While reading Analyzing Politics: Rationality, Behavior, and Institutions (2nd Ed.) by Kenneth A. Shepsle, I gave specific focus to the chapters on ‘Collective Action’ and ‘Public Goods’.  The knowledge from those chapters I hoped would help clarify my understanding of the socialist political project.  And while it’s been informative, I was surprised to stumble upon an example in the book about the Military Industrial Complex—which is a far distance ideologically from the socialist ideology.

It was surprising and interesting, so I thought I’d share what the book says about the game theory which has made the M.I.C. so large.  Much of this post will simply be a summary of chapters 9 and 10, pp. 268- 324.

Once you read through this, you might also see how you can apply this understanding to the private prison industry and a whole variety of other industries which expand the private sphere into public goods/services.

Refresher on Collective Action

To understand public goods, we need to understand theories of collective action. I will give a specific definition of public goods in the next section.

First, a situation that demands collective action is one in which there is a goal that requires a certain amount of people to be contributing to achieve the goal.  We first imagine a category of people who can choose either to ‘contribute’ or ‘not contribute’—perhaps people in a neighborhood/county, or people who work at a particular workplace.  Contributing has a cost to the contributor—maybe it takes up some of their free time, or perhaps some of their money goes to paying dues.  If a critical mass of people contribute, then the goal is achieved.  If the goal is achieved, everybody in the group reaps the benefits—even those who chose not to contribute.  That is a prototypical, basic example of multi-person cooperation (a more complex example might be when the goal can be half-achieved—when there are still some benefits even if critical mass isn’t reached).

Challenges to Collective Action

There are challenges to collective action that prevent the group from reaching the critical mass of people to achieve the goal.  That might seem odd because everyone in the group would like the benefits of achieving the goal—if everyone wants it, why should this be hard?

1. Free-riding: Although people like the benefits of achieving the goal, they don’t like the cost—the effort of contributing.  They hope that other people will contribute to reach critical mass, and that they can get away with not contributing.  They are free-riding on others’ contributions—the problem is when there are so many free-riders that the group doesn’t reach an effective mass of contributors.

2. Non-Uniqueness: There might be multiple goals which everyone treats as equally beneficial.  However, people can only contribute to a limited number of those goals, and if they don’t communicate (perhaps the county is too large and people don’t know each other) then they have trouble coordinating to meet the goal.  Repetition of the same problem can lead to conventions, like everyone driving on the same side of the road.

3. Conflicting Interests: What if there are multiple goals, but individuals aren’t indifferent about which goal to reach (as they are in the Non-Uniqueness problem)?  That is, what if part of the group would prefer to go after Goal X while others prefer Goal Y?  Then the group might split up and people would be less happy than if the whole group had focused on only one of the goals.

These are big problems because in many cases they show up—usually there are multiple goals, and people have different preferences about which one to focus on.  Also a common problem is that when the group is large enough, people don’t know each other and are essentially anonymous to one another.  People don’t know who has or has not contributed, and it’s difficult to apply social pressure in such anonymous cases.

Solutions to the Challenges

However, we obviously know that collective action does sometimes take place.  How is it that the Civil Rights Movement or labor unions were effective at organizing?  There are three main factors, and all have some level of experimental support:

1. By-Product Theory: People get into social groups (churches, clubs, political groups) because having social groups like those fun.  But people might talk and realize that they want to achieve a goal, and now that everyone knows each other, they can put social pressure on people to contribute, or exclude people from certain social group activities.  Members are given things for contributing, and excluded if they don’t contribute, and achieving the goal is a by-product of that reward system.  This gets around the problem in free-riding about how public goods are given to everyone (a higher minimum wage is a higher minimum wage for all).  It does so by inventing another group of goods that are conditional on contribution to the main goal, and people can’t both free-ride on working towards public goods and still get those conditional goods.

2. Leaders: Much of organizing is costly because organizing people and making plans takes up time.  Sometimes, leaders, or “political entrepreneurs” take on the brunt of this organizing work because they find great benefit in doing so.  Politicians sometimes do this to get re-elected, or leaders do it for the status and social benefits.  For whatever reason they find to be a good one, leaders take on the role of monitoring how much people are contributing and putting pressure on people to contribute. They may even remove selective benefits from non-contributors (as discussed in the By-Product bullet-point).

3. Ideology: If you want people to contribute, but they only look at the end consequence of contributing, then they might choose to free-ride.  However, if people find contribution to be beneficial itself—if they find value in the act of contributing and not just the outcomes, then they are more likely to contribute for contribution’s sake.  This is a game-theoretic modeling of ideologies and political beliefs.

Sometimes these techniques work and sometimes they don’t.  It’s tough to overcome the difficulties facing collective action, but at least the by-product, leader, and ideology theories serve as observation-based descriptions of how to build towards collective action (albeit being slightly reductive).  Evidence supports all three theories of solutions to collective action challenges, but people seems to be most driven by the by-product style of organizing and by ideology.

A Tale of Public Goods and Private Contractors

Public goods are the type of goals which collective action aims towards.  Public goods are “nonexcludable [that is,] available to everyone if it is provided to anyone” and they are “jointly supplied [that is,] one person’s enjoyment of [it] does not diminish its availability for enjoyment by [the relevant] others” (emphasis added)[1]  With that definition, things like clean air, public libraries and free schools, freeways and infrastructure, or military/defense would be considered public goods.

Libraries, schools, infrastructure, and the military benefit the public in the ways susceptible to free-riding.  While some free-riding is subverted by requiring taxes, there’s still the problem of making sure that those tax dollars get funneled into those public goods.  Collective action defends the public goods’ budget from those people who don’t use the public goods and/or would prefer to pay less taxes.  Collective actions such as sending letters to representatives and voting for pro-public-goods politicians can be effective, and we sometimes see people do this to encourage representatives to fund public education.

However, we don’t usually see large coordinated movements that effectively support infrastructure or the military’s funding.  What’s happening here? This was my impetus for writing this post; I wondered how public goods could come out of something other than collective action (and whether it would be better or more effectively provided if instead it were the result of collective action).

Well, our infrastructure is pretty bad—it has felt the chokehold of austerity—but it’s still common to see construction take place without collective action.  On the other hand, the military budget is incredibly massive, especially when we put it beside the average citizen’s relative lack of thought about military funding or foreign policy.

The answer to this seeming discrepancy lies with those private industries which profit from construction and from selling weapons and technology to the military.  For example, they are willing to take on the costs of lobbying to politicians, or of paying for attack ads against those politicians who do not funnel tax money into their industries.  Shepsle notes that:

The highway system, surely public in consumption, is in fact mostly private in production. [2]

The Military Industrial Complex functions similarly.  The cost of organizing to convince politicians, or to boost the likelihood of certain politicians getting elected is made up for by the profits that the industry makes when the government contracts out construction and military R&D.  Citizens play little role in all of this, apart from paying taxes and being convinced to support politicians who ““support the military””.

Now I’m entering territory that Sheplse doesn’t really cover.  There are two additional observations I want to make here:

First, the influence of money—on representatives and judges, on who is more likely to become a representative, and on who is more likely to advise representatives—seems capable of creating and maintaining an ideology among representatives which is not shared by their constituents.  The difference between how representatives and citizens think can cause citizens to feel like they aren’t being represented by their government (and because of this, they may be more likely to be convinced to back a populist candidate).

I concede that we would normally expect a difference between the way representatives think versus how normal citizens think.  Representatives know what problems and trade-offs must be made, and they are generally in a better position to make those decisions because they ideally have access to more information.  However, representatives think differently from normal citizens not just because they have more information, but because private contractors affect how representatives act, especially with regards to those public goods which are privately produced, and which citizens don’t collectively act to maintain as publicly provided.

The effect of money on politics is less noticed when it means that the government funnels more money than necessary into things like the military or prisons, but it is more widely noticed when public goods deteriorate because of lobbying.  The deterioration might be due to the lack of public funds due to tax cuts, made to appease large companies that fund ideologically similar politicians’ campaigns, or lack of public safety due to poor gun-control laws influenced by the NRA’s strong-arming.  People recognize that public schools have less funding (because of less taxes) or that lack of regulation is leading to their community’s poor health (lack of regulation on the healthcare insurance industry, or lack of gun control laws).  Citizens might not trace the line directly back to the money in politics, but they are nonetheless able to recognize that the government isn’t representing them, and will push back one way or another.

Second, I want to try to generalize what we’ve been talking about.  What about a public good makes it more/less susceptible to being privatized?

I see two main factors here: (i) how well is the government able to publicly organize and provide the public good, and (ii) how prescient is the public good in the minds of voters?  I think that the profit motive of private industry is inconsistent with sustainably providing public goods, but we also need to consider how the incentives of elected officials may be inconsistent with providing public goods.  Shepsle mentions that there might be some government information that they would want to be kept in the private sphere (i.e. knowledge that can be effectively used outside of the government to improve the economy).  Also, representatives are incentivized to show results within their term, so some time-frames for research or production are disincentivized, even though they might be more capable of producing higher-quality public goods.  When the incentives of elected officials are less effective than the private sphere, the government might prefer to contract the work out.

Some goods might not be very prescient in the minds of voters.  While schooling and public safety are quick to galvanize the public and give feedback to representatives, some goods like a clean environment, good healthcare, an unbiased justice system, the military, or infrastructure can reach high levels of abstraction or change too slowly for voters to notice.  At least, we don’t take action until it’s almost too late.  When public goods are so difficult to grasp, it’s easier for private companies to lobby politicians without pushback from the public.  By the time that people really start taking stock of how these private companies have warped public goods for profit, politicians are too comfortable with the way things work.  As I described in my first point about the influence of money on representatives, private companies can almost create a prevailing, pro-private-industry ideology among representatives.  When this exists, establishment politicians will maintain privatization, and even be willing to privatize more of our public goods.  For example, we’ve seen how difficult it is to address the gun lobby, and we’ve also seen politicians ceding ground on public schools to introduce more charter schools.

Footnotes

[1] Kenneth A. Shepsle, Analyzing Politics 2nd Edition (New York: W.W. Norton & Company, 2010), 308.

[2] Ibid., 316.

Bibliography

Shepsle, Kenneth A. Analyzing Politics: Rationality, Behavior, and Institutions, Second Edition. 268-324. New York: W.W. Norton & Company, 2010.