1. Group Formation II: Interest groups

2. The Free Rider Problem
One person’s contribution to the collective good is small
Collective good will be provided regardless of person’s contribution
The person can receive the benefits without contributing
Private incentive is to “free ride” on contributions of others
CONTRIBUTION is valuable to the individual. Would privately prefer NOT to pay the costs, and have the good provided anyway.

3. Consequences for group formation
Groups will form when:
“Group” is small enough that one person’s participation is noticed/meaningful
Benefits of joining are larger than costs
Example: Group’s activities produce private, excludable goods (not public goods)

4. So why so many groups?
Entrepreneurs
Selective Incentives

5. Overcoming free rider problems
Selective incentives: A selective incentive applies selectively to individuals depending on whether or not they contribute to the provision of the collective good. They “privatize” public goods.
Material

6. Examples of Material benefits
Information
Direct help/services
Discounts
Goodies (the hand-cranked emergency radio!)

7. Overcoming free rider problems
Selective incentives: A selective incentive applies selectively to individuals depending on whether or not they contribute to the provision of the collective good. They “privatize” public goods.
Material
Social/ “Solidary”
Purposive/Expressive

8. Evidence: Why do people really join groups?
Personal examples?
Other Evidence

9. Is Olson right? Does the free rider problem bias the group environment in favor of small, narrow interests?

10. Evidence Some groups do arise because of disturbances (not all)
Group universe overrepresents small, narrow, homogeneous, wealthy interests (but not all)
Entrepreneurs are important!
Material incentives don’t generate enough membership/donations to maintain most citizen groups
Patrons are important!