Public Goods and Collective Action Flashcards
What is a public good? (4)
1) A public good is one which all enjoy in common.
2) Enjoyment by one individual does not lead to less enjoyment by others.
3) it is not possible to exclude anyone from the consumption of public goods.
4) Not possible to divide the available amount of a public good.
Give two examples of public goods.
1) Democracy
2) The Sun
What is the purest form of public goods?
What are the problems with these types of public good? (3)
Goods that are collectively produced and consumed are the purest form of public goods.
The problems they cause involve trade-offs between:
1) Individual Utility Maximisation.
2) Strategic Interaction
3) Social Outcomes.
In what situations does the collective action problem arise? (3)
What does the rational consumer have incentive to do and why? (3)
The collective action problem arises in situations in which:
1) A good is collectively produced.
2) The good is collectively consumed - non-excludable.
3) Each individuals’s contribution to the production of the good is small.
1) In these conditions, any rational individual will have incentives to avoid contributing.
2) The good will likely be produced anyways.
3) The individual will be able to enjoy the good anyways.
Give an example of the collective action problem.
A large group of sailors want a lighthouse.
No sailor can afford to pay for the whole lighthouse.
Collective production is required, but individual contributions may be small.
Therefore a rational sailor would free-ride, but if they all do this, the lighthouse will not be built and everyone will be worse off.
What is the core of the collective action problem? (2)
1) Each individual is better off by free-riding.
2) If everyone free-rides, the group is worse off.
In what situation only, is it possible for the collective action problem to arise? (3)
1) Each rational individual has incentive to free-ride.
2) Individual free-rides themselves may not jeopardize the production of the good.
3) Free-riding by many does jeopardise the production.
Is there a collective action problem if unanimous cooperation is unavoidable?
Give an example.
No.
Example: group of smokers locked in a room with a gas leak
(Laver, Ch. 3)
Is there a collective action problem here? No; no incentive to
free-ride, no coordination problem (unless people are suicidal
& misanthropic)
What is true of many problems in social science?
Give an example.
What conclusion can we make about the collective action problem?
However, many interesting problems in social science require some, but not total cooperation between group members.
A single person burning smoky fuel at home does not create
an environmental problem.
But if an entire country does, it creates a problem ⇒
eradicating smog requires a collective effort in which no
single individual’s role is critical.
Collective action is a coordination problem - need to make sure that free-riding is discouraged so that enough people contribute to the production of a good.
Possible solutions to the collective action problem. (4)
Give examples.
1) Privatising collective consumption goods.
e. g. TV in the UK - license fee to the BBC.
2) Provide exclusive private benefits as incentives to group members.
e. g. Trade unions benefit all workers not just their members, therefore many unions offer health care and child care to members.
3) Sanctions for free-riding and third party enforcement.
e. g. compulsory voting fines.
4) Repeated long-term interactions.
Identify a problem with each of the four solutions to the collective action problem.
1) Privatising collective consumption goods cannot be done for all goods, e.g. clean air.
2) Providing private benefits can be costly.
3) Sanctions may be difficult to execute but could work with a third party enforcer.
4) Repeated long-term interactions - this would only work if the interactions continue indefinitely.
