. 267.
7. Tullock, The Politics of Bureacracy, op. cit., p. 85.
8. Downs, 'Why The Government Budget Is Too Small In A Democracy',
loc. cit., p. 530. It is a fine philosophical question if something can be
too small where the costs of being properly informed are too high. Nor is
it clear that all rational citizens, even if fully informed, would reveal the
same preference as Downs himself. It is uncharacteristic for Downs to
confuse the subjective with the objective but he clearly does so in the
present context.
9. Ibid., p. 544.
10. See on this Buchanan and Tullock, op. cit., The Calculus of Consent,
Chapter 10, and D. A. Reisman, The Political Economy of James
Buchanan (London: Macmillan, 1989), Chapter 4.
11. Downs, 'In Defense of Majority Voting', loc. cit., p. 195.
12. Downs, 'Why The Government Budget Is Too Small In A Democracy',
loc. cit., p. 562.
13. Ibid., p. 544.
14. Ibid., p. 551.
15. Ibid., p. 561.
16. G. Tullock, Towards a Mathematics of Politics (Ann Arbor: University
of Michigan Press, 1967), p. 118.
17. ETD, p. 186.
18. ETD, p. 199.
Notes and References 319
92. Ibid.
93. D. C. Mueller, Public Choice (Cambridge: Cambridge University
Press, 1979), pp. 1-2.
94. A. Marshall, 'The Present Position of Economics' (1885) in A. C.
Pigou (ed.), Memorials of Alfred Marshall (1925) (New York:
Augustus M. Kelley, 1966), p. 160.
95. ETD, p. 37.
96. Downs, 'The Public Interest: Its Meaning in a Democracy', loc. cit.,
p. 31.
97. Ibid., p. 24.
98. Ibid., p. 30.
99. Ibid.
100. O. E. Williamson, The Economic Institutions of Capitalism (London:
Collier Macmillan, 1985), p. 47.
101. O. E. Williamson, Markets and Hierarchies (New York: The Free
Press, 1975), p. 14.
102.1 Williamson, The Economic Institutions of Capitalbm, op. cit., p. 49.
103. P. M. Jackson, The Political Economy of Bureaucracy (Deddington:
Philip Allan, 1982), p. 205.
4.1 Methodology
1. M. Olson, The Logic of Collective Action, (LCA) (Boston: Harvard
University Press, 1965), p. 59.
2. LCA, p. 60.
3. LCA, p. 13.
4. LCA, p. 63n.
5. LCA, p. 61n.
6. LCA, p. 160n.
7. LCA, p. 61n.
8. Mancur Olson, 'The Relationship Between Economics and the Other
Social Sciences', in S. M. Lipset (ed.), Politics and the Social Sciences
(New York: Oxford University Press, 1969), p. 142.
9. LCA, p. 174.
10. LCA, p. 173.
11. LCA, p. 161.
12. LCA, p. 2.
13. LCA, p. 87.
14. LCA, p. 13.
15. LCA, p. 15.
16. LCA, p. 159.
Notes and References 325
1. M. Olson, The Rise and Decline of Nations (RDN) (New Haven and
London: Yale University Press, 1982), p. x.
2. RDN, p. 215.
3. RDN, p. 129.
4. B. Barry, 'Some Questions about Explanation', in 'Symposium:
Mancur Olson on the Rise and Decline of Nations', International
Studies Quarterly, Vol. 27, 1983, p. 20.
5. Ibid., p. 19.
6. RDN, p. 161.
7. RDN, p. 129.
8. RDN, p. 8.
9. C. Kindleberger, 'On the Rise and Decline of Nations', in 'Symposium',
loc. cit., p. 5.
1. RDN, p. 141.
2. Olson, 'On the Priority of Public Problems', in Marris, The Corporate
Society, op. cit., p. 307.
3. M. Olson and C. Clague, 'Dissent in Economies', Social Research, Vol.
38, 1971, p. 776.
332 Notes and References
4. RDN, p. 10.
5. RDN, p. 82.
6. Olson, 'The Political Economy of Comparative Growth Rates', in
PEG, p. 27.
7. M. Abramowitz, 'Notes on International Differences in Productivity
Growth Rates', in PEG, p. 83.
8. Ibid., p. 86.
9. J.-C. Asselain and C. Morrisson, 'Economic Growth and Interest
Groups: The French Experience', in PEG, p. 157.
10. RDN, p. 48.
11. RDN, p. 77.
12. RDN, p. 78.
13. Olson, 'The Political Economy of Comparative Growth Rates', in
PEG, p. 19.
14. RDN, p. 78.
15. RDN, p. 97.
16. RDN, p. 105.
17. RDN, p. 105.
18. M. Olson, 'The South Will Fall Again: The South as Leader and
Laggard in Economic Growth', Southern Economic Journal, Vol. 49,
1983, p. 924.
19. Ibid., p. 932. But Olson elsewhere states (RDN, p. 110) that resistance
to change in the South based upon 'the old pattern of coalitions' was
eroded by 'adaptation to new technologies and methods of production'.
This admission of reverse causation is hardly comforting to the
supporter of his theory: if slow growth can foster coalition-building and
rapid growth can undermine it, the inference is that the lines of
causation can go from growth to groups and not vice versa, as Olson
would suggest, based on a correlation-coefficient which would
apparently be an ambiguous indicator.
20. This line of argumentation owes much to W.A. Lewis, 'Economic
Development with Unlimited Supplies of Labour', Manchester School,
Vol. 22, 1954. It has also figured prominently in the explanation
provided by Edward Denison and other economists of why France
enjoyed so rapid a rate of economic growth in the postwar period. Olson
makes no effort to integrate the surplus labour argument into his
account of why growth-rates differ. Nor does he correct his data on
growth to allow for differential growth in the population or in
participation-rates (say, of married women). It would have been useful
if he had tested his hypothesis using per capita data and/or data on
growth of production per person who is economically active, as opposed
to using data on national income aggregates.
21. F. L. Pryor, 'A Quasi-test of Olson's Hypotheses', in PEG, p. 91.
22. Olson, 'The South Will Fall Again', loc. cit., p. 932.
23. RDN, p. 91.
24. RDN, p. 142.
25. RDN, p. 131.
26. RDN, p. 158.
27. RDN, p. 158.
Notes and References 333
1. RDN, p. 18.
2. flow, p. 232.
3. M. Olson, 'The Efficient Production of External Economies', American
Economic Review, Vol. 60, 1970, p. 516.
4. W. J. Baumol, Welfare Economics and the Theory of the State, 2nd ed.
(London: G. Bell and Sons, 1965), p. 180.
5. Olson, 'The Political Economy of Comparative Growth Rates', in
PEG, p. 23.
6. J. M. Buchanan,'Rent Seeking and Profit Seeking', in J. M.Buchanan,
R. D. Tollison and G. Tullock (eds), Towards a Theory of the
Rent-Seeking Society (College Station: Texas A & M University Press,
1980), p. 9. The two seminal contributions to the literature on
rent-seeking are reprinted in this volume. They are G. Tullock, 'The
Welfare Costs of Tariffs, Monopolies and Theft' (originally published in
the Western Economic Journal, Vol. 5,1967) and A. O. Krueger, 'The
Political Economy of the Rent-Seeking Society' (American Economic
Review, Vol. 64, 1974).
7. Ibid., p. 8.
8. RDN, p. 254n.
9. RDN, p. 254n. It must be stated, however, that not all of the measures
demanded by the coalitions are in fact antithetical to growth and
efficiency. Thus some will press, no doubt, for resale price maintenance
and the perpetuation of the conveyancing monopoly, but others will call
for more start-up capital and lower interest-rates to promote new
investment. Clearly, some groups will demand policies that are
favourable to economic progress. The real question then becomes the
Downs question of why one group succeeds where another fails - and
not the Olson question of what can be done about coalitions per se.
10. RDN, p. 233.
11. M. Olson, 'Environmental Indivisibilities and Information Costs:
Fanaticism, Agnosticism, and Intellectual Progress', American Econo-
mic Review (Papers and Proceedings), Vol. 72, 1982, p. 265.
334 Notes and References
1. SLG, p. 73.
2. SLG, p. 73.
3. SLG, p. 71.
4. SLG, p. 82.
5. SLG, p. 82.
6. SLG, p. 78.
7. SLG, p. 79.
8. SLG, p. 81.
Notes and References 335
9. SLG, p. 88.
10. SLG, p. 101.
11. SLG, p. 91.
12. SLG, p. 90.
13. SLG, p. 103.
14. SLG, p. 103.
15. 5LG, p. 103.
16. SLG, p. 140.
17. SLG, p. 143.
18. SLG, p. 137.
19. SLG, p. 139.
20. SLG, p. 141.
21. SLG, p. 143.
22. SLG, p. 118.
6.3 Policy Inferences
1. SLG, p. 178.
2. SLG, p. 181.
3. SLG, p. vii.
4. SLG, p. 10.
5. SLG, p. 57.
6. SLG, p. 57.
7. SLG, p. 109.
8. SLG, p. 18.
9. SLG, p. 106.
10. SLG, p. 110.
11. SLG, p. 178.
12. SLG, p. 183.
13. SLG, p. 187.
14. SLG, p. 188.
15. SLG, p. 42.
16. SLG, p. 126.
17. SLG, p. 149.
18. SLG, p. 151.
19. SLG, p. 150.
20. SLG, p. 139.
21. SLG, p. 67.
339
340 Index
State intervention see intervention, growth 110, 210, 233, 236, 237-8,
State 245, 251; and groups 218,
statesman 69-70, 71, 92, 119 220, 236, 246
status and imbalance 50-1 superpower concept 65
Stigler, G. J. 59, 75-7, 111 trade unions 157
Stinchcombe, A. L. 141 utility 33-4
Sugden, R. 165, 176 and distributions 32
superman syndrome 94-5 maximising by bureaucrats 62-3
Sweden 214, 235-6 see also preferences
Switzerland 214
sympathy 180-1
values
group 159
Tawney, R. H. 108, 172, 173, 282 moral 297
taxes 56, 58, 156, 157, 299 social 267
visibility of 55 Veblen, T. 11, 260, 298
technological progresss 220, 221, violence 283-5, 287, 289, 299,
274, 280 300-1
tensions, social see instability see also instability, social
time 42, 168 Virginia School 40, 54-5
and growth 233-4, 275 vote 8, 131
Titmuss, R. M. 181, 282, 283, 284, as investment 49
289 maximising policies 16, 17, 24,
Toye, F. J. 11 26, 36, 40
trades unions 157-8, 261, 296, 297, selling 35
302 value 47-9, 141, 158
Truman, President H. 133-5 vote-maximising, by politicians 12,
trust 208 16, 17, 33
truth 135, 307, 308 voters 48
and prisoner's dilemma 163 and calculative rationality 19-20,
Tullock, G. 61-2, 69-70, 111 21-4; see also preferences
and democracy 8, 12, 46, 54, 58 Downs on 10, 184
and majority rule 40-1 minority view 37
and self-interest 13, 57, 64, 130 prejudice of 48
two-party system 219 rational 2, 30, 39, 48
self-interest of 13, 17, 60, 98-9,
184
and uncertainty 30
uncertainty and utility 33-4
as constraint 1 voting
in democracy 57-8 majority 54
and elections 30, 48 paradox of 37-41,43-4
unemployment 244-6 rule 30, 40; majority 18, 40
United Kingdom 21, 158, 288, 290 strategic 48-9
growth 210, 215, 231-3; and
groups 214, 217, 236-7, 242,
244-5 waste 261, 279, 280-1
United States 11, 21, 25, 133-4, Weber, Max 20, 66, 69, 78, 80, 88
264, 290 on capitalism 172
348 Index