"Consider a hypothetical, competitive industry, and suppose that most of the producers in that industry desire a tarrif, a price-support program, or some other government intervention to increase the price for their product. To obtain any such assistance from the government, the producers in this industry will presumably have to organize a lobbying organization... The campaign will take the time of some of the producers in the industry, as well as their money.
Just as it was not rational for a particular producer to restrict his output in order that there might be a higher price for the product of his industry, so it would not be rational for him to sacrifice his time and money to support a lobbying organization to obtain government assistance for the industry. In neither case would it be in the interest of the individual producer to assume any of the costs himself. [...] This would be true even if everyone in the industry were absolutely convinced that the proposed program was in their interest."(pg. 11)
In both instances groups will not be formed, because the groups cannot exclude people from benefiting if they do not join the cartel or lobbying organization. In a perfect competitive marketplace, the level of production of any one producer has a negligible impact of the market price of that good. A cartel will not be formed because every agent within the cartel has an incentive to drop out of the cartel and produce as much as she possibly can, as her production will not cause the price to drop at all. Similarly, each producer of the good has an incentive not to pay dues to the lobbying organization, as the loss of one dues paying member will not influence the success or failure of that organization. One extra member in a lobbying organization representing a very large group will not determine whether or not that group will get a piece of legislation enacted that will help the industry. Since the benefits of that legislation cannot be limited to those firms in the lobbying group, there is no reason for that firm to join. Olson indicates that this is the norm for very large groups:
"Migrant farm laborers are a significant group with urgent common interests, and they have no lobby to voice their needs. The white-collar workers are a large group with common interests, but they have no organization to care for their interests. The taxpayers are a vast group with an obvious common interest, but in an important sense they have yet to obtain representation. The consumers are at least as numerous as any other group in the society, but they have no organization to countervail the power of organized monopolistic producers. There are multitudes with an interest in peace, but they have no lobby to match those of the "special interests" that may on occasion have an interest in war. There are vast numbers who have a common interest in preventing inflation and depression, but they have no organization to express that interest." (pg. 165)
In the next section, we'll see how small groups get around the collective action problem described in The Logic of Collective Action and we'll see how those smaller groups can take advantage of groups which are unable to form such lobbies.
Be sure to continue to page 3
