Study

Politics is the process through which individuals and groups reach collective agreements. Success at politics typically involves bargaining and compromise, as there is often substantial disagreement over the goals of collective action. Individuals and groups can usually benefit from collective undertakings. National defense, public order, civil liberties, and public parks are all examples of public goods provided by governments that would be difficult to provide through private activity.

In order to achieve collective action, however, individuals have to overcome several challenges. These include coordination problems, where agreement must be reached on what to do and how to do it. In situations where individuals agree on the benefits of a collective undertaking, prisoner’s dilemmas can still lead to the pursuit of private gain at the expense of the collective good. Politics is rife with forms of prisoner’s dilemmas including the free rider and tragedy of the commons problems.

Proper institutional design can help individuals and groups overcome these challenges. Often, simple agreement over the rules and procedures for reaching and enforcing collective agreements can mitigate conflict. Constitutions and governments provide rules for how these collective agreements will be reached and then enforced. These may contain mechanisms, such as agenda control, veto power, and supermajority rules, to help solve problems and reduce certain costs associated with collective action.

The costs of collective action include both transaction costs—the time, effort, and resources needed to reach collective decisions—and conformity costs—the extent to which collective decisions require individuals to do things they wish to avoid. Institutional design generally involves a trade-off between transaction and conformity costs. Enabling government to decide and act quickly, for example, often entails imposing substantial conformity costs.

Modern democracies blend majority rule and delegation to form representative government. Politicians’ desire for reelection helps limit delegation problems such as agency loss. The American separation of powers system differs from parliamentary governments used by other nations primarily in the high transaction costs of its decision-making processes. The American Constitution’s Framers chose this system to minimize conformity costs.

Review Questions

• Why can’t we solve our disputes through simple bargaining all the time? What factors serve to undermine bargaining in different settings? What can people or governments do to help solve disputes despite these factors?
• What sorts of institutions are commonly used to manage conflicts in societies? What are some examples of where these institutions have failed?
• According to Kernell, Jacobson, and Kousser, why are institutions difficult to change? Why and how did the Framers try to make the Constitution difficult to amend?
• Compare and contrast problems of coordination, free riding, the prisoner’s dilemma, and the tragedy of the commons. Give a real-world example of each.
• What are the various costs associated with collective action?
• Discuss how the coordination and transaction costs for states changed when the national government moved from the Articles of Confederation to the Constitution.
• Contrast the simple majority, plurality, and supermajority voting rules. For each rule, give an example of its use. Discuss the trade-off between transaction and conformity costs for each.
• What are principals and agents? When in your life have you been one or the other? Think of two examples of how you have delegated to a nongovernmental agent in your daily life. Have you ever had problems with one of your agents shirking or misusing your delegated authority? What precautions did you take?
• Some government agencies receive delegated power to enforce laws and rules on society. Think of an example. What would happen if the agency did not exist? Would people still follow the law or rule? How might society suffer if they did not?
• How has fire protection evolved in the United States from a private good to a public good? How did smoking evolve from a private issue to a public issue?
• What are some examples of public and private goods that you have consumed today? How did you acquire them?