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Collective Action
The Impact of Selective Incentives
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By ANDREAS P. KYRIACOU*
ABSTRACT. I integrate the notion of intrinsic motivation, applied to
economics most notably by Frey (1997), into the logic of individual
contributions toward collective goods as analyzed since Olson ([1965]
1971). This illuminates the many and various ways through which the
intrinsic motivation to contribute toward such goods can be crowded
out by the application of selective incentives. I suggest that the
crowding-out effect increases the cost to society of organizing the
provision of collective goods and argue in favor of designing selective
incentives that mitigate this effect.
[S]triving for the public happiness (in some concrete respect) and attaining
it cannot be neatly separated. Indeed the very act of going after the public
happiness is often the next best thing to actually having that happiness
. . . the benefit of collective action for an individual is not the difference
between the hoped-for result and the effort furnished by him or her, but
the sum of these two magnitudes! . . . [S]ince the output and objective of
collective action are ordinarily a public good available to all, the only way
in which an individual can raise the benefit accruing to him from the
collective action is by stepping up his own input, his effort on behalf of the
public policy he espouses. Far from shirking and attempting to get a free
ride, a truly maximizing individual will attempt to be as activist as he can
manage, within the limits set by his other essential activities and objectives.
(Hirschman 1977: 8586)
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THE INDIVIDUALS I ANALYZE in this article are selfish in that they have a
preference for the consumption of the public good, but they also have
altruistic preferences in that they have a taste for the consumption of
the public good by others. Both these egoistic and altruistic preferences are instrumental or results-oriented in that their satisfaction
depends on the actual consumption of the public good by the
individual or others.
Importantly, individuals are moreover assumed to be intrinsically
motivated, such that they receive utility from the very act of contributing toward the public good. This participation altruism (Margolis
1982; Olson 1982) must be distinguished from the previous resultoriented variety. It corresponds to Andreonis (1989) warm glow
from the very act of giving. He calls this selfish altruism to distinguish it from the nonselfish type or pure altruism, which presumably
is the desire for a public good supply so that others can enjoy the
good. Selfish altruism means that people get some private benefit from
the very act of giving. Similarly, Elster (1985) identifies intrinsic
motivation as a motivation that is selfish (in the sense of Andreonis
selfish altruism) and also process-oriented (not outcome-oriented).
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HAVING DEFINED INTRINSIC MOTIVATION as a preference and not a constraint, it is now time to incorporate it into a model of individual
contributions toward collective goods that also allows for the application of selective incentives. Consider an individual faced with the
choice of contributing or not to the public good. Following Buchanans (1968) probabilistic approach to the free riders choice, the
individual would contribute to the collective good if the expected
value from doing so is larger than that from free riding (see Table 1).
The probability that others contribute when the above individual
does is gc, while g n is the probability that others contribute when he
doesnt.2 b is the value of collective good to the individual when the
collective good is provided, while c is the cost of individual contribution. First, b decreases with the number of individuals in the group
(N) when the good is rival bN < 0 and does not change when it is not.
This is the same as saying that the total value of the public good is
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Table 1
Buchanans Approach Toward Contributing to the Public Good
Individual contributes
Individual does not contribute
Others
Contribute
Others Do
Not Contribute
Expected
Value
(b - c)gc
bgn
(-c)(1 - gc)
0(1 - gn)
bgc - c
bgn
Table 2
Buchanans Approach Plus Altruistic Preferences
Others
Contribute
Others Do
Not Contribute
Expected
Value
bgc + v + sp + ap Individual
(b + v + sp + ap - (v + sp + ap contributes
c)gc
c - d)(1 - gc)
c - d(1 - gc)
n n
n
n
n
Individual does (b - s )g
-s (1 - g )
bg - sn
not contribute
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The original Olson free rider in large groups was the result of b < c,
assuming that b = 0 (collective good rival in consumption) and v = 0
(miniscule impact on collective good from individual contribution).
No attention was paid to g cs or g ns. In the presence of selective
incentives, the individual would contribute in large-number settings if
sp > c - sn (sp > c in the case of positive selective incentives, or sn > c
in the case of negative ones).
The intrinsic benefit from the very act of contributing is captured by
ap (process-based altruism). Does changing the size of the group affect
ap? Several insights suggest so. First, recall Elster (1985) and Margolis
(1982), who argue that intrinsic altruism partly depends on instrumental altruism, insofar as peoples enjoyment from the very act of
contributing depends to some extent on the knowledge that their
contribution can have some impact on the collective good available to
others. Since instrumental concerns (v) increase in smaller group
settings, then intrinsic motivation may also do so. Second, insofar as
intrinsic motivation is fostered by the external acknowledgment of
ones deeds, then intrinsic motivation is likely to be important in
small-group settings, where communication and interaction is stronger
(Frey and Bohnet 1996; see also the review by Udhn 1993). Thus,
reducing N would also increase ap. Conversely, increasing N would
reduce but not cancel out ap: the possibility that v might tend to zero
in very large number settings does not imply that ap will do so. The
importance of intrinsic motivation in small-number settings reinforces
Olsons ([1965] 1971) result on the facility of collective action by small
groups in the absence of selective incentives.
The psychological discomfort or cost from the knowledge that
others may free ride on ones contribution is represented by d
(Tullock 1971). This cost is likely to increase with N and thus the
number of potential free riders (dN > 0). Several authors have suggested a negative relationship between the intrinsic or psychic benefit
from the very act of contributing (ap) and the psychic cost from the
knowledge that others free ride on ones contribution (d). Elster (1989:
180) states: [I]f people feel that they are taken advantage of, why
should they not rip off the system in return. Klasko (1992) finds that
the propensity to evade taxes systematically increases with the perception of tax avoidance by other persons. Frey (1997) argues that
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may be creating a nation where citizens disrespect for tax laws will
expand to disrespect for other laws. Conceptually, this motivational
spillover effect is a negative externality: it is not taken into account by
those applying the selective incentives. Insofar as such a negative
spillover effect occurs, it will require the generalization of selective
incentives to other areas, something that will further increase the cost
of collective action.
A parallel can be made here with the literature on rent seeking
(Tollison 1982). An individual rent seeker generates social costs for
society, but a related and important problem is that his or her activities
may inspire similar behavior in others, not least in the form of the use
of scarce resources in an attempt to neutralize the costs to them of the
others rent-seeking efforts. The initial rent seeker may therefore set in
place a spiraling of rent-seeking activities to the detriment of social
welfare. Similarly, the application of selective incentives for the provision of one collective good maybecause of the spillover effect
set in train the need to generalize these external incentive structures
to provide other public goods, something that generates additional
costs for society.
VI
Conclusions
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