Wednesday, September 05, 2007

Engage *This*

"Men journey together with view to particular advantage, and by way of providing some particular thing needed for the purposes of life, and similarly the political association seems to have come together originally, and to continue in existence, for sake of the general advantages it brings" Aristotle, Ethics, Book VIII, Chapter 9

"Organizations can therefore perform a function when there are common or group interestsm and their primary function is to advance the common interest of groups of individuals." Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary." Adam Smith, The Wealth of Nations, Book I, Chapter X

"By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community...As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed...The regulation of these various and interfering interests forms the principal task of modern legislation, and involves the spirit of party and faction in the necessary and ordinary operations of the government." James Madison, The Federalist No. 10

"Special interest politics is a simple game. A hundred people sit in a circle, each with his pocket full of pennies. A politician walks around the circle taking a penny from each person. No one minds; who cares about a penny? When he has gone all the way around the circle, he throws fifty cents down in front of one person who is overjoyed at the unexpected windfall. The process is repeated...After a hundred rounds everyone is a hundred cents poorer, fifty cents richer, and happy." David Friedman, The Machinery of Freedom, Chapter 27.

Before Mancur Olson published "The Logic of Collective Action" it was generally taken for granted that it was relatively easy to form groups (the "factions" mentioned in The Federalist) based on common interests, and to take collective action to further those interests; and also that the biggest (internal) problem facing a democracy was how to prevent the tyranny of the majority. In particular, the Federalist Papers assume that minority interests will be unable to control the legislature because "If a faction consists of less than a majority, relief is supplied by the republican principle, which enables the majority to defeat its sinister views by regular vote." On the other hand, "When a majority is included in a faction, the form of popular government, on the other hand, enables it to sacrifice to its ruling passion or interest both the public good and the rights of other citizens." Hence the reason the Founders wanted a republic with checks and balances rather than a democracy, and a Bill of Rights, to reduce the possibility of tyranny by the majority.
As far as I can see -- and I'm certainly open to the possibility that I'm misinterpreting or simply overlooking something -- Olson's point in "The Logic of Collective Action" was that all collective action is subject to the free-rider problem and therefore subject to the Prisoner's Dilemma. This is true virtually by definition; if "collective action" means "action taken for collective benefit" then by definition it's a public good (at least for some particular group), i.e. it's non-exclusionary; and if it's non-exclusionary, then it's subject to the Prisoner's Dilemma because it will benefit someone to "defect" (i.e. refuse to contribute/cooperate) if he can get away with it (i.e. still receive the benefits). This all makes perfect sense to me! And as he points out, "the concept of public goods is one of the oldest and most important ideas in the study of public finance." (And to quote The Federalist again, "To secure the public good and private rights against the danger of...faction, and at the same time to preserve the spirit and the form of popular government, is then the great object to which our inquiries are directed.")
Olson then suggests that one characteristic of states or governments is that they deal with public goods by means of coercion; that is, they force people to pay taxes and follow the law -- supposedly for the benefit of all -- by using force to compel obedience and/or punish dissent. He also discusses the possibility that other groups can use forms of coercion against members who "defect" and refuse to contribute to efforts made for a common goal.
This leads, of course, to the civics-textbook claim governments exist (at least partly) in order to provide public goods and that coercion is necessary in order to remedy the "market failure" that would exist due to the free-rider problem, e.g. people refusing to pay their share of the costs for things which benefit everyone in the public -- things like highways, schools, health insurance (in Canada), television and radio stations (in Britain) nuclear weapons, prisons for nonviolent drug addicts, customs agents whoo confiscate lesbian-rights literature (in Canada), police officers assigned to hang around public restrooms and arrest homosexuals, and all sorts of other wonderful things we could never pay for privately and just could never live without. (I also find it ironic that Olson uses corporate lobbying as an example of a "public good" that is underproduced -- in economic terms -- due to the free-rider problem.)
Many economists have pointed out the practical disadvantages to providing public goods through coercive means. Such goods might be produced even when the benefits to the public are not worthwhile, if they benefit the politically powerful. Later in his book -- although not in the article we're assigned -- Olson talks about how the free-rider problem allows concentrated interests to overcome diffuse interests, i.e. tyranny of a politically-powerful (because well-organized) minority over the unorganized majority.
Garrett Hardin's point in his classic essay "The Tragedy of the Commons" is that any commons suffers from the free-rider problem and Prisoner's Dilemma, because everyone has an incentive to grab as much as possible -- which is more than their fair share -- because if they don't grab it, somebody else will. John Locke recognized this over three centuries ago and came up with the "Lockean Proviso" in the Second Treatise of Government. Hardin explains how the commons' lack of ownership means a lack of enforcement of the Lockean Proviso to everyone's detriment, with specific examples.
Hardin recommends several alternatives to an unregulated commons. He advocates individual ownership when possible, otherwise (in cases such as air, flowing water, and public parks) government ownership with impartial regulations. He recognizes the state awards benefits to the politically powerful ("Bureau administrators...are singularly liable to corruption") which was Olson's point, so he recommends impartial regulations ("a government of laws and not men") based on price, merit, or equal shares for all rather than administrative fiats, and of course I agree! Bruce Ackerman's Social Justice in the Liberal State discusses how to determine whether private or communal ownership is the most economically efficient way to control a resource, and how to allocate it justly, including compensating those who are disadvantaged by whatever method is chosen; and William Blinder's Hard Heads and Soft Hearts discusses specific proposals for market-based environmental protection including emissions fees/taxes versus "cap-and-trade" permits. Currently there are many such proposals and even the Kyoto Protocol is somewhat market-based because it allows emissions trading. The biggest problem with such proposals is how to allocate allowed emissions for each nation.
Hardin also suggests that overpopulation is an example of the tragedy of the commons, because couples who have children are free riders, and therefore childbearing needs to be regulated. This argument is reasonable but mistaken, as David Friedman demonstrates in his article "Laissez-Faire in Population: The Least-Bad Solution," at least to the extent that there are no subsidies or externalities involved in raising children.
Finally, Robert Putnam (author of Bowling Alone, which inspired, and Better Together) has an article that talks about ways to overcome the Prisoner's Dilemma, and thereby overcome the Free Rider Problem. He analyzes evidence from local governments within Italy and finds that private "civic ties" provide a sense of community and trust (what Tom Wolfe calls a "favor bank" and Stephen Covey calls an "emotional bank account") so that people are willing to cooperate. Participants with civic ties believe it's worth the risk to trust someone else; they think the likelihood of cooperation is great enough to cooperate themselves. Putnam also found a breakdown of civic ties due to distrust in communities that are more diverse, which causes such problems as ethnic strife in the United States and, in extremis, in places such as Rwanda, the former Yugoslavia, and of course Iraq. Another reason for lack of trust is official corruption and "kleptocracy": insecure property rights and government intervention in favor of the politically favored, which in endemic in both the developing world and former communist countries -- and, to a lesser extent, in the United States as well.
In another article, "Reviving Community: What Policy-Makers Can Do to Build Social Capital in Britain and America," he suggests that governments can "rebuild social capital by subsidizing community organizations, through civics education, by instituting a scheme of voluntary national service, and through structural reforms." These may be useful, but I believe he is overlooking the vital information provided by Robert Axelrod's work on "the evolution of cooperation" which provides an experimental proof that the Prisoner's Dilemma is solvable if it's iterated. By breaking down social interactions into a series of smaller interactions, the risk is lower and non-cooperation or "defection" can be punished. Therefore people are more willing to risk trust others more than they would in an all-or-nothing gamble, and are also better able to build up trust.
In Starship Troopers Robert Heinlein asserted that a government (or other system) works as long as authority and responsibility are linked. There are several American political institutions which serve to break down this linkage via "rational ignorance." One of them is our weak party system which prevents voters from easily knowing the exact positions taken by their representatives on each issue. Another is the Presidential system rather than a parliamentary system, which prevents parties from being held accountable for the results of their platforms. A third is the "first past the post" or "winner take all" electoral system which emasculates minor parties. Finally, the ability of the state to enact programs which provide benefits to a single class or group, such as subsidies to farmers, is perhaps the single worst flaw in our system.
I believe the single greatest problem facing liberal constitutional democracies is the ability of concentrated minority interests to enact legislation against the common good. Strong parties, a parliamentary system, and proportional representation would go a long way to overcoming the causes of "rational ignorance" while a Constitutional amendment prohibiting the state from transfers or other programs unless they are universal (possibly with a means test) -- suggested by Charles Murray in In Our Hands -- would eliminate its effects.