Mancur Olson's Theory of Collective Action and Growth

Mancur Olson's Theory of Collective Action

According to Mancur Olson, the significance of group dynamics in collective action is categorized into three main types:

• The Privileged Group: Each of its members, or at least one of them, has an incentive to see that the collective good is provided, even if they bear the full burden of providing it themselves.
• The Intermediate Group: No single member gets a share of the benefit large enough to incentivize them to provide the good alone. However, the group is small enough that others will notice whether any member is or is not helping to provide the collective good.
• The Latent Group: This is a very large group distinguished by the fact that if one member does or does not help provide the collective good, no other member will be significantly affected; therefore, no one has any reason to react. (Present but not visible)

Organizational Power and Collective Action

Among these groups, Mancur Olson found that relatively small groups have a greater chance of being able to organize for collective action and tend to organize with less delay than large groups. The larger group (latent group) usually lacks both the selective incentives and the small number of members needed to organize.

Thus, members of small groups have disproportionate organizational power for collective action. This disproportion diminishes but does not disappear over time in stable societies (e.g., lobbies).

Impact on Long-Run Economic Growth

How can these groups affect long-run economic growth? One possibility is that some groups serve their members' interests by helping to make the society in which they operate more productive. However, there are two primary ways they interact with the economy:

1. Reduction of Efficiency and Aggregate Output

Groups often reduce efficiency and aggregate output by trying to get a larger share of the society’s output for their members, except for the special case of encompassing groups. If a social group seeks to obtain a larger slice of the "social pie," the resources devoted to it will not produce the social output they produced in their previous employment, thus reducing the size of the social pie itself. Because the members of the organization are part of the society, they will also share in the loss of social output that results from the redistribution toward themselves.

2. The Encompassing Social Group Exception

By contrast, there are special-interest organizations that encompass a substantial proportion of the society (e.g., a large labor union). Encompassing social groups have an incentive to make the society in which they operate more prosperous. They aim to redistribute income to their members with as little excess burden as possible and will quit such redistribution unless the amount redistributed is substantial in relation to the social cost.