2.6: Collective Action Problems

“Hoodoos” — rocky spires — abound in Utah’s Bryce Canyon National Park, part of the National Park Service, one of many public goods provided by the American government.

Public goods and common goods can be expensive. As shown in Figure 2.3 below, each year the American government spends trillions of dollars on public goods which most of us would be unable to obtain individually. This is one of the main reasons why humans form groups: to be able to enjoy public goods which they could not enjoy otherwise. Almost no American could afford to pay for a military large enough to protect him or her from foreign invasion, but all Americans working together can chip in enough money to fund a military capable of protecting them all. This is the primary purpose of taxes: to collect enough money for the government to provide expensive goods.

Figure 2.3: U.S. federal budget outlays, Fiscal Year 2024 (Source: Congressional Budget Office)

The tricky part about nonexcludable goods is that they can easily be exploited. If you stopped paying taxes—that is, if you decided to become a free rider, someone who benefits from a good without contributing to it—you would not suddenly be denied the enjoyment of tax-funded public goods. The air you breathe would be just as clean, the roads you drive on just as well-maintained, the home you live in just as safe from foreign invaders. Similarly, you could consume any amount of a common good, such as the timber or wild game in a forest, regardless of how much of it you need or can reasonably use. You could free-ride on the restraint of other consumers that allows the timber to replenish or the wild game to repopulate.

If free riders are few, nonexcludable goods can be provided and sustained. The trouble is that everyone has an incentive to free-ride, because it is preferable to enjoy a public good without contributing to it, or to consume extra of a common good. When the number of free riders becomes too large, there are no longer enough contributors to provide the public good, and common goods can be depleted quickly. This is known as a collective action problem. The group and all of its members benefit if the public good is provided, but each individual member prefers to free-ride rather than contribute.

Government solves collective action problems mainly through coercion. Rather than allow citizens to free-ride, it forces them to contribute to public goods and limits their consumption of common goods. Few people would choose to limit their consumption of common goods to sustainable levels. Even fewer would freely choose to pay the taxes on which the government relies to provide public goods. This is why the government does not let them choose. If you decide to not pay taxes, or to consume more of a common good than you are allowed, the government will attempt to change your mind. It might begin by asking nicely, but if you continue to refuse its requests will become increasingly demanding. Eventually, people with guns will come to your home to arrest you and confiscate some of your property for the trouble you’ve caused. If you resist even then (perhaps with a gun of your own) they may use deadly force against you, possibly even killing you.

Coercion is not pleasant, so most of the time we try not to think about it. We prefer to imagine that a good, free, democratic America works by everyone just asking nicely and everyone else responding in kind. Most Americans pay taxes, obey laws, and heed the instructions of police officers without having to be asked twice. However, they do so because they recognize that refusing to follow the rules comes with harsh penalties, up to and including the government’s use of deadly force to ensure compliance. If governments could not use violence as a last resort, they would be unable to provide and sustain the goods we expect from them. Every government, democratic or otherwise, is predicated on its ability to bring violence to bear against its own citizens if necessary.