Collective Action
One would expect that a group of people with a common interest would naturally coordinate to exercise their common goal. However, this is generally not the case, as Mancur Olson, the author of The Logic of Collective Action, argues. Olson (2004: 2) states that "it is not in fact true that the idea that groups will act in their self-interest follows logically from the premise of rational and self-interested behavior." Collective action groups, without some sort of coercion or special device to make individual participants act in the interest of the group, will not succeed because "rational, self-interested individuals will not to act to achieve their common or group interests." Not every attempt at collective action has failed, however, and it is these successful cases that require further examination. The government had an impact on many of these cases, and from studying these events we can see that governments can solve collective action problems through the use of incentives and the legislation of coercion.
The underlying problem with collective action is the participants' inability to cooperate, contribute, and make agreements efficiently. For example, collective action is analogous with the idea of perfect competition in that all producers of an identical good seek to sell their good at a higher price. Because the goods are identical, however, firms must charge the same price, and no economic profit is made. If all the firms in the market could make an agreement to uniformly cut output and charge an equally higher price, they would all profit. Olson explains the reason firms do not come to such an agreement. All competing firms wish to sell as much as they can, but as they sell more, the cost of producing the good eventually exceeds the price of the good. According to Olson (2004: 9), "Each firm's interest is directly opposed to that of every other firm, for the more the firms sell, the lower the price and income for any given firm." The firms
The underlying problem with collective action is the participants' inability to cooperate, contribute, and make agreements efficiently. For example, collective action is analogous with the idea of perfect competition in that all producers of an identical good seek to sell their good at a higher price. Because the goods are identical, however, firms must charge the same price, and no economic profit is made. If all the firms in the market could make an agreement to uniformly cut output and charge an equally higher price, they would all profit. Olson explains the reason firms do not come to such an agreement. All competing firms wish to sell as much as they can, but as they sell more, the cost of producing the good eventually exceeds the price of the good. According to Olson (2004: 9), "Each firm's interest is directly opposed to that of every other firm, for the more the firms sell, the lower the price and income for any given firm." The firms