Solutions to overcome collective action problem
By Collective action we mean to follow the goal or set of goals by more than one person, together to attain the fruitful gains. It means following those set of standards of social integration as well as those factors that leads to the attainment of maximum benefit from the combined action of group, whether it is social, economical, political, or any other field. It means in pursuit of shared Interest (Marshal 1998), framing rules for profitable utilization of resources, and voluntary methods. In the Social arena, its theories emphasized how can Collective Action be linked to social institutions for performing welfare activities, whereas economically it is concerned with the provision of public goods, other collective consumptions through the collaboration of two or more individuals, and the impact of external forces on group behavior.
The capacity to perform the tasks that affect the whole community or group is a most important function of collective action. This involves Management of natural resources, providing facilities for joint Investment by small farmers, dissemination of technologies, Marketing, group empowerment, many other development policies etc. If group of people have a common interest then they’ll naturally get together and fight for the common goal, but according to Olson:
“But 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. It does not follow, because all of the individuals in a group would gain if they achieved their 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 their common interest, rational, self-interested individuals will not act to achieve their common or group interests.”( Moffet Mike, Special Interests and Economic Policy).
This means in the Collective Action it is not necessary that all would gain and achieve their group objective. There are self interested Individuals too in groups that goes contrary to the Interest of the group. For e.g. In Perfect Competition Market whereby there are very large number of producers of an identical good. In this condition, all firms will end up charging the same price, a price that leads to a zero economic profit. If the firms decides to cut their output and charge a price higher than the one that prevails under perfect competition all firms would make a profit. But according to Olson, this does not happen, since there is a uniform price in a market, therefore a firm cannot get a higher price unless all the other firms in the industry have this higher price. But here a firm has self-interest, it wants to sell as much as it can, until its cost of producing another unit exceeds the price of that unit. Therefore here each individual’s firm’s interest is different to that of other firms, for more the firms sell, there will be lower price and income for any given firm and this is also quite true that if a group of firms cannot reach a collusive agreement in the marketplace, they will not be able to form a group and lobby the government for help.
The solution to this problem as advised would be to put in place a price floor, whereby producers of this good should not charge a price lower than fixed price. Another solution could be Government passing a law fixing the quantity each firm can produce and that no new businesses could enter the market.
The biggest problem in collective action may arise is in the procurement of public goods whereby people might free ride in a hope that they can get an access to anything what others will give. Free riders are the persons, who are reluctant to shoulder the responsibility of sharing the cost of production but consumes more then their share, whereas the related problem is the overuse of common pool resources creating “tragedy of the commons”. Another dilemma that involves collective Action problem is of social mobilization whereby everyone will join with a realization that all will be benefited if they join, but hereby if a singe Individual will act without others then he will fare badly or the situation may arise that no one may act out of fear that others will not join. For e.g. this happens during labor strike or at the start of the dancing party.
It also happens that sometimes the behavior and looks of the people are so similar that we make a judgment that particular ‘system’ is constituted will work reasonably well. But practically this is not quite true. Another problem that crops up is the difference of opinions, ideologies, their behavior patterns that each individual holds when joining in Collective group, but we design a structure that takes into account just few common traits in human but neglecting the point that potential behavioral pattern of the persons may widely differ.
Firstly in very large group, each member is so small in relation to the total that any of his actions do not have any impact on the whole group. Secondly, in larger group hardly anybody know each other, and the group will ipso facto not be a friendship group; so there won’t be any effect on the group if one person fails to make for a common cause, as contrast to it smaller groups can exert social as well as economic pressures, they are able to get around the problem. And the result could be that smaller groups or what we call “Special Interest Groups” can have the policies enacted, which could be harmful for the nation.
Even Ostrom states that, “All efforts to organize collective action, whether by an external ruler, an entrepreneur, or a set of principals who wish to gain collective benefits, must address a common set of problems.” These problems are coping with free-riding, solving commitment problems, arranging for the supply of new institutions, and monitoring individual compliance with sets of rules.” She further says that those groups who are able to organize and govern their behavior successfully follows some fixed principles like their Group boundaries are clearly defined, the rules for the utilization of collective goods should be well matched to local needs and conditions, individuals who are affected by these rules also participate in modifying the rules, the community members have the right to devise their own rules, there is a monitoring system for each member, A graduated system of sanctions is used, the members in a community have access to low-cost conflict resolution mechanisms etc. (Rheingold Howard, 2005)
The groups that have learned to solve complex collective action dilemmas possess the ability to harness more resources and create a larger pool of wealth, spread more widely, than groups that fail.
The Free rider problem can be overcome by providing the, “selective incentives” or positive inducements to those Individuals who make donations to nonprofit organizations. For example Tax incentive for donations is the best way for “selective incentives”. (Shaoguang Wang, Money and Autonomy, 2005) that makes exclusion impossible.
A Social pressure can also be most effective to overcome the Free rider problem. Community leaders can be grouped to recognize the problem and organize the meetings to chart out the solution to solve the problem. And those who are hesitant to cooperate should be ostracized. An alternate method to overcome the problem is the coercion of the government and adoption of the measures by the Government so that no one can be called Free rider.
A system can be created which can generate personal ties when they are needed. In organizations, the sharing of knowledge can go a long way in blocking the Collective Action Dilemma. Established roles, if are formed can streamline the decision-making and create legitimacy for decisions. In organizations and even in larger cultural groupings, shared values and a sense of collective identity can bring members close to each other to fulfill the common purpose. In markets, the price signals to identify the beneficial exchanges can help in the decision making process by the groups. Monitoring and sanctioning systems can substitute for interpersonal trust and along with that Norms of generalized reciprocity together with monitoring and sanctioning systems, can help overcome problems of collective Action.
Over and above, setting a common goal may go a long way to help the individuals understand their objectives and role, assess existing behaviors and to build a system that can utilize the behavior to achieve the goal.
1. Moffet Mike, Special Interests and Economic Policy, The logic of Collective Action, Available at economics.about.com http://economics.about.com/mbiopage.htm
2. Shaoguang Wang, February 5, 2000, Money and Autonomy, Dilemma Faced by the Nonprofit Sector, Department of Government and Public Administration, The Chinese University of Hong Kong, Available at http://22.214.171.124/search?q=cache:16_9UBV81pQJ:www.cuhk.edu.hk/gpa/wang_files/Money.pdf+Shaoguang+Wang,+Money+and+Autonomy,+Dilemma+Faced+by+the+Nonprofit+Sector,+Department+of+Government+and+Public+Administration,+The+Chinese+University+of+Hong+Kong&hl=en&gl=in&ct=clnk&cd=1&client=firefox-a
3. Rheingold Howard, 2005, Institutions for Collective Action, Available at Toward a Literacy of Cooperation, http://cooperation.smartmobs.com/cs/node/164
Monica Di Gregorio, Konrad Hagedorn, Michael Kirk, Benedikt Korf, Nancy
McCarthy, Ruth Meinzen-Dick, Brent Swallow, 2004, The Role of Property Rights and Collective Action for Poverty Reduction, Available at http://126.96.36.199/search?q=cache:iRXoeC0gqwEJ:www.wider.unu.edu/conference/conference-2004-2/conference-2004-2-papers/DiGregorio.pdf+Marshal+1998+for+Collective+Action&hl=en&gl=in&ct=clnk&cd=3&client=firefox-a