Sunday, August 12, 2012
I will choose small but efficient one: Mancur Olson. (1965). The Logic of Collective Action (Havard University Press)
Why do corporations usually win their policy goals very successfully? Even though labour unions have a great market power and large membership, and small and medium businesses and unskilled workers are greater in their numbers, why are they typically unable to contend with corporations in terms of mobilizing resources to win their collective goods? Some may say they are so weak that they can’t, but doesn’t it mean that are unsuccessful because they are unsuccessful? Isn’t it a simple tautology?
Mancur Olson’s the Logic of Collective Action (1965) suggests a fine explanation on these phenomena. According to Olson, a group does not act; individuals do. Without an effective method to enforce the collective action to individual members, a group will not be able to efficiently achieve its common goal. He used an analogy to a group of firms in a perfectly competitive market that seek a government policy and attempt to collectively act to organize a lobbying group. However, in this bid:
”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.” (Olson, 1965, p. 11)
In this view, a group, composed of a large number of members, cannot efficiently mobilize its members because a rational individual member is hardly expected to coordinate his or her action with other members in his or her own expense. Especially, the common goal of the group is typically not what can exclude some individual members from being benefitted (p. 15). For example, a union contract benefits all the members of the union once it is ratified by the union’s general congress regardless of an individual member’s effort to participate in such a union activity as a strike or picketing. The union may formally or informally impose coercive methods such as disciplinary punishments on strikebreaking or worksite harassments on traitors, but it does not change the fact that the union contract must benefit all the members (pp. 75-76). Therefore, an individual member in a group would rather take “free-riding” action than committing himself or herself to the group’s collective goal unless a type of coercion or compulsory duty is imposed.
Although Olson took an example of a success story of American labour unions through the late nineteenth century and the first two thirds of the twentieth century (pp. 76-91), it is not possibly comparable to corporations’ success story because corporations’ success has been established mainly by their voluntary efforts while unions have been dependent on legislations and coercive methods towards their own members as well as the employers. Applying to the Olsonian theory, corporations have strength at their size and number of members when it comes to influencing a government’s policy making process. Olson argues:
”The high degree of organization of business interests, and the power of these business interests, must be due in large part to the fact the business community is divided into a series of (generally oligopolistic) “industries,” each of which contains only a fairly small number of firms.” (p. 143)
Obviously, the number of corporations is not smaller than the number of labour unions. The number of large firms, as of July, 2011, is 2,708 in Canada(Industry Canada, 2011). However, a corporation does act like an individual, or at least a relatively small number of individuals in its executive committee or board of directors easily coordinate their action. In an industry level, there are only a few dominant firms that need to coordinate. As Olson puts, “[t]he multitude of workers, consumers, white-collar workers, farmers, and so on are organized only in special circumstances, but business interests are organized as a general rule” (Olson, 1965).
Regarding the other two groups, small and medium enterprises and unskilled labour population, it is not unclear, according to Olson, that it is very hard for those to be well represented in policy-making process. Unskilled workers are mostly not represented because the number of them is so large that they are almost unable to coordinate actions. Unlike labour unions, they lack mechanism to enforce duties for their common goals on their fellow unskilled workers, as well.
Small and medium businesses might be more successful in achieving their goals than unskilled workers, taking into account their sizes and number. Whether they could win over labour unions, however, would rather depend on how much corporations would be willing to take risk fighting unions than SMEs’ own power.
Olson’s theory provides a keen insight into how a society, composed of self-interesting beings, work. Once the first chapter, including mathematical descriptions of group activities is finished, it is very easy to read the rest of the book. If you have a good ECON101 knowledge, and basic calculus, actually, you will find that part great. I personally love it.
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