The State by Anthony de Jasay
Page 27
4.3.11 There is, thus, a very large number of potential groups, each partially homogenous, into which the heterogenous population of a given society could, under propitious circumstances, coagulate. Some of these groups, though never more than a tiny fraction of the potential total, will actually be formed in the sense of having a degree of consciousness of belonging together and a degree of willingness to act together. Happily, there is no need here to define groups more rigorously than that. They may be loose or tightly cohesive, ephemeral or permanent, have a corporate personality or remain informal; they may be composed of persons
(e.g. a labour union) or be coalitions of smaller groups (e.g. acartel of firms, a federation of unions). Finally, they may be formed in response to a variety of stimuli, economic, cultural or other. We will be interested in those groups which form in the expectation of a reward (including the reduction of a burden), to be had by virtue of acting as a group, and which continue to act together at least as long as that is needed for the reward to continue accruing. Defined in such a way, all groups I wish to consider are interest groups. All need not, however, be egoists, for the concept I have chosen can accommodate altruistic pressure groups or groups of eccentrics, plain cranks who act together to obtain a putative benefit for others (e.g. the abolition of slavery, the promotion of temperance and literacy, or the putting of fluoride in everybody's drinking water).
4.3.12 In the state of nature, members of a group, acting cohesively, obtain a group reward, i.e. a benefit over and above the sum of what each would obtain if acting in isolation, in two ways. (1) They may jointly produce a good (including of course a service) which, by its nature, would not be equally well, or at all, produced otherwise. It is not certain that there are many such goods. Streets or fire brigades are likely examples. The group reward is secured for the members, so to speak, autarchically, without making anybody outside the group contribute, and without making him worse off. (2) They may jointly extract the group reward from outside the group, by changing the terms of trade which would prevail between non-members and the members when acting singly. Guilds, trade unions, cartels, professional bodies are the most prominent examples of proceeding in this way. In the state of nature, such tilting of the terms of trade, making the group better off and others presumably worse off, would not be based on custom (for how did "tilted" terms come about before becoming customary?), nor on sovereign command (for there is no political authority). Their only possible source is contract (without this presupposing markets of any particular degree of perfection). Hence, they connect to notions of alternatives and of choice.
The freedom of others not to enter into a contract with the group, no matter how unpalatable it may be to exercise it, makes group reward a matter of bargaining. This is most explicit in negotiated, one-of-a-kind transactions but routine, repeated transactions in organized markets with large numbers of contracting parties and corresponding to various configurations of monopoly, monopsony or competition of greater or lesser imperfection, all represent at least implicit bargains where the element of negotation is latent.
At least for our immediate purpose, which is to understand the difference between the group structure of the state of nature and the group structure of civil society, the critical determinant of group behaviour is the "free rider" phenomenon. Free riding manifests itself both within a group and in its relations with
others. Its basic form is well known from everyday life. The passengers in, say, a cooperative bus must over some period jointly bear the full cost of running it.*16 Otherwise the bus service will stop. However, any full allocation of the cost (defined with proper regard to the period) will do. The bus will go on running even if one passenger pays all and the others all ride free. There is no obvious, most-logical, most-efficient, most-egalitarian or most-fair rule for sharing out the total burden to be borne. If all passengers were cost accountants reared on the same accountancy textbooks, they might all grope towards a fare structure reflecting, for each trip taken by a passenger, the length of his trip, the number of stops offered along the route, the average frequency of the service and its peak vs off-peak pattern, the density of other traffic, physical wear and tear and a host of other variables entering into the long-period marginal cost of the trip in question. However, while all may regard it as technically correct (i.e. good cost accounting), there is no reason why they should all agree that the fare structure thus constructed is equitable, nor why they should wish to adopt it even if they did think it equitable. Altruism would make each want to pay for the others. A sense of equity might make them charge higher fares to those who profit most from the service, so as to capture and share out some of the "consumers' surplus" accruing to the latter. A certain conception of social justice, as distinct from equity, might make them fix high fares for rich and low ones for poor people.
4.3.15 Sorting out in some manner a suitable fare structure to cover the cost of a given service, however, is only half the battle. If variations in the service are feasible, the cooperators must also reach agreement on the variant to be provided. If the bus stopped at every front door, nobody would have to walk but it would take ages to get downtown. If it is only to stop at some front doors, whose shall they be? Should the passengers favoured in this way pay more for the greater benefit they enjoy, compensating those who have to walk a way to the bus stop? No single "right" way seems to emerge which the members of the group would all want to adopt for allocating the group burden and sharing out the group reward, either on grounds of ethics or of interest, let alone both. Vague rules like "all pulling their weight," "all paying their way" and "all getting their fair share" can only be understood in relation to what they have in practice agreed, for there is no other common standard for one's proper "weight" to be pulled, one's "fair share" to be got. This is the more so as some members of the group may disagree with the others on what ought to have been agreed in fairness, good logic or justice without, however, opting out of the cooperative. Finally, whatever route and fares may have been fixed, each selfish passenger, on boarding the bus, might reasonably take the view that his hopping on it makes no difference to the cost of running it; the cooperative group as a whole is looking after the books and if there should be a shortfall, he would prefer not to be the one to make it up.
4.3.16 If all members of a state-of-nature group were selfish in the above sense, they would all want to minimize their burden and, in the borderline case, to ride free. For the group reward to accrue-for the bus to go on running, for a strike threat to be taken seriously in collective bargaining, for market-sharing quotas to be respected in defence of a cartel price, etc.-a given group burden must nevertheless be fully borne. It is widely believed that the free-rider problem, as an obstacle to cooperative solutions, is more acute for the large than for the small group because in the large group the free rider's anti-social behaviour has no perceptible impact on the group reward and a fortiori none on his own, hence it pays him to ride free, while in a small group he perceives the feedback of his anti-social conduct upon the group's reward and his share of it.*17 However, while it is probably true that people behave better in small than in large groups, the feedback effect is unlikely to be an important reason. A member of the small group may perfectly well perceive the reduction in group reward due to his misbehaviour. It is nevertheless rational for him to continue to misbehave as long as the incidence of the consequent reduction of group reward upon his share of it just falls short of the share of group burden he escapes by free riding.*18 This condition may easily be satisfied by any group regardless of size, up to the point where free riding causes the group to fail altogether. Most of the reasons why small groups are easier to form and to maintain than large ones, have to do with the greater visibility of each member's behaviour. Moral opprobrium, solidarity, shame have less chance to sway people lost in a mass.
Consequently, if state-of-nature interest groups do get formed and the whole group burden is being carried by somebody or other, despite the incentive selfish group m
embers have to ride free, at least one of three conditions needs to hold (though they may not suffice without other circumstances being propitious too).
(a) Some members of the group are altruistic and actually preferto bear the "others' share" of the burden or let the others have "their share" of the reward. The others can accordingly ride free to some extent, though not necessarily scot-free.
4.3.19
(b) Though all members are selfish, some are non-envious. If theymust, they will carry more than their share of the burden of group action rather than allow the group to fail altogether, because the burden they assume does not, at the margin, exceed the reward accruing to them, and they do not grudge the free riders' getting a better deal still.
4.3.20
(c) All group members are both selfish and envious. Free ridingmust somehow have been kept below the critical level at which the grudge felt by the envious "paying passengers" against the free riders would have outweighed the net benefit they derived from carrying on with and for the group.
Case (a) corresponds to volunteer civic action, self-sacrificing pioneer effort, "leading your troops from the front," and, perhaps, also to political activism and busybodyness; other satisfactions than the good of the group may also not be totally absent.
Case (b) underlies, for example, the creation of external economies, which would not come about if those whose (costly) action calls them forth would greatly resent their inability to keep others, who bear no cost, from also benefiting.
Case (c) is the most demanding; here the free-rider problem becomes critical to the formation and survival of the group. A cooperative solution must here repose upon two supports. To start with the second, there must be in the cooperative solution reached by selfish and envious members of an interest group, enforcement involving an effective threat of punishment, retaliation.*19 Where access to the group reward is technically easy to control,
enforcement is passive. It resembles a coin-operated turnstile. If you pay your coin, you are in; if not, not. More awkward situations call for the invention of active, possibly complex methods of enforcement. Social ostracism of the blackleg, harassment of the employer, "blacking" of his goods and his supplies may be necessary before a new (or old but not very strong) union can impose the closed shop. Retaliation against a price-cutter and cartel-breaker may take the most cunning forms. Even so, it is not invariably effective. John D. Rockefeller, who was a great practitioner of these cunning methods, had so little confidence in their reliability that he eventually resorted to amalgamation of ownership instead-hence the creation of Standard Oil. Summary justice in the American West against violators of vital group understandings (e.g. that range cattle and horses are not stolen, mining claims are not jumped and lonely women are not molested), was an attempt to shore up a precarious way of life whose viability greatly depended on no "free riding," on everybody playing the game.
4.3.24 Before enforcement, there must be understandings, agreed terms to be enforced. What will be the share of each in the group burden, and how will the common reward be shared out (unless, of course, it is totally indivisible)? The immediate reflex for most of us would be to say "equitably," "justly" or "fairly." As these are not descriptive but evaluative terms, however, there is no assurance that most group members will judge any given allocation as equitable, just, etc. Still less is it certain that if they did, the equitable, etc. set of terms would also be the most likely to secure adoption in the "cooperative solution," i.e. to ensure group cohesion. Strategically placed members, "hold-outs" or bargaining sub-groups may have to be conceded very much better terms than members who "have nowhere else to go." Manifestly, the better the terms a member or sub-group can extort from the rest of the group, the more nearly will it have approached free-rider status and, hence, also the limits within which the group can carry free riders without breaking down.
It may be thought that once it was up against such limits, threatened with breakdown, the group would seek to preserve itself by recourse to new, more effective methods of enforcement of group understandings, cost and reward allocations or codes of conduct and would retaliate more vigorously against its free riders. Some such tightening up may in fact be feasible. But the group is not the state; it lacks most or all of the state's repressive powers; its ascendancy over its members is different in kind, as is their faculty to opt out if pressed.*20 A group's capacity to develop enforcement is heavily conditioned by the nature of the reward it is designed to produce, and of the sort of burden that must be carried to make the reward accrue. There is no presumption that it will be always, or very often, adequate for controlling the free-rider problem and enabling the group to survive or, indeed, to form in the first place.
If so, it is reasonable to impute to the state of nature-as to an ecological system containing prey, predator, and parasite-some equilibrium in the group structure of society. Equilibrium hinges on the destructive potential of the free-rider phenomenon. The latter limits the number and size of interest groups which manage to form. The resulting universe of groups, in turn, determines the tolerated number of free riders, and the actual volume of their "parasitical" gains consistent with group survival.
Interest groups extracting rewards not available to single individuals from transactions with others, are benign or malign
depending principally on the observer's values. If their transactions are wholly or mainly with other interest groups, the extra rewards secured by one group may be seen by the disinterested observer as being at the end of the day broadly compensated by the extra benefits the other groups manage to secure at its expense. This is roughly the "pluralistic," "end-of-ideology" view of how modern society works. Instead of classes struggling for dominance and surplus value, interest groups bargain each other to a standstill. Though modern society does not actually work like this, there is perhaps some presumption that state-of-nature society might. If it is comprehensively organized, net gains and losses due to cohesive group action can be hoped to be small (though "on paper" everybody gains as an organized producer at the expense of his own alter-ego, the un-organized consumer). Moreover, "excessively" hard bargaining by a group vis-à-vis other groups in poorer bargaining positions, is liable to set up some of the same sort of self-regulating, self-balancing effects as "excessive" free riding does within a group, so that as group formation remains within limits, so does the inordinate exploitation of group strength bordering on free riding.
4.3.28 Our framework is now ready for inserting the state. We want to answer the question, What difference does the functioning of the state make to the equilibrium group structure of society? Clearly, where a state exists, sovereign command is added to contract as the means for extracting group reward from others. In addition to market-oriented groups, rational incentives arise for state-oriented ones to be formed, or for groups to start facing both ways, towards their market and towards the state. The greater the reach of the state, the greater is the scope for profiting from its commands, and as Marx has not failed to notice, the state was "growing in the same measure as the division of labour within bourgeois society created new groups of interests, and, therefore, new material for state administration."*21
When society consists only of persons, families and at worst perhaps very small groups, they give or withhold their consent in democracy to the state's rule in response to the available incentives. They are, so to speak, perfectly competitive "sellers" of their consent-in George J. Stigler's clever term, "price-takers." The "price" they accept or decline is contained in the global redistributive offer the state designs to buy a majority in the face of rival offer(s). A state-oriented interest group, however, instead of merely reacting to the going offer, actively bargains, and trades the votes and clout it represents against a better redistributive deal than its individual members would get without coalescing. The group reward, then, is the excess redistribution it manages to extract by virtue of its cohesion. Like any other "price-maker," it can to a certain extent influence, i
n its own favour, the price it gets. In the political context, the price it sets is for its allegiance, support.
The reward-a subsidy, tax exemption, tariff, quota, public works project, research grant, army procurement contract, a measure of "industrial policy," regional development (not to speak of Kultur-politik!)-is only in a proximate sense "given" by the state. This is plainly visible in the pure, taxing-Peter-to-help-Paul type of redistribution, but becomes more masked in its more impure (and more usual) forms, particularly when the redistributive effect is produced jointly with other effects (e.g. industrialization). The ultimate "donors"-taxpayers, consumers of this or that article, competitors, rival classes and strata, groups or regions which might have been, but were not, favoured by some policy-are hidden from the beneficiaries both by the insoluble mysteries of
true incidence (Who "really" ends up by paying, say, for price control? Who bears the burden of a tax concession? Who is deprived of what when the nation's athletes get a new stadium?), and by the very size and thickness of the buffer that public sector finances constitute between the perceptions of the gainers and losers.
A given group which, by lobbying and bargaining, succeeds in extracting some advantage from the state, would typically and not unreasonably, consider that its cost is infinitesimal by any sensible yardstick that men used to public affairs might apply:*22 the aggregate of all such special advantages already conceded to others, or the great good it will do, or the total state budget, etc. Like the cartoon tramp holding out his hat-"Could you spare 1 per cent of gross national product, lady?"-the group will feel induced to formulate demands by the perfectly sensible recognition that granting them is a matter of small change to the state. It might never put a demand for unrequited aid, even of a much lesser order of magnitude, to persons or other groups, for it would not care to ask for charity. At the same time, if it did bring itself to do so, how far would it get with 1 per cent of the income of Peter and Paul? And how would it go about successfully begging from enough people to make it worth-while? Given the choice, it is an inferior tactic for a group to address its claims to another group rather than to the state. The reasons have to do with the nature of the "quid pro quo," as well as with the fact that the state alone disposes of the panoply of "policy tools" for diffusing and smoothing out the incidence of the cost. There is only one instrument, the state, whose position of universal intermediary enables the successful postulant to get, not at some suitably modest fraction of some people's income, but at that of a whole nation.