Anarchists and libertarians fail to acknowledge the nature of collective action problems, and the ways in which various modalities (including hierarchical organization, of which government is one example) are used to address it. The trick is to most effectively blend these different modalities, not to reduce reality to a caricature that allows us to pretend that that challenge doesn’t really exist.
(There’s a famous example used in economic literature, of a barge-pullers guild in 19th century China, that hired overseers to whip slackers in order to eliminate the free-rider problem. In other words, the barge-pullers themselves chose to impose on themselves an overseer in their own collective interest. It’s a strange and complex world in which we live; we need first and foremost to face up to that fact before rendering judgment in broad brushstrokes that fails to acknowledge fundamental aspects of reality.)
The “problem” with government isn’t its existence or the fact that people rely on it for certain purposes, but what in economic, legal and managerial theory is called “the agency problem.” In a popular sovereignty, government is constituted as an agent of the people, its principal. This is in many ways a reversal of most ancient notions of sovereignty, which saw the people as “subjects” of the sovereign. The problem, or challenge, is the degree to which reality can be made to correspond to theory.
In one view, this reversal of theoretical roles occurred organically, because in the crucible of European internecine warfare the crown’s (particularly the English crown’s) need for revenue to finance such wars drove an ongoing liberalization of the political economy to generate such revenue, In other words, international competition drove sovereigns to empower ever-more ever-broadening swathes of their citizenry, since those that did so fared better in the wars among relatively small and easily swallowed states.
In the Glorious Revolution in England in 1688, this reversal was institutionally recognized, laying the groundwork for the American revolution’s clearer codification of that institutional shift in its break from Great Britain. The challenge then became aligning the agent’s action’s to the principal’s interests, a challenge compounded by the size and diffuseness of the principal in comparison to the agent. This is the ongoing challenge we face.
A centralized agent ostensibly working on behalf of a diffuse principal can always exploit the transaction costs facing the principal in its translation of some hypothetical “popular will” into a mandate to the agent in order to serve the agent’s interests at the expense of the principal’s. This is the challenge we must continually face. But to then leap from the reality of that challenge to the conclusion that the existence of the agent is a sign of our own self-enslavement neglects the real need we have for such an agent, the real function it performs, and the costs of choosing to “liberate” ourselves from any centralized agency through which to address the collective action problems that face us.
The bottom line is that we live in a complex and subtle world, and that our neat reductions of it, our caricatures of reality, do not serve us well. While it’s true that, historically, governments of large political states were established through military conquest and exploitation, it is also true that the benefits of civilization are a derivative of that brutality, and that there are indeed benefits (as well as costs) of civilization, of a large-scale division of labor which freed up some to do things other than produce food. Our challenge now is not to feed our emotionally gratifying sense of superiority to “the Sheeple” for “knowing” that government is our oppressor, but rather to face, intelligently and effectively, the real challenges and real enterprise of aligning the actions of our agent with the interests of its principal, of making government ever more something that serves the interests of the people in general and ever less something that serves the interests of the few who capture it for their own benefit.
And that is a complex challenge, a complex enterprise, best framed in precise, analytical ways. It is our task to work to maximize the robustness, fairness and sustainability of our political economy, by applying disciplined reason and imagination to methodically gathered and verified information in service to our shared humanity. Unfortunately, caricatures of reality like those popular among ideologues of all stripes do nothing to help us accomplish that, and do much to interfere with our ability to do so effectively.
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(This essay is an elaboration of Collective Action (and Time Horizon) Problems).
Imagine that I offered each person in a group the following deal: You can agree to give me $30, and in return I’ll give $10 to each and every person in the group, including you. I’ll give the $10 to everyone, whether they paid $30 or not, for each person that does pay $30.
Each person is faced with an offer to pay $30 dollars in return for, to him or her individually, $10, a bad deal for that individual (a loss of $20). But since everyone else in the group also each gets $10, for any group with a membership of more than three people, it is a bigger return to the group than cost to the group. If there are 10 people in the group, and everyone makes the deal, they each pay $30 and each get $100 in return, for a net gain of $70. However, if one doesn’t pay, he or she gets $90 outright (9 people taking the deal times $10 to each person in the group) while each of the others only get a net gain of $60 ($90 minus the $30 paid in). The individual incentive is not to pay in, even though everyone is better off the more people who do, with everyone coming out ahead if 3 or more people pay in. Those who don’t pay in, however, always do better than those who do (the “free rider problem”).
This dynamic is a major underlying force in the generation of social institutions, which to a large degree exist to overcome this collective action problem. There are many scenarios woven throughout our collective existence in which people benefit from some form of cooperation (even those forms that establish the rules for competition, such as the enforcement of property rights in service to the functioning of markets), but are tempted by individual incentives to cheat or fail to act cooperatively. Our laws, our contracts, our governments, our social norms, our ideologies, all are laden with mechanisms that have evolved with the purpose of creating mutual commitment mechanisms, enforced either externally by social institutions or internally to one’s own psychological make-up. Combined, they form social institutional technologies which are robust sets of memes self-replicating and spreading throughout our shared cognitive landscape (see the essays linked to in the first box at Catalogue of Selected Posts).
It has always been a dynamic at the heart of intertribal and international relations, in which sovereign societies must strategically interact in a world with limited international legal enforcement mechanisms. With increasing political, economic and cultural globalization, and information, communication and transportation technologies make the world ever smaller and more tightly integrated, examining these dynamics is one critical component of understanding the shared geopolitical landscape in which we live.
“The War of the Woods”:
Imagine that long ago, two countries, Apestonia and Pulgalandia, had a forest on their border. Both countries desperately needed the wood in the forest, because it was both their primary building material and their fuel. Each country was faced with the choice of either dividing the forest evenly, or attacking the other and trying to get more of the forest for themself.
There are 1000 acres of forest between the two countries. If the two countries agree to draw their border right through the middle of it, they can each have 500 acres of forest, which they both desperately need.
But if one attacks quickly while the other one is planning on sharing the forest evenly (and so isn’t prepared for war), the one that attacks will capture 700 acres of the forest, 300 acres will be burnt or destroyed during the fighting, and the other will get zero acres. Since they are militarily evenly matched, if they both attack each other at the same time, 400 acres of forest will be destroyed in the fighting, and they’ll each end up with 300 acres of forest.
Here’s a table that summarizes these choices and outcomes:
Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate(attack) Cooperate(don’t attack) Apestonia: 500 Acres
Pulgalandia: 500 Acres Apestonia: 0 Acres
Pulgalandia: 700 Acres Don’t Cooperate
(attack) Apestonia: 700 Acres
Pulgalandia: 0 Acres Apestonia: 300 Acres
Pulgalandia: 300 Acres
Each country faces the following logic: “We don’t know what the other country will do. If they decide to cooperate (not attack first), we will get 500 acres if we also cooperate, but 700 acres if we don’t (if we attack unprovoked). Therefore, if they cooperate, we are better off not cooperating (attacking). If they decide not to cooperate (to attack), then we will get zero acres if we cooperate (don’t attack), but 300 acres if we don’t (if we attack). Therefore, no matter what the other country does, we are better off attacking.”
However, if both countries follow that logic, they each end up with 300 acres, though if they had cooperated and split the forest, they would have each ended up with 500 acres. So, while each country has an incentive to attack, if they can find a way to commit one another to cooperation, they both benefit.
So, even though they have a conflict over the forest, they have a shared interest in finding a way to commit one another to cooperating for mutual benefit. This is often the case, with war being costly in blood and treasure, and peaceful coexistence (and even mutually beneficial exchange) being far more conducive to general prosperity.
Historically, real tribes and countries have faced this challenge. Some have said, “Okay, let’s agree to cooperate, and to make sure no one cheats, we’ll exchange hostages.” And then each country would send an important member of their own society (often the ruler’s daughter to be raised by the other ruler as his or her own) to go live with the other society, so that if either cheats, that hostage can be killed in retaliation. Later, countries sent the children of royalty to marry the children of royalty in other countries, sort of as “permanent hostages,” but also to bind the countries together so that they can act more cooperatively.
In the modern world, we’ve developed a much more elaborate system of international diplomacy, with embassies in each other’s countries, and treaties, and international organizations (like the United Nations). The European Union, whose roots go back to post-WWII efforts to create economic ties that would diminish the chances of resumed warfare, is perhaps the most advanced example of emerging international political economic consolidation
Not just internationally, but within nations, overcoming this collective action problem is a big part of why we’ve created many of the social institutions we’ve created. Our Constitution, our laws, even our religions, have developed in many ways to help make it easier for people to commit one another to mutually beneficial actions even when they have individual incentives to cheat or act in non-cooperative ways.
With modern technologies, modern weapons (such as nuclear weapons), modern transportation and communication technologies, an increasingly global economy, increasingly global environmental and natural resource issues, all nations in the world face many collective action problems. Our increasing political globalization is a complex tapestry of conflict and cooperation woven within this underlying logic.
So far, we’ve assumed that the countries were equally matched, and looked at the cost-benefit analysis of each when considering whether to attack the other or to live in peace. But what if they weren’t evenly matched? What if one was militarily stronger than the other? How would that change things?
If Apestonia were more powerful than Pulgalandia, then Apestonia would capture more forest than Pulgalandia would if the two went to war. If Apestonia were to attack first, perhaps it would capture the whole forest against the weaker Pulgalandia, losing only a small portion (let’s say a tenth) in battle. This outcome can be seen in the lower-left square of the two-by-two table, in which Apestonia attacks first and captures 900 acres, while Pulgalandia ends up with zero.
Conversely, if Pulgalandia attacks first, it will gain the advantage of surprise, but will still be facing a superior force, and might manage to capture and control 300 acres against Apestonia’s 500, 200 being lost to the destruction of war. This outcome is summarized in the upper-right square.
Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate (attack) Cooperate(don’t attack) Apestonia: 800 Acres
Pulgalandia: 200 Acres Apestonia: 500 Acres
Pulgalandia: 300 Acres Don’t Cooperate
(attack) Apestonia: 900 Acres
Pulgalandia: 0 Acres Apestonia: 600 Acres
Pulgalandia: 100 Acres
If they both attack each other at the same time, more forest will be lost to the destruction of battle, and neither will have the benefit of surprise, but Apestonia will still come out ahead. This is reflected in the lower-right square.
Because of the difference in power, when they negotiate a peace in which neither attacks, Apestonia can demand more of the forest than Pulgalandia. This is reflected in the upper-left square.
The logic that the two countries face is still similar to the logic that they faced when equally powerful. Neither knows what the other will do. Apestonia says to itself, “If Pulgalandia cooperates (doesn’t attack), we can get 800 acres for also cooperating (not attacking), or 900 acres for attacking. If Pulgalandia doesn’t attack, we are better off attacking. If Pulgalandia does attack, we can get 500 acres for not attacking first (only reacting to their attack), and 600 for attacking first, so, again, we are better off attacking. No matter what Pulgalandia does, we’re better off attacking.
Similarly, Pulgalandia is better off attacking no matter what Apestonia do. They say to themselves, “If Apestonia doesn’t attack first, we get 200 acres for also not attacking, but 300 for attacking, and if Apestonia does attack first, we get zero acres for not having attacked at the same time but 100 acres for having attacked at the same time. Either way, we’re better off attacking.”
But they both know this, and both know that they’d be better off not attacking one another. So, just as before, they need to invest in some way of committing one another to cooperation.
But the pay-offs can look different as well. It may be that, while the weaker Pulgalandia has incentives to attack no matter what the stronger Apestonia does, Apestonia gets a stronger benefit from cooperation. In the chart below, Pulgalandia still is better off attacking no matter what Apestonia does, and Apestonia, knowing that, knows it has to attack to get 550 rather than 500 acres. This is reflected in the table below:
Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate (attack) Cooperate(don’t attack) Apestonia: 800 Acres
Pulgalandia: 200 Acres Apestonia: 500 Acres
Pulgalandia: 250 Acres Don’t Cooperate
(attack) Apestonia: 650 Acres
Pulgalandia: 100 Acres Apestonia: 550 Acres
Pulgalandia: 200 Acres
But the most Pulgalandia can possibly get is 250 acres, if they attack before Apestonia does. Apestonia can just say, “look, we’ll give you 300 acres, 50 more than you can possibly get by attacking us. We’ll keep 700, which is more than we can get in any other way. If you attack, even while we are planning on cooperating with you, you lose 50 acres. You have no reason to attack, and we’re both better off than we can otherwise be.”
This is reflected in the table below, in which neither country has any incentive to do anything other than cooperate:
Pulgalandia Apestonia Cooperate(don’t attack) Don’t Cooperate (attack) Cooperate(don’t attack) Apestonia: 700 Acres
Pulgalandia: 300 Acres Apestonia: 500 Acres
Pulgalandia: 250 Acres Don’t Cooperate
(attack) Apestonia: 650 Acres
Pulgalandia: 100 Acres Apestonia: 550 Acres
Pulgalandia: 200 Acres
This is an illustration of how power is exercised among nations (or factions within a nation), even without having to exert any military force at all to do it. Nations know their relative power to one another, and when they negotiate treaties and deals they negotiate agreements that favor the more powerful. When the United States was formed, the more powerful (populous) states made sure that their power was reflected in the new government (by having representatives in Congress proportional to their population). When the United Nations charter was drafted, the most powerful nations insisted on forming a “security council,” that had far more power over the organization than other nations did.
Weak nations sometimes have the power of threatening to create problems for stronger nations, and thus get concessions to keep them calm. But nations also sometimes have leaders or governments that cease to act rationally, like the current government of North Korea seems to not be acting rationally.
Of course, if, in the end, the United States, worried about an irrational nuclear armed North Korea, gives them large amounts of aid to keep them from causing problems, then it will have turned out that North Korea’s “craziness” was pretty smart after all…. Strategies that “trump” rational considerations can be very rational strategies, including various ways of binding oneself to a limited range of options in order to increase one’s own bargaining power, or behaving in ways which make an opponent question one’s rationality in order to make them more accommodating for fear of erratic responses.
The scenarios presented above are highly simplified, leaving out many factors, such as uncertainty (real actors in such situations don’t know what the exact outcomes of various combinations of choices will be), more complexity in available options (not just binary choices), more interacting actors (not just two), more conflated issues being bargained over (not just a single resource), more costs and benefits to be considered (not just the amount of that single resource gained or lost), factional conflict across levels (different interest groups and political parties vying for different outcomes due to differing material interests and political ideological orientations), less centralized decision-making (not a single ruler making unlimited autocratic decisions, but rather in various ways collective decision-making processes impinging on the negotiations between actors constituted in that way), and various intrusions of emotional and irrational considerations, that even rational actors have to take into account.
But the complexity of the real world does not mean that abstraction from it is not a helpful tool in understanding underlying dynamics. Rather, it is a way of isolating individual dimensions of those underlying dynamics, gradually adding in enough of the complexity to begin to capture a deeper and subtler understanding of how our social institutional landscape really functions.
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Given my frequent reference to collective action problems (and time horizon problems), along with the endemic levels-of-analysis error committed by right-wing ideologues who insist that individual volition (as opposed to social contracts) should be relied on to produce all public goods, I thought it would be a good idea to have one post to refer to which explains them and their relevance simply and clearly.
Collective action problems are those situations in which a group of people have some public good which they can produce together, or which they must maintain together. Each individual contribution to its production or maintenance costs only the individual making it, but benefits every member of the relevant public. It is often the case that by a strictly self-interested individual calculation, the costs to the individual of contributing to the public good outweigh the benefits to that individual, though the benefits to the group (and thus to all individuals in it) outweigh the costs to the group (and thus to all individuals in it). (Put another way, the total benefits of each contribution outweigh the total costs, but since the individual bears the entire cost and receives only a fraction of the benefit, the costs to the contributor of contributing outweigh the benefits to the contributor).
The classic mathematical formulation of the problem is “the prisoners dilemma” (http://en.wikipedia.org/wiki/Prisoner’s_dilemma). In short, the scenario involves two partners in crime arrested and held in separate interrogation rooms. Each is offered a deal if he turns in the other. Since neither knows what the other will do, they each have to ask themselves what is the best choice for each possibility. If A doesn’t turn B in, then it is in B’s best interest to turn A in, and if A does turn B in, it is still in B’s best interest to turn A in. According to rational self-interest, B’s most logical choice is to turn A in. A faces exactly the same logic. They both turn each other in. But, if they had been able to coordinate their choice, and commit one another to it, they would have both been better off not turning one another in.
There are other classic formulations as well, such as Garrett Hardin’s “Tragedy of the Commons” (http://en.wikipedia.org/wiki/Tragedy_of_the_commons), and “the free rider problem” (http://en.wikipedia.org/wiki/Free_rider_problem).
When I was a high school social studies teacher, I taught my students about collective action problems using the following exercise: Using “classroom currency points” (ccps), I made the following offer to my thirty-or-so students: For each that chooses to pay me 10 ccps, I will give each and every person in the group 1 ccp, regardless of whether they chose to pay the 10 ccps or not. To avoid discussing any complexities at this point, let’s say that the decision is made in secret, no member of the group ever knows what any other individual member chose to do, and all members agree that their only goal in this exercise is to maximize their own individual wealth (the latter being, in practice, what students did). If each individual acts in his or her own rational self-interest, since there is a net cost of 9 ccps to accepting the offer (pay ten and get one back in return, along with everyone else), no one would choose to do so. However, if everyone does accept it, each person is made 20 ccps richer (pay 10, and get one back for each of the 30 students who paid). No matter how many people accept or reject the offer, those who chose not to take it will always be better off than those who chose to take it. In other words, rationally doing what best maximizes one’s own individual wealth (in this scenario) leads to an outcome in which everyone does worse than they would have done had they been able to enforce a cooperative agreement.
Even adding in some of the complexities I left out, communication without any mutually enforceable commitment mechanism doesn’t solve the problem, since each can assure the others that he or she will cooperate but then not actually do so, benefiting from others’ cooperation while not contributing him-or-herself as a result. Some enforcement mechanisms are informal, such as the loss of respect and reciprocal goodwill if non-cooperation is found out; and some are internalized, in the form of values and beliefs in which one feels shame at neglecting to do “the right thing,” and pride at doing the right thing. These are all aspects of the human and social institutional landscape, and all relevant factors in a complete analysis.
Returning to the basic model, it is not hypocritical, for instance, for someone to both support a higher carbon tax and yet not unilaterally pay to the government the amount they think it should be (though calling it “hypocritical” can act as an informal enforcement mechanism in some situations). The carbon tax is based on the calculation that we are all better off in the long run by paying it (and by having our carbon emissions affected by having to pay it), but the choice not to do so unilaterally is based on the calculation that the costs are borne by that individual only, in exchange for a very slight marginal decrease in carbon emissions. Even simply “driving less” faces the same logic: it inconveniences the individual, but does not fundamentally address the problem that is a function of widespread rather than isolated individual behaviors.
The lack of recognition of the difference between advocating for a social policy which incentivizes people to act in a certain way, and choosing to unilaterally act in that way, is an example of a “levels of analysis error,” analyzing social issues as if they can best be understood on the individual level of analysis. This error permeates Libertarian/Tea Party ideology, which doesn’t recognize the existence of public goods, and therefore of collective action problems.
Time horizon problems are similar to, and interactive with, collective action problems. A time horizon problem involves the fact that we quite reasonably value that which will be enjoyed or suffered closer to the present than that which will be enjoyed or suffered farther in the future. One psychological reason is that we cannot be certain that we will survive into that future, so delaying gratification risks never enjoying it, in proportion to how far into the future it is postponed, while delaying something unpleasant means possibly never having to suffer it, in proportion to how far into the future it is postponed. More generally, the present is visceral and certain, while the future is abstract and uncertain. This is why children have to learn to delay gratification, and most adults never get as good at it as would behoove them to be (though some overshoot the mark).
Collective action problems and time horizon problems combine in many instances to create a mutually reinforcing obstacle to widespread cooperation for mutual benefit. The classic example is global warming. Global warming is a global phenomenon, with every emission of Greenhouse Gases (GHGs) affecting the whole world equally (in regards to global warming), but the costs borne by each individual, corporation, and nation that engages in GHG emissions reduction. Compounding this massive, multilevel collective action problem is the time horizon problem: The costs of abatement are in the present, while the benefits lie in the future. Uncertainty plays into these obstacles: Convenient distrust of the overwhelming scholarship demonstrating the reality of the problem is easily mobilized in service to not confronting this combined collective action/time horizon problem.
In the real world, collective action and time horizon problems are nested and overlapping, across levels and among various swathes of shared interests, group identities, or social institutional entities. And the ways in which human minds work, embracing frames and narratives rather than, for the most part, the most rational arguments utilizing the most reliable data, combined with our capacities for empathy and selflessness, complicate the systemic dynamics involved further, creating, along with the multilevel and multisector nature of collective action and time horizon problem, both more complexity in the challenges being confronted, and more opportunity for resolution.
Both biological and cultural evolution are driven, to a large extent, by the combination of collective action and time horizon problems (more the former than the latter). As Economist Robert Frank argues in his book Passions Within Reason, emotions evolved in a certain branch of the animal kingdom in order to facilitate cooperation: The costs of angering others, and benefits of earning their heartfelt gratitude incentivize acting cooperatively. However, genetic and memetic selection occur at the individual level, so incentives to cheat also exist. (Cognitive Scientist George Lakoff, in his book The Political Mind, describes how the mind is “hard-wired,” so to speak, with a capacity for empathy, illustrating the neurological correlary to Frank’s thesis).
Social institutions arise and evolve primarily to augment and improve upon this haphazard function of emotions, with contracts and laws and taking the place of trust, and enforcement by the state taking the place of private retaliation. Four distinct modalities combine in various ways in particular social institution to better align individual to collective (and immediate to long-term) interests: Hierarchies, markets, norms, and ideologies. Hierarchies are systems of legitimate authority relying on formally codified and enforced rules. Markets are decentralized systems of multilateral exchange, usually facilitated by some form of currency. Norms are informal rules mutually enforced through decentralized social approval and disapproval. And ideologies are internalized beliefs and values enforced through self-policing and auto-sanctioned by cognitive dissonance (in the form of self-inflicted feelings of guilt or shame). Individual social institutions generally are comprised of some or all of these modalities, usually in combination, developing interdependently both within and across individual social institutions.
A great deal of theory and research, within a great many different disciplines and paradigms, has explicitly and implicitly been devoted to these dynamics. The complexity involved is, of course, far more extensive than I have indicated in this brief overview. But understanding the basics described in this post should be a requisite part of every human education, for it informs the nature of the challenges we face, and of the solutions available, in essential ways.
(See also The Mathematics of Conflict and Cooperation, for more elaboration of this model.)
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