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COLLECTIVE ACTION
Public Goods
and the
Theory of Groups
MANCUR OLSON
Introduction
It is .;>ften taken forgranted, at kast where eeonomi objectives are
involved, that groups of individuals with o:>mmon interests usually
attempt to further those o:>mmon interests. Groups of individuals
with common interests are expected to act on behalf of their common.
interests much as single individuals are often expected to act on
behalf of their personal interests. This opinion about group behavior
is frequently found not only in popular discussions but also in
scholarly writings. Many economists of diverse methodological and
ideological traditions have implicitly or explicitly accepted it. This
view has, for example, been important in many theories- of labor
unions, in Marxian theories of class action, in concepts l)f "countervailing power," and in various discussions of eoonomic institutions.
It has, in addition, occupied a prominent place in political science,
at least in the United States, where the study of pressure groups has
been dominated by a celebrated "group theory" based on th idea
that groups will act when necessary to further their common or
group goals. Finally, it has played a significant role in many wellknown sociological studies.
The view that groups act to serve their interests presumably is
based upon the assumption that the individuals in groups act out
of self-interest. If the individuals in a group altruistically disregarded
their personal welfare, it would not be very likely that collectively
they would seek some sellish common or group objective. Such
altruism, is, however, considered exception and self-interested be
havior is usually thought to be the rule, at least when economic
issues are at stake; no one is surprised when individual businessmen
seek higher profits, when individual workers seek higher wages, or
when individual consumers seek lower prices. The idea that groups
tend to act in support of their group interests is supposed to follow
logically from this widely accepted premise of rational, self.interested
behavior. In other words, if the members of some group have a
common interest or objective, and if they would all be better off if
tnat objective were achieved, it has been thought to follow logically
that the indiyiduals in that group would, if they were rational and
self-interested, act to a.;hieve that objective.
But it is fJDf. in bet true that the idea that groups will act in their
lntrod.,ction
self-interest follows logically from the promise of rational and sdinterested behavior. It docs nC>t follow, be<:ause all of the individuat.
in a group would gain if they achi vcd thcir group objective, that
they would act to achieve that objective, even if they were all rational
and self-interested. Indeed, unless the number of individuals in a
group is quite small, or unless there is coercion or some other special
device to make individuals act in thcir common interest, rl<tirma/,
I
A Theory of Groups and Organizations
A.
characteristic of organizations generally. One purpose that is nonetheless characteristic of most organizations, and surely of practically
all organizations with an important economic aspect, is the further
ance of the interests of their memberS. That would seem obvious, at
least from.the economist's perspective. To be sure, some organizations
may out of ignorance fail to further their members' interests, and
others may be enticed into serving only the ends of the leadership.$
I. :Eeonorrtit:ts have for the most part neglected to d , :vll!lop theories of organiza
lions., but there are a f works. from j'l 00nomie poi.ot of view Q.D r:ht! J,bj t. t
f.ot example, three papers by Jacob Matschak, "ilemenu for a ry of Teama,"
M qlf.lemr:n $ric"" J (Jat'l.u;ar)' 195!5), 127.... 137, "TQW ds .:UI. EconQmie Tbt: Qt)' (It
Or.anizadon :.nd Information," in J) d.n'()n Prousus, .ed. R,, M, Thrall, C. H, Combt,
and lt L. Davi$ (New York: Juhtt Wiley, 1954), pp, 187-2201 ;\nd "Eflident :utd
Viable Organization Forms," in Modt'fn. Orglf.niflntion Tlurory, ed. Mason Haire (Nrw
York: John Wile . 19:>9), pp. 307-320; two paprs by R, lladner, "Applic;tti(ln c>f
Linear PrQgramming to Team Dec:isi.on Problem&/' Mttna11ement Science, V (January
1959), 143....150, and "Tc:un DcdsU,n Problem,," Atmals oj Mdtlunnau'cal StdliJti('t,
XXXIU (S<pl<mb<r 1962), 8 7-881; C. B. McGuire, "Some Team Model ol Sal"'
Otpni:u iotl," Mtmaremntt Sdtt t:t, VII (J:4nt..tar;r 1961), 101-130; 0Jkar Morgen
stern, Proltgt:ffnt:na to a T/l.t:Qry 11/ Organi: Mion (Santa Monica, Calif.: RAND
Re:Jeat<h Memorandum 734, 19SJ); Jamco G. Mir'(h and Hcrbctt A. Simon, Or,tiriiJld
tiont (N' w York: John Wil.:::y, 19,8); Kenneth 8oulding, TAt OriarJi:ati(Jfllll
[W'IIQ/u,io" (Ncw1 York: Harper, 1953).
2. Max Weber called attention to the cue where ao organization cc>ntiDI,Iei tQ Cll!ll;itt
for ;orne: time after it ha$ b omc me:aningleN aur;e some olfic:ial is making a
living out of. it. See his Th qry Q/ $r; "j,J IUid Ero,Qm/ 0rtmt':rtJrion, tram. 'talcott
Par.f(lns nd A.. M, Hend4rson (New 'YQrk: Oxford t)nivenity Pre . 1947), p. 318.
3. tlu'c1 viii.9.1160a.
4. Uon Ft:sting(:r, ''Group Anr tion. ; nd Mi!m rship," in GffJ P [)yrJ11mics, !.
Dotwin Cl\rtwrisht ;md Alvin Zandc=t (Evannon, JII,: llow, Pc=tc=rson, I95JL p. 93.
5. A GrammtV of PQ/#i(l, ift:h ed. (London: Geotgc Allen Unwin, 1939), p. 67.
6. Philanthropic and relisio1.1s orpnizations arc= not nete$sarily c:xpo:ted to serve
Qnly the= interest& of their members; auch organizations hav : oth :t p1.1rpo s that are
considered more: irnpol'l nt, howenr muGb thc=ir members "ne t to brlong, ot ilore
improvro or hdpc=d by bc:longinJ. But the complexity of such org ni tions nd not
be debiitcd at lcn,-th here, uu: this study will focu; on organizations with
ignificant emnomk aspt. The c:mpba.tis re will have 110mc=tbing in common with
what M11x Weber :ailed the 'as!QGiative group"; he= eallcd sroup asSO(;iative if "me
orientation of &O(ial ac:;tion with it i'c'$ti on a rationally motivated agfeer'r'l m." Weber
contrasted bit. "a odative sro1,1p" with the= "communal j'fOI.IP .. which was. centered
on personal atlrttion, c=rotic rdatioruhips, etc., like the family. (S Weber, PP I3l).....
139, and G.!' Ce Coyle, SOL"itJl Proctm ir Orgtmi% d Gr(u,pJ, New York: Richard Smith,
Inc. 1 1930, pp. 7-9.) The logic:; of the theory developed here can a.tended to cover
communal, tcliaiou . nd philanthropic Qrganizations, but the theory i.s not particularly
U$eful in studying such groups. See my pp. 6lnl7, 15'9-162.
7. That is., it& mctnbc:ts. This .t.mdy does not follow the tc:tm.inoloik.Oll uu.gc: of
tho.te ora.jl.lli:r.ation theoria:tlii who dc=Ktibc em,ployee.t u "membaa'' of the= organi:tation
for wll:ieh lhey wark. H re it ia more: t:onvct.li.cn( tQ o.i1Qw thl! language of evctydl\y
Maciver also made this point explicitly when he said that "every
organization presupposes an interest which its members all share."
Even when unorganized groups are discussed, at least in treatc
ments o "pressure groups" and "group theory," the word "group"
is used in such a way that it means "a number of individuals with
a common interest." It would o course be reasonable to label even a
number of people selected at random (and thus without any comJ_Don
interc t or unifying characteristic) as a "group"; but most dtscusSions
of group behavior seem to deal mainly with groups that do have
common interests. As Anhur Bentley, the founder of the "group
theory" o modern political science, put it, ''there is no group without
its interest." The social psydtologist Raymond Cattell was equally
explicit, and stated that "every group hasits interest.u 10 This is also
the way the word "group" will be used here.
Just as those who bdong to an organization or a group can be
presumed to have a common interest, 11 so they obviously also have
purdy individual interests, diliercnt from those of the others in the
organi..ation or group. All of the members of a labor union, for
example, have a common interest in higher wages, but at the same
time each worker ha.. a unique interest in his personal income, whicjl
depends not only on the rate of wages but also on the length of time
that he works,
8, R. M. M:aclvu, "lntc c,U," Ent.'yclo(Httd/4. tJ/ t!J8 SotUt/ Sd fJus, VII (New York:
Macmilhan., 1932), 147.
9. Anhul' Bentltty, TAt: PrtX #
;J
GOIIN"nme>lll
(Evanaton,
m.:
Principia Press,
(New York: Alircd A. Knopf, 1958), pp.H-35. See .al10 Sidney Vrbll,
Sm#JI G fiJ tmd Politi"dl BtlttJviM (Priner:ton, N.J.: Prin<:cc University Preu,
1961), pp. 12-ll.
Prot-4JJ
faction 1 h u are l)ppostd to ont' anotht!:r. 'I"hn fa(t doe! not weakcti the .assumption
m<i!dc h rt that organizations exist to servt' the :ommon irttcrC tt of membc;t$ for du::
ul!ump ion does not imply that intragroup conflic:t ill\ nglected. The opposmg group"
wlthin an organization otdinarily have $0MC intttrest in rommon (if not, wb wQuld
chey maintain the organiza iofl?), and the membe-rs of any subgroup or fa(tlon alt-o
have a M:patatc c;ommon intert'$t of their own. They will ind:d o( en hue: a
(Ort'IP'IQ.Il purpose in defeitin,Q' some othe-r ubaJ:rQup or faction. The approach u
here doe$ not. neal t the: confli"t wi hin groups and ol'$'anizat:il)na, then, bocau e It
ooruidet.s each organization ;U a unit only to the extent that it docs in f attempt . o
serve a common int;rest, and comidc:t.10 the Yarious subgroupt
the relevant \lftlt'
with ec:ammo,q. J,ntcrefit& to nalyze the facrional trite.
B.
gina! cost equals price and to ignore the effects of its extra output on
the position of the industry. It is true that the net result is that all
firtrts are worse off, but this does not mean that every firtrt has not
maximized its profits. If a firm, foreseeing the fall in price resulting
from the increase in industry output, were to restrict its own output,
it would lose more than ever, for its price would fall quite as much
in any case and it would have a smaller output as well. A firm in a
perfectly competitive market gets only a small part of the benefit (or
a small share of the industry's extra revenue) resulting from a
reduction in that firm's output.
10
14. For
11
f ll'=r discussion of thi$ question see Man(m' Olson, Jr., and David
ot
DtmQ
Caroh.na Preu, 1960), especially note I, pp. 95-96, For c:x.ainple, i.n 1947 the Natiofial
A&IIOCi.uioq of Manuiactqren: spC'nt over $4.6 million, and <t'ller :tomcwhat longtr
period the Amcdcall Medic.d AsliOCiation spent u much on a c JmpaiaP against
compui: Qry health insur nc:c.
17. "If the full ruth were ll:Vflit known ... lobbyi g. in all ita ramiiication$,.Would
prove tQ be a billion dol!;ar indu&try." tJ,S. Congress, lic>ute, SC'Ic:<t Committee on
bbying Activiti t;,,,R port, 81st Cong., 2nd Sc:ss, (1950), a111 quoted in the C< n,nt
cssco l c:opdition for the poli ic.al $truggle of the mali:K\'1," Sf: t: hu, Polltl"al Pmi,e-tl
11
; c:onc.lu&loo
13
ts
cannot finance its most basic and vital activities without n::sort
;\tt::
Weber providt'
notable example:
11.
releva t SitUation mlJht changej there: would be other !Dea.rt& of pwu1i.n.g intem:u
but
tru
thi&
tht
'
did not confront some of the same problems in the union that they
meet in the market, since their efforts in both places have some of the
same purposes.
However similar the purposes may be, critics may object that atti
tudes in organizations are not at all like those in markets. In organizatiom, an emotional or ideological dement is often also involved.
Does this make the argument offered here practically irrelevant?
relevant .:u:
1...t
l,leti.Q
It u ' ,
t;t.t
'
OUt!lf!
c
.
all
to the
mtc: cu o_f other$ doe. l!ii ist. B t it i cYen more certain that the man of mea do not
act w u way, and tt 1s an mducuon ftom experience: that they cannot do so and
ht ug out 50(;Jcty
c:u
15
SQ-69.
14
but must rely on taxation, is that the most fundamental services a
nationstate provides are, in one important respect, like the higher
price in a competitive market: they must bo available to everyone
if they aro available to anyone. The basic and most elementary
goods or services provided by government, like defense and police
protection, and the system of law and order generally, are such that
they go to everyone or practically everyone in the nation. It would
obviously not be feasible, if indeed it wore possible, to deny the
protection provided by the military services, the police, and the courts
to those who did not voluntarily pay their share of the costs o
government, and taxation is accordingly necessary, The common or
collective benefits provided by governments are usually called "public
goods" by economists, and the concept of public goods is one of the
oldest and most important ideas in the study l)f public finance. A
common, collective, or public good is here defined as any good such
thar, if any person X, in a group X,, . ,X,, .. ,X. consumes it,
it cannot feasibly be withheld from the others in that group.'' In
20, See, however, $CCtlon E of this ch; pttr 1 on "exclusive'" and "inclusive" a:roups.
21. Thi.t. simple definition foouse$ up(ln two points that are important in .he pmenf
contc::xt. The Ar t point iJ that mo:!.t collective goodt. c.an only be defil\cd wtth re.t.pect
to some pecific gto Jp, One Cllettivc at>Od gCX:$ to one a:roup of people, anQthet
collccdve good to anothct group; ooc may br:nefit the whole world, anodw only two
spc:<:iAc people. Moreover, some s:oods arc collettive goods to tho!lt ,in .o gtoup and
t the 5ame time private goods to thoM i.n afiOth('.!, b USi! some mdmduats r.an, be
kept from c:oP5Umi.ng them and oth rs r::an't, 'rake for example!: the: par de that a
c:oll 'iv good to 2.1! thos-e who live in tall bi.Jildings ov :tluoking the par de rou,e,
but which ppcan to btl!' a priv:. te good {0 those who can R it only by buyij'lg tickt'ts
for a seat In the s ands along: the way. The sc<;ond point iii- that 011Cc th levant
group has b :n defined, the defil'litiun u ed here, lik; Musgrav :'.t, distinauishe:s ,;ol..
loc:tl.ve good in tctms of infea lbility of exdudins potcn iiiil consumers of Uk good.
'thi.!i approa'"h is used because oollc;cdve good' produced by' organi ation& of all kindt
&e;m to be such that c ::lusion b normally not Ma,ible. To be sure, fur some .:::olte ;tivc
goodt it is physically pouible to practi.ce t'll: luslon. Bu[, as Head hu shown, it i& ,;.Qt
ncee.ssary thu exdusioo be technically impossible; it i:5- only neccnary th t, t tJ;e
infeuibl!!: or u 11 :c()Oomi, Head haJ dso shown most clc:.rly that nonexch.ld; billly 1.$
only one of two basic element' in the (aditioC al \lndentandins of J)\lbHc good . 'nu:
<>ther, he points ou . is ")ointi\CU of 1upply." A gOQd has "jointnen" if makinB it avail
able tQ one in.dividual means tha It tan be easily ot freely s1.1pplied o othen a' well.
'I'he pol;tt case of jQintness w ; uld be S;tmuel&on' pure public good, whk;h i$ a good
s\lch that additional consumption of jt by one indliiidual r;1(1('s not dimini,h tht'
amoun ..vailablc to others. :By the dcl\nitioo 1.Ued here, joi.otness not a n::<:esAI')'
auributc: of public good. As l; et parts of this chapter will show, at if:!:ast one rype
Qf (oll dve good t:;Qnsiderc::d here aMbits no jQintness whatever, nd ew if any
wot.tld have ,h degr of )ointneJ' ncedt'd o qualify ill- pure p1,1bHc goods. Notic:thlll!
leu, m t of the oll4Ctivc goods to b4: studied ere o display a l..rge m sure of
jointness. Oo the defi.1\ition and importan. of pubhc goo(h, su: John 0. H d;
15
other wo ds, those who do not purchase or pay for any of the public
or collecll.ve good cannot be excluded or kept from sharing in the
consumptiOn of the good, u they can where noncollective goods are
concerned.
Stude?ts of public finance have, however, neglected the fact that
the tzt'hte m t of any common goal or the satisfa tion of 111ny
t:()fllmon mterell mlfans that a publi or collective good has be
provldU for that group." 2 The very fact that a goal or purpose is
common to a gro p m ans that no one in the group is t:xduded from
the eoefit or sat1sfact1on brought about by its achievement. As the
opem g aragraphs of this chapter indiGated, almost all groups and
org mzattons have the purpose of serving the common interests of
e r me ber.s, MJt. M. Maelver puts it, "Persons ., , have <:ammon
nt r s s 1n the degree to which they participate in a cause , , , which
'?d!VlS!bl embr ces them all." 28 It is of the essence of an organlza.
uon that It prov1des an inseparable, generalized benefit. It follows
that the provision of public or collective goods is the fundamental
f nctlon of or'!"'nizatio s generally. A state is first of all an organiza.
non that prov1des public goods for its members, the citizens; and
oth r types of organizations similarly provide collective goods for
thar members.
And ju t as. a stat cann?t support itself by voluntary contributions,
or by .sel ng tts bas1c serv1ces on the market, neither can other large
organ1zat10ns support themselves without providing some sanction,
" ublic Good and Publie Poli!!y,'' PubUt.' p,,ilnN, VQt, XVII, no, 3 (1962), 197-219
R dtard Musgrav , 'l'lttt Th Wry of PubUt' F 'n11nc.:- (New York: McQr.nrrHill 1959):
Pa J. A. Samuc:l ti, "The Pure "nll!ory of Publi .Expenditure," "Oiagl"a ti<; EJ:
posnt fl ?,f ,A Th ry of Public E:cpenditur.eo," and "Aspects of llubli JS.xpcnditure
'l"heones:, w R4't ew CJ/ E&'Qnomi"r tZntl SJt tilli'"' XX.Xl/1 (N'ovembt:r 1951), 387390, XXXV ! (Nov<m"':r 19$5), 350-356, 011d X (November 1958), 3 2-3 8. For
$0'?ewhat d1 .,r t op1naom about the usefulnc:u of the CQncept of public good"
Juh1.1$ M,argohs, A mmcnt on the Pure Th.ory of Public Expcnditur ," RtlliiW 9f
cQru.mu"r tmd
thr:t, XXVU (NI)vtmbti:f 195.5), 347......349, nd Gc::thatd CoJm,
T eory Pubhc J!; pendltul'es," .A.rm11it of lh ,Am.ffltan A.r'tklttmy of PDJ;titl.l flni
S..W S"'"". C XXX111 (January 19 6), 1-11.
. 22 ',f'herc: as no DC\CC:s ity that :a public good to one group in 1aociety j necc..arily
n the Interest Of !he let)' as a whoJ . J I$ a tariff could 1,. pubJj(: good to tb
mdu try thar sought 1t, so the:: t ::tnoval of the tariff' cou1d be a public .iQ(ld t tb
who ton.sumed. the jndu:stry's produc . Thii; i1 equally trye when the publ
con ept .'$ i phcd o ly, to alve nmeots; for a military apc::nditurQ, or 1 tariff, ot
;tl'l, zmgration rentJ(;tion that 1s
public good to one t:.Owatry could be a tpgbUc
bad to another country, .and harmful to world $1Xic::ty 11 a whole.
23. R. M. Macher in E11f?Jidoptlttdi4 >/
S9!:W sdnle . vn, 147.
,,#
16
or some attraction distinct from the public good itsc:lf, that will lead
individuals to hdp bear the burdens of maintaining e o gani.za?on.
The individual member of the typical large organtzatlon IS a
position analogous to that of the fir in a perfect! competitive
market, or the taxpayer in the state: hi own c or will not have a
noticeable effect on the situation of h1s organizatiOn, aod he ean
enjoy any improvements bro ght ab ut y others whether or not he
has worked in support of his organzation.
. .
There is no suggestion here that . states or other orgamzatl ns
provide only public or collective goods. Governments often prov1de
noncollective goods like deetric power, for example, and they usually
sell such goods on the market much as private firms wo ld. do.
Moreover, as later parts of this study will argue, large orgamzau ns
that are not able to make membership compulsory must also prov1de
some noncollective goods in order to give potential "?e bers
incentive to join. Still, collective goods are the characteristic orgaruzational goods, for ordinary noncollective goods can always be provided by individual action, and only where common pur ses or
collective goods are concerned is organization or group action ever
indispensable.u
C. 'l'HI 'l,'IW)!110NAL 'l'HIORY OP GII.OIJPS
Ther is a traditional theory of group behavior that im lici y
assumes t private groups and associations operate acco dtng .to
principles en ely different from those that govern the rdauonships
among firms in e maketplace or between taxpayers and the state.
This "group thco ' appears to be one of the principal concerns. of
many political scient1 in the United Sta es, as well s a IIiaJ r.
11
preoccupation of many ologists and soc1al psyc olog1sts. This
traditional theory of group e mo t other theories, has.been de
veloped by different writers WI varymg views, and .there IS accordingly an inevitable injustice in y attempt to gtve a common
24, It docs n01:, how.,vcr, follow 1hat Qr ed
good. c:
Grou,pt.."'
"
., .,
of thu dlaptc::t,
rna
17
human pro,PtD.Nty
LowiC , SrK.'I.I
Orfl"llialioo (Now York: Rloohan & Co., 19i8); Truman, .;pedal pp. 14-43.
28. Gcorr Silnmel, Coof/in ..J II < Wb I G,...p Atlilia#oot, u
Klll't WoUI
towatdl groqp$; see Coyle, SfX'illl
rt