Mancur Olson is known mostly for his first book published in 1965, The Logic of Collective Action, Public Goods and a Theory of Groups. An overly simplified version of his theory is to show that collective action becomes more and more difficult as group sizes grow. Here’s a portion of his analysis taken from Chapter One.
There are two things to determine in finding out whether there is any presumption that a given group will voluntarily provide itself with a collective good. First, the optimal amount of the collective good for each individual to buy, if he is to buy any, must be discovered; this is given when Fi(dV./dT) = dC/dT . Second, it must be determined whether any member or members of the group would find at that the individual optimum that the benefit to the group from the collective good exceeded the total cost by more than it exceeded the member’s own benefit from that collective good; that is, whether Fi > C/V.
The argument may be stated yet more simply by saying that, if at any level of purchase of the collective good, the gain to the group exceeds the total cost by more than it exceeds the gain to any individual, then there is a presumption that the collective good will be provided, for then the gain to the individual exceeds the total cost of providing the collective good to the group.
It’s a very individualistic point of view. If the participant in the collective extracts enough then they will agree to pay accordingly. There are metered goods for which this slicing and dicing of inputs and smattering out the expenses based on individual consumption works quite well. The provision of clean drinking water through most municipalities in the US follows a similar model.
But instead of thinking about the breadwinning individual as the only participant in the payment scheme, shouldn’t we think of every household as a group? Whether the service is brought to one or ten members, doesn’t that change the gist of the analysis? On the individual level of analysis, one individual could claim that she is paying a disproportionate about of the infrastructure costs. She is bearing the entire load of one home whereas the home in which an extended family enjoys the benefits of clean water across more beneficiaries.
Olson’s way of equating payment for the public good to an immediate withdrawal of a benefit seems different than how it is thought about with the delivery of a service such as clean water. The head of household is anticipating potable water for everyone in their home. And even beyond their residence as it is necessary to be able to drink from the tap at schools and in other public venues. Water is such a basic public good that, as opposed to a fee for service immediate exchange, the expectation by the individuals who pay the water bill is for everyone in their community to access drinking water.
The feel of this group seems more in line with how groups are broken down by Hayek, as I wrote about yesterday. His basic building block group was the assembly of folks who interact face to face. A group, not a bunch of individuals. Through a city or community, there is a desire for core services, such as water, to be accessible by everyone whether they are the ones earning a wage and writing the check for the water bill or not.
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