By Ethan Hollander, Wabash College
Collective action problems emerge from situations where society could benefit if people contributed to a common cause, but where people don’t do so because contributing is costly to them. Oftentimes, the most fundamental political decision to be made is whether a collective action problem is worth solving in the first place.
Collective Decision-making
Decisions about how, or even if, we’re going to solve a collective action problem are inescapable features of modern society. In a way, they’re just another example of the kind of trade-off we make by deciding to live with others. By living with others, we lose the one-to-one relationship between what we do and the status of the public good.
Collective decision-making entails a sacrifice: We sometimes have to live with decisions that we ourselves wouldn’t have made.
Even though collective action problems are often the business of governments and states, these problems can arise even in the smallest society possible, like a society of just two people.
This article comes directly from content in the video series Democracy and Its Alternatives. Watch it now, on Wondrium.
Prisoner’s Dilemma
A two-player collective action problem is called a prisoner’s dilemma, and it gets its name from a classic example of the interaction in which two prisoners are brought in for questioning after robbing a bank and then speeding away from the scene in a stolen car.
The authorities have enough evidence to convict the men of the lesser charge: stealing the car. But to convict them of bank robbery, they need to get one of the prisoners to turn on the other.
So, they question both suspects—in separate rooms, of course. And they explain that if both suspects remain silent, they’ll both go to jail for a year for the lesser offense of car theft. On the other hand, if they both confess, they’ll go to jail for the more serious crime of bank robbery (minus a small reduction for cooperating).
The kicker is that if one of the suspects confesses and the other does not, the police will use the testimony of the cooperating witness to convict the other guy of the serious crime, and let the confessor go away scot-free as a reward.
For the two prisoners, the best overall solution is for both of them to remain silent, resulting in a relatively short prison sentence for each. But, taken individually, each suspect faces a powerful incentive to turn on his former accomplice and to confess. That way, if your buddy stays silent, you get released immediately. And if your buddy turns on you, at least you still get the small reward for cooperating.
The most likely scenario is, therefore, the one in which both suspects confess. They turn on each other, and as a result, they both go to jail for a long time.
Our suspects could have limited the damage had they both kept their mouths shut. But in their individual attempts to avoid jail altogether, they end up worse off than they otherwise could have been.
That’s the prisoner’s dilemma.
Real-life Situations
Now, as helpful as the prisoner’s dilemma might be for law enforcement in criminal investigations, what’s remarkable is the way that it models so many real-life situations, in everything from politics to economics and even sports.
An arms race between two superpowers, for example, is really just a two-player prisoner’s dilemma. During the Cold War, the United States and the Soviet Union were rivals, and so they each built up a huge arsenal, either to attack the other or to deter the other from attacking. But a much better situation would have been for both sides to just simply agree not to build any weapons. That would have freed them up to spend their money on other things.
An equivalent situation in economics is a price war—when, say, two rival airlines compete one another into oblivion. In the attempt to get more market share, they lower their prices. But then they end up in a situation where prices are so low that neither firm is really profitable.
Resolving Collective Action Dilemmas
Now, societies don’t always need an enforcer to resolve collective action dilemmas. In a few situations, collective action problems have an uncanny ability to solve themselves.
For example, when there are just a few competitors in an industry, they sometimes do find a way to coordinate their efforts. Price-fixing is illegal, of course, but it happens all the time—and it happens precisely because firms know that if they get into a price war, they’ll both lose. And so, they agree to restrict supply, and artificially, therefore, keep prices higher than they would otherwise be.
Why are price-fixing schemes successful in some cases and not in others? Why do agreements between countries or firms or individuals sometimes stick, and sometimes fall apart?
In an industry with a lot of competition—a lot of firms each trying to outcompete the others—collusion and price-fixing aren’t likely. But when there are just a couple firms, it’s easier for them to keep track of the other and to work out a deal. Supply is artificially limited, and this keeps prices high—a situation that’s good for the companies, even if it’s bad for the rest of the people.
Collective action problems are more likely to solve themselves when there are fewer players in the game, and they interact with one another on a repeated basis, and over an extended period of time.
Common Questions about How to Deal with Collective Action Problems
Collective action problems emerge from situations where society could benefit if people contributed to a common cause, but where people don’t do so because contributing is costly to them.
Collective action problems can arise even in the smallest society possible, like a society of just two people. A two-player collective action problem is called a prisoner’s dilemma.
Collective action problems are more likely to solve themselves when there are fewer players in the game, and they interact with one another on a repeated basis, and over an extended period of time.
