What this episode is about
Why is it that the bigger the issue and the more people it affects, the more it seems like nobody’s in charge? Why can absurd rules that everyone knows are losing money and wasting time survive untouched for decades? In this episode I do a close reading of a founding work of public choice theory and one of the most-cited social science books of the 20th century: Mancur Olson’s The Logic of Collective Action: Public Goods and the Theory of Groups.
Olson overturned an assumption almost everyone takes for granted: that when a group of people share an interest, they’ll band together to fight for it. Quite the opposite. Precisely because everyone is rational and does the math, the bigger the group, the thinner each person’s share of the benefit, so everybody wants a free ride and in the end nobody pitches in. Meanwhile, small groups with concentrated interests really will fight tooth and nail for themselves, and drag the whole society along with them.
I start with the penny, which the U.S. Mint keeps making even though it loses money every year, and the European Parliament’s monthly “traveling circus” between Brussels and Strasbourg. Then, using the book’s wheat farmers, the lobbying problem, committees and corporations, big labor unions and the American Medical Association, I explain public goods, free riding, “the exploitation of the great by the small,” selective incentives and the “by-product” theory. After that, I use this key to take a fresh look at Marx’s prediction of class revolution, the claim that “big business as a whole controls the state,” and the Jones Act, a century-old law that has locked up U.S. domestic shipping. By the end you’ll see that, actually, there’s nobody in the world’s driver’s seat.
Highlights
- Why the more rational individuals are, the harder it is for large groups to act: from cutting wheat output to industry lobbying, it’s the same math problem
- “The exploitation of the great by the small”: why small groups are amazingly effective, and why big countries carry most of the load in NATO
- How big unions with millions of members and the American Medical Association get organized: sticks, carrots and the “by-product” theory
- Why Marx’s predicted class revolution never came, and why “big business as a whole” can’t control the state
- The penny, the European Parliament’s commute, the Jones Act: how the scattered majority pays for the concentrated minority
Jump to a section
- 00:00 Opening: why the world looks like one giant amateur-hour operation
- 01:19 The bigger the national issue, the sloppier: the wrong group chat, an airport nine years late, and a Pentagon that can’t pass an audit
- 02:53 Olson’s answer: only small groups really pitch in
- 04:08 Absurdities that last for decades: the penny and the European Parliament’s “traveling circus”
- 07:38 Common sense overturned: do shared interests make people act together?
- 08:43 Wheat farmers and the lobbying problem: public goods and free riding
- 12:33 Can patriotism make people pitch in voluntarily?
- 14:29 Small groups vs. large groups: “the exploitation of the great by the small”
- 17:45 Committees and corporations: it’s always a small circle that makes the call
- 19:41 Big unions and the American Medical Association: selective incentives and the “by-product” theory
- 26:15 Two claims revisited: Marx’s class revolution and “big business as a whole”
- 28:34 A case beyond the book: the Jones Act and the lockdown of U.S. domestic shipping
The book
- Title: The Logic of Collective Action: Public Goods and the Theory of Groups (Revised edition, with a new preface and appendix)
- Author: Mancur Olson
- Publisher: Harvard University Press
- Publication date: 1971
- ISBN: 9780674537514
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