Collective Action Problem

To further their interests, individuals must sometimes act collectively. It is easy to assume that individuals with shared—that is, collective—interests will jointly pursue those interests: that workers will form unions and lobby for higher wages, that states will agree to cut carbon dioxide emissions to preserve the environment, and that commuters will use public transport to reduce traffic congestion. Yet as each of these examples shows, collective action can actually be quite problematic. Workers do form unions and states do sometimes sign environmental treaties, but it cannot simply be assumed that collective action will occur.

Free riding is one particular problem that can stymie collective action. In situations where the benefits of collective action accrue to all the members of the group regardless of who contributed to its provision, individuals may reason that they are better off not contributing to the collective cause and instead free riding on the efforts of others. The problem is that if everyone in a group reasons in this way, then no collective action will occur, and all the members of the group may end up worse off relative to when they share the costs of collective action. The collective action problem was clearly stated by Mancur Olson in The Logic of Collective Action:

Any group or organization, large or small, works for some collective benefit that by its very nature will benefit all the members of that group in question. Though all the members of a group therefore have a common interest in obtaining this collective benefit, they have no common interest in paying the cost of providing that collective good. Each would prefer that the others pay the entire cost, and ordinarily would get any benefit provided whether he had borne part of the cost or not. (Olson, 1965, p. 21)

Free riding is a particularly important source of collective action problems. There are, however, other reasons why collective action might or might not occur. Just a few will be mentioned here: