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Was Mancur Olson Wrong?

Friday, February 15, 2013

The great economist turned political science on its head. But a new book says Olson was off base.

Question: Why is there a National Cotton Council but no National Anti-Cotton Council?

After all, as you may or, more likely, may not know, the federal government subsidizes cotton growers to the tune of almost $2 billion a year (the average from 1995 to 2011). Unless you happen to be a cotton grower, you can probably imagine better uses for those federal dollars. Yet the cotton program, a New Deal vestige, goes on. And on.

It has a lobby, of course. But why no counter-lobby?

In 1965, a young University of Maryland economist named Mancur Olson (the first name is pronounced “mansir”) formulated a crucial part of the answer in his book The Logic of Collective Action. To organize a group is costly for the organizer in money, time, and energy. Constituencies with narrow, focused interests can surmount that problem more easily than can constituencies with broad, diffuse interests, because the broader group will have more of a problem with free riders: people who sit back and let others do the hard work of organizing while expecting eventually to partake of the booty. “In short,” wrote Olson, “the larger the group, the less it will further its common interests.”

Cotton, a classic narrow interest, illustrates the arithmetic. Because big cotton farms account for a large share of output, the largest 5 percent of recipients collect more than half of subsidy benefits and the largest 20 percent collect more than 80 percent. (The figures are published by the Environmental Working Group.) In 2010, the biggest 1 percent of farms collected almost $175,000 each. That is a lot of money — well worth organizing for, even if you know that some cash will slosh into the pockets of small producers who don’t lift a finger to defend subsidies. (Which actually is a public-relations plus. Support the family farmer!)

On the other hand, the cost of the program comes out to less than $6 per year per taxpayer, hardly enough to be worth organizing to oppose, or even to be worth learning about. Which is why you may not know that U.S. cotton subsidies exist. Or that they are illegal under international trade rules. Or that the United States, as a result of their illegality, is also subsidizing Brazilian cotton farmers as a bribe to forestall trade retaliation. You couldn’t make up this stuff.

The United States is subsidizing Brazilian cotton farmers as a bribe to forestall trade retaliation.

Olson’s theory about the asymmetry of incentives, and the “public choice” school of political economy of which it became part, blew a hole in the hull of American political science’s leading postwar theory, pluralism, which saw transactional interest-group politics as basically fair and functional so long as everyone was at the bargaining table. Wrong, said public choice: the table is tilted. Unusually, the public-choice analysis found support from both ends of the political spectrum. Liberals embraced the idea that the system was biased toward the concentrated power of corporations; conservatives embraced the idea that political decision making is inherently unfair. Down went pluralism.

But was it right all along? Or, at least, more right than post-Olson scholarship has reckoned? That is the thesis of Gunnar Trumbull’s new book, Strength in Numbers: The Political Power of Weak Interests. Trumbull, a professor of business administration at Harvard, argues that Olson missed at least half the picture. Diffuse interests can organize, often surprisingly easily, and they in fact do organize all the time. Yes, the challenges of mobilizing a broad but shallow interest are real, but “the incentives to overcome these challenges are frequently even greater,” he writes. “Diffuse interests have historically nearly always found representation in public policy. Across the advanced democracies, diffuse groups like retirees, patients, and consumers enjoy strong protections — protections that were opposed by industry.”

Business-school professor that he is, Trumbull proceeds by marshaling case studies. Starting in the 1960s, consumer groups sprouted across the United States and Europe, and with them laws and agencies (like the U.S. Consumer Product Safety Commission, created in 1972) that sought to safeguard consumer interests. In Germany, small shopkeepers prevailed in a battle to handcuff big-box retailing. (In France, by contrast, the big retailers won.) Britain and France both passed consumer-credit regulatory regimes, though of very different sorts. (Britain sought to ensure broad access to credit, France to protect against predatory lending — antipodal notions of consumers’ interest, a point I’ll return to.) In France, the United States, the United Kingdom, and Germany, pharmaceutical companies, despite their concentrated money and firepower, failed to ward off heavy regulation. (Though, again, the regulatory regimes are very different, with the United States targeting safety and France low prices.)

So the bumblebee flies, whatever Olson’s theory may posit. How? First, according to Trumbull, Olson underestimates diffuse groups’ ability to develop compelling narratives about how they serve the public interest. In fact, weak, diffuse groups have a paradoxical political advantage: precisely because they are weak and diffuse, the public sees them as less self-interested and thus comparatively trustworthy. Second, Olson also underestimates the power of ideological motivation, rather than just money and concentration, to spur activism. Third, “diffuse interests can be represented without mobilization,” thanks to activism by politicians and government officials who take up their cause. (FDR started a federal pension program at a time when “retirees,” as a self-identified social class, did not yet exist. The program created the constituency, rather than the other way around.) Fourth, weak or diffuse interests can link up with concentrated groups to amplify their effectiveness, as when consumers align with exporters to oppose trade protections or when free-speech advocates join with political parties to oppose campaign-finance limits.

All in all, then, “the obstacles that coordination problems pose for diffuse interest representation have been overstated.” And this has some meaningful implications. To the Left, it suggests that suspicion of supposedly all-powerful corporate interests has been overdone. To the Right, it suggests that politics can be a legitimate broker of diverse interests after all.

WWOS — what would Olson say? He lived, after all, until 1998, and he was a politically sophisticated man. He was well aware that Public Citizen, the Sierra Club, AARP, the Consumer Product Safety Commission, the Environmental Protection Agency, and Medicare had come into being. In writing my own book drawing on his work, I interviewed him a number of times, and we talked about these very questions.

Were he around today, I imagine he might make three kinds of rejoinders to Trumbull. First, he would graciously accept Trumbull as a useful reminder that the world is a complicated place where single-cause theories are always wrong. Olson did not say diffuse interests cannot organize, any more than Newton’s gravitational theory says you can’t walk uphill. He said it is harder, other things being equal, for diffuse interests to organize. But, of course, other things are not equal. Policy entrepreneurship, public opinion, ideological motivation, public-interest narratives, coalition politics, and many other things also matter. Of course!

He might go on to note some chinks in Trumbull’s armor. Trumbull’s counterexamples date mainly from the 1960s and 1970s, a unique period of regulatory growth. Some of the diffuse-interest organizations he cites were seeded with government support, which is cheating. More importantly, Trumbull, I think, is naive about the problem of false or misguided claims of representation. Public-choice analysts have argued plausibly that self-styled consumer groups, for example, lobby not for the correctly understood interests of consumers (low prices, well-functioning markets) but for the policy preferences of a left-leaning urban elite. The very fact that “consumer-credit protection” can translate into opposite policies in Britain and France suggests that there is often no clearly definable consumer interest to represent. We know, indeed, that advocacy groups frequently define the mission before assembling the membership — and then adjust both as needed to stay in business. Trumbull, then, may not so much demonstrate that diffuse interests can reliably organize as that special-interest groups often organize in their name.

Then, I imagine, Olson might go on to make a deeper point. His career did not end in 1965. The Rise and Decline of Nations, published in 1982, was his most audacious work and marked an important change in emphasis. Whereas Logic concerned itself with a snapshot of forces constraining group mobilization at any given time, Rise and Decline was a dynamic analysis. What happens if forces are out of balance, even only a little, over time?

Weak, diffuse groups have a paradoxical political advantage: precisely because they are weak and diffuse, the public sees them as less self-interested and thus comparatively trustworthy.

Well, even if narrow interests have only a slight advantage, their advantage will tend to compound, much as an unbalanced pair of oarsmen will steer a canoe off course. Moreover, another important imbalance is at work: hard though it may be to organize interest groups, once established, they are even harder to get rid of. So it is no good to say that diffuse groups can and do overcome their challenges in particular cases; societies will still drift toward an accumulation of groups seeking and defending narrow interests — protective regulations, tax loopholes, subsidies, and so on. The element of time makes Olson’s analysis a theory of social development: other things being equal, societies’ arteries will tend to become clogged with groups in the business of obtaining for themselves whatever it is they want — subsidies to cotton growers, regulatory preferences for solar power, environmental protections for snail darters, you name it. And every group will see its own claims as vital to the national interest, and other groups’ as grubby handouts.

It is hard to dispute that something like that has happened. One can certainly debate the extent of the sclerosis, and the efficacy of countervailing forces and efforts. In my own view, determined political action makes a big difference, though it must be applied persistently over time. Fatalism is not in order! Be that as it may, Trumbull never engages the dynamic argument, which these days is the only game in town. His book, though new, feels more dated than Olson’s 1982 Rise and Decline.

Still, I want to help him — as, again, I think Olson might have done — with a friendly amendment, one which brings pluralism back into the picture, albeit in a rather disquieting way. In 1965, when Olson wrote The Logic of Collective Action, the world was managed by institutions that acted as gatekeepers: big corporations, big unions, big media, and big political parties. Organizing a new interest group in that cartelized era really was hard. You could spend a fortune just on long-distance phone calls. Since then, the cost of organizing has dropped by orders of magnitude. Just think about what a single Facebook page can do. The Tea Party, the archetype of a diffuse-interest group, could never have reached escape velocity without free online conference calling, as its founders have told me.

In that important respect, the advantage of interest concentration has eroded (though not disappeared) since Olson published his Logic. Today corporate lobbies can have an Internet-piracy bill all set for congressional passage, only to see it blown up overnight by a zero-budget online protest. In that sense, the system today may be fairer. But pluralism, alas, is not fully vindicated: now that every Tom, Dick, and Harriet can organize quickly and cheaply, the problem of interest-group accumulation is more severe.

Better? Worse? I had better leave you to ponder that. Meanwhile, the cotton lobby sails on, a reminder of the iron law of interest-group politics: no matter who else loses, farmers always win.

Jonathan Rauch is a guest scholar at the Brookings Institution and author of Government’s End: Why Washington Stopped Working.

FURTHER READING: Vincent H. Smith, Barry K. Goodwin, and Bruce A. Babcock contribute “Field of Schemes: The Taxpayer and Economic Welfare Costs of Shallow-Loss Farming Programs.” Smith, with Henry Olsen, says “Harvest Deficit Reductions from the Farm Bill.” James V. DeLong says “It’s Not a Welfare State, It’s a Special Interest State.” Timothy P. Carney explains how “Taxpayers Often Win When Special Interests Fight Each Other.”

Image by Dianna Ingram / Bergman Group

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