The State

Anthony de Jasay, courtesy of the author
Jasay, Anthony de
(1925- )
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First Pub. Date
1985
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Indianapolis, IN: Liberty Fund, Inc.
Pub. Date
1998
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4. Redistribution

Addictive Redistribution

4.3.0

Help and need feed upon one another; their interaction can give rise to uncontrolled cumulative processes.

4.3.1

By helping to create entitlements and to form interest groups, the state changes society in its image and at its peril.

4.3.2

Redistribution is potentially addictive in two distinct though related respects. One concerns the behaviour of persons and families—society's fine-grained basic stuff. The other acts upon groups, affecting in so doing the coarser, more visibly "structural" features of society. Fusing the two into a single group theory (since we could always say that families are small groups and isolated individuals are incomplete groups) might have had the elegance of greater generality, but the split treatment seems to me clearer.

4.3.3

The root ideas concerning the habit-forming effects of redistribution on persons and families are old and well worn. Their public acceptance reached its zenith with Cobden and Herbert Spencer (to whom one might add the peculiarly American phenomenon of W. G. Sumner). For no better reason than the boringness of virtue, they have since lost much of their currency.*13 Victorian homilies about self-reliance, about God helping those who help themselves and about the corrupting effect of charity, have practically disappeared from public discourse. On the other hand, the fully fledged welfare state has now been functioning long enough, and it has permeated the life of broad enough strata in society, to make it possible for theorizing to take the place of moralizing about these matters. A general sort of hypothesis would suppose that a person's behaviour over some period is affected, in a number of unspecified ways, by the receipt of unrequited help in the past or present period. Filling the empty box, it would be reasonable to assume, for instance, that receipt of help makes people consider future help more probable. Some of the self-reinforcing cumulative features of the provision of social welfare would inspire the more specific hypothesis that the more a person is helped in his need, and the higher he rates the probability of the help forthcoming (until, in the limiting case of certainty, he ends up by having entitlements), the more his conduct will be reliant on it.

4.3.4

In line with the normal relation between practice and capacity, therefore, the more he is helped, the lesser will become his capacity to help himself. Help over time forms a habit of reliance on, and hence the likelihood of a need for, help. Habit, moreover, is not simply temporary adjustment to passing conditions. It implies more than changes in momentary, short-term behaviour. It involves a longer-term, quasi-permanent adaptation of the parameters of behaviour: it changes character. These changes may to some extent be irreversible. Withdrawal of the help in question becomes progressively harder to bear and adjust to; at some stage, it attains the proportions of personal catastrophe, social crisis and political impracticability. The noise and turmoil provoked by contemporary Dutch, British, German, Swedish and American attempts (I am listing them in what seems to me their order of seriousness) marginally to rein in welfare expenditures as a proportion of national product, lend themselves well to being interpreted as "withdrawal symptoms" in a condition where the addict requires a progressively larger dose of the addictive substance to "feed his habit."*14

4.3.5

There are straightforward ways in which the adaptation of behaviour and character to the public aids that are forthcoming, is capable of setting off the self-feeding processes which can be discerned in heavily redistributive societies. For instance, a degree of public care for the welfare of mothers and children relieves, if it does not remove altogether, the most pressing material need for family cohesion. Reassurance about the minimum needs of mother and child will induce some (not necessarily substantial) proportion of fathers to desert them who might not have done so otherwise. (As connoisseurs of the American Great Society era will recall, publicly diagnosing this phenomenon has brought much undeserved abuse and charges of racist arrogance on Daniel P. Moynihan's head, though his facts stood up very well to the attacks.) Their desertion, in turn, disables the truncated residual family unit, greatly reducing its capacity to look after itself. Hence a need arises for more attention and more comprehensive assistance to one-parent families. Once reliably provided, such aid in turn encourages some (initially perhaps small) proportion of unmarried young women to have children (or to have them early). In this way, additional incomplete families are formed. They have little capacity for fending for themselves. Hence the need for public assistance further expands, even as reliance on it becomes widespread enough to cease to offend class or community standards of respectable conduct.

4.3.6

Much the same kind of reaction may be set off by public care for old people, relieving their children of a responsibility and contributing both to the self-sufficiency and the loneliness of grandparents who, but for state care, would be living with their descendants as a matter of course. By the same token, some of the people who would have produced and reared children as the most basic form of old-age insurance, now rely on the state insuring them instead. Whether the consequent reduction in the birth rate is a good thing or not, it sets off demographic shock waves which can unpleasantly rock society for a couple of generations, among other things by endangering the finances of the Ponzi-letter scheme of unfunded public old-age "insurance."

4.3.7

Analogous processes, where effects become causes of further effects of the same Janus-faced kind, may be at work in (or at least are consistent with) many other areas of redistributive action. Their common feature is the adaptation of long-run personal and family behaviour to the availability of unrequited aids, which are first passively accepted, then claimed and ultimately, in the course of time, come to be regarded as enforceable rights (e.g. the right not to be hungry, the right to health care, the right to a formal education, the right to a secure old age).

4.3.8

Such adaptations are obviously liable to leave some people happier and others, perhaps even some among the beneficiaries of state help, unhappier, though it looks very problematical to say anything more than this. Something, however, can be said about some wider political implications, notably in terms of the environment in which the state operates and seeks to attain its ends. Functions which used to be performed by a person for himself (e.g. saving for retirement) or by the family for its members (e.g. looking after the sick, the very young and the very old) in a decentralized fashion, autonomously, more or less spontaneously if not always lovingly, neither will nor can any longer be so performed. They will be performed instead by the state, more regularly, more comprehensively, perhaps more fully and by recourse to coercion.

4.3.9

The assumption of these functions by the state carries with it side-effects of some momentum. They affect the balance of power between the individual and civil society on one side, the state on the other. Moreover, the addictive nature of social welfare and the fact that its beneficiaries can generally "consume" it at nil or negligible marginal cost to themselves, powerfully influence the scale on which it will be produced. It seems plausible to argue that as the disabling, dependence-creating effects of aid are unintended, so is in the last analysis the scale of redistribution to produce social welfare. It is yet another example of the disconcerting habit of social phenomena to get out of control and assume shapes and sizes their initiators might never have envisaged. In the face of the habit-forming feedbacks at work, it is doubly unsatisfactory to apply to this particular form of redistribution the fiction of some deliberate social choice.*15

4.3.10

Partial loss of control over the scale of production of social welfare, and over the corresponding expenditure, is an important aspect of the predicament of the adversary state. I will revert to it when considering the phenomenon of "churning." However, I have only just begun to look at addictive redistribution and have yet to consider the workings of the sort of redistribution which fosters the proliferation of distinct, cohesive groups in society that, in turn, exact more redistribution.

4.3.11

Let us now put behind us the simplifying assumptions of an amorphous, structureless society which gave us the neat equilibrium solution of the preceding section on "buying consent." Society is now more like it is in reality, with its members being differentiated from each other by countless unequal attributes, among which the source of their livelihood (farming, lending money, working for IBM), their domicile (town or country, capital or province), their status (worker, capitalist, lumpen-intellectual, etc.) are but a few of the more obvious ones. People who differ from others in a number of respects can be sorted into groups according to any and each of these respects. Each member of society can be simultaneously a member of as many groups as he has attributes in common with somebody else. All members of a given group resemble each other in at least one respect, though differing in many or all others.

4.3.12

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. a cartel 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).

4.3.13

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.

4.3.14

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.

4.3.15

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.

4.3.16

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.

4.3.17

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.

4.3.18

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 members have to ride free, at least one of three conditions needs to hold (though they may not suffice without other circumstances being propitious too).

 

4.3.19

(a) Some members of the group are altruistic and actually prefer to 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.

4.3.20

(b) Though all members are selfish, some are non-envious. If they must, 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.

4.3.21

(c) All group members are both selfish and envious. Free riding must 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.

 

4.3.22

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.

4.3.23

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.

4.3.24

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.

4.3.25

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.

4.3.26

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.

4.3.27

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.

4.3.28

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.

4.3.29

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

4.3.30

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, in its own favour, the price it gets. In the political context, the price it sets is for its allegiance, support.

4.3.31

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.

4.3.32

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.

4.3.33

There are yet more potent ways in which the chance of obtaining rewards "from" the state rather than through the market, directly from persons or groups in civil society, transforms the environment in which interest groups get organized and survive. A given pay-off may be significant enough to a potential group to incite it to form and engage in the joint action required to get it. Its corresponding cost, by virtue of the intermediary role of the state, is apt to be so widely diluted across society and so difficult to trace as to its incidence, that "nobody really feels it," "everybody can afford it." The state-oriented group, by extracting a benefit whose cost is borne by the rest of society, is acting out the role of the free rider vis-à-vis society in precisely the same way as the member of a group vis-à-vis the rest of his group.

4.3.34

Unlike the individual free rider who beyond a certain point either meets some resistance, or destroys his group, however, and unlike the market-oriented "free-riding" group which is resisted by those who are expected to concede its excessive contract terms, the state-oriented group meets not resistance, but complicity. It is dealing with the state, for which condoning its free-rider behaviour is part and parcel of building the base of consent on which it has (whether wisely or foolishly) chosen to rest its power. Consent-building by redistribution is closely moulded by the pressure of political competition. The state, competing with its opposition, will have only limited discretionary choice about whose demands it will grant and to what extent. It will rapidly find itself presiding over a redistributive pattern of increasing complexity and lack of transparency. When another "free rider" is allowed to come on board, the "paying passengers" have every chance of remaining oblivious of the fact, as well as of its incidence on the "fares" they have to pay. Though they will hardly fail to gain some general awareness of free riding going on and may even have an exaggerated idea of its extent, in the nature of the case they will fail to perceive specific marginal additions to it. Nor can they, therefore, be expected to react defensively to the incremental free rider.

4.3.35

While the dilution of costs via the vastness and complexity of the state's redistributive machinery attenuates resistance to free riding by groups, free riding within state-oriented interest groups is rendered relatively innocuous by the special nature of the burden group members must carry in order to reap the group reward. A market-oriented group must fully (though not necessarily "equitably" nor "justly") allocate among its members the burden of group action—the cost of running the group bus, the discipline and loss of pay involved in obeying a strike call, the lost profit of restricted sales, the self-denial needed to respect a code of conduct. Unless one of the conditions sketched above in this section (altruism, non-envy and ample surplus of group reward over group cost, and successful restraint of free riding) is met, the free-rider problem will abort that caused by the interest group before it can arise: the group will decay, fall apart or fail to reach its cooperative understanding in the first place.

4.3.36

A state-oriented group, however, typically carries a featherweight burden. It need ask little of its members. It suffices for dairy farmers to exist as such for the state, with the opposition at its heels, to devise a policy for milk (and butter and cheese) which will provide them with better returns than the market, unassisted by a milk policy, could do. In return, the group need not even prove performance of the implicit political contract by "delivering the vote." Dairy farmers have wide latitude to "ride free" in two senses: they can vote for the opposition (which, if known, might simply cause the state to redouble its efforts to devise a more effective butter policy), and they can fail to pay membership dues to help finance dairy industry lobbying.

4.3.37

Neither type of free riding is likely greatly, if at all, to reduce its effectiveness in extracting a redistributive reward. Even when an interest group has politically "nowhere else to go," so that the implicit threat of its throwing its support behind the opposition is ineffective because not credible, or when its bargaining strength is for some other reason less unbeatable than that of dairy farmers, so that it does need an effort to get its way, the money it can usefully spend on lobbying, political contributions and the like is generally very small beer compared to the potential pay-off. If all group members do not chip in, a few can (and a few sometimes do) effortlessly cover the necessary costs for the whole group. Much the same is likely to happen when group interest requires its members to wave banners, to march, to link arms or to throw stones. Many free riders might stay at home but the normal group will usually contain enough willing members for the conditions of case (b) (p. 237) to be fulfilled and a nice and loud demonstration to have the required impact. In sum, as political action is on the whole extraordinarily cheap, state-oriented interest groups are very nearly immune to their own free-rider problem.

4.3.38

With the state as a source of reward for interest groups, free riding loses most of its destructive potential as a check on group formation and group survival. In terms of the "ecological" parallel used above, prey, predator and parasite no longer balance each other out. The defensive reactions of the prey are blunted: there is no market mechanism to signal society that a given interest group is raising its claims upon it; its exactions are screened from it by the size and complexity of the state's fiscal and other redistributive apparatus. Moreover, while the mechanism of bilateral contracts between consenting parties works symmetrically, in that it is as efficient in concluding acceptable as in rejecting unacceptable terms, the democratic political process is constructed to work asymmetrically, i.e. to concede a large variety of group claims rather than to deny them. Hence, even if the "prey" were specifically aware of the "predator," it would have no well-adapted defence mechanism for coping with it.

4.3.39

Moreover, "predator" groups, in terms of my argument about the relative cheapness of cohesive political action, can survive and feed upon society almost no matter how infested they may be with their own free-rider "parasites." As a corollary of this, the parasite can prosper without adverse effect on the predator's capacity to carry and nourish it. More of one thing does not bring in its train less of another. Any large or small number of free riders can be accommodated in a population of interest groups which, in turn, can all behave as at least partial free riders vis-à-vis the large group that is society.

4.3.40

The above might suggest the sort of unstable, weightless indeterminacy where interest groups can, at the drop of a hat, just as soon shrink as multiply. Having no built-in dynamics of their own, it takes stochastic chance to make them do the one rather than the other. Any such suggestion which would, of course, run counter to the bulk of historical evidence (to the effect that more often than not, interest groups increase in number and influence over time), is as good as barred by two further features implicit in the interaction of group and state. First, whether or not the granting of a group reward is successful in winning the support of the group and reinforcing the state's tenure of power, it will generally increase the state's apparatus, the intensity and elaborateness of its activity, for the granting of each group reward requires some matching addition to its supervisory, regulatory and enforcing agencies. By and large, however, the more the state governs, the greater tend to be the potential rewards that can arise from successfully soliciting its assistance and hence the greater the pay-off to group formation. Second, each grant of a group reward shows up the "soft touch" character of the state caught in the competitive predicament. Each grant, then, is a signal to potential groups which consider themselves similarly placed in some respect, improving in their eyes the likelihood of actually managing to obtain a given potential reward if they organize to demand it.

4.3.41

On both these scores, therefore, the bias of the system is to cause interest groups to proliferate. Whether the process is first set off by the state's offer of a favour or by a group's demand, is a chicken-and-egg question of very limited interest. Regardless of the initial impulse, the incentives and resistances appear to be arranged in such ways as to cause redistributive policies and interest group formation mutually to sustain and intensify each other. Interactions between group pressure and redistributive measures need not be confined to matters of narrow self-interest. Groups may form and act to promote the cause of a third party, e.g. slaves, mental patients, the "Third World," etc. Such "persuasive lobbies" may not possess enough clout to let them trade their political support directly against policies favouring their cause. However, they may succeed in influencing public opinion to the point where state, opposition or both will consider it good politics to include in their platforms the measure demanded. Once adopted, such a disinterested measure both widens the accepted scope of state action and the apparatus for executing it, and serves as a precedent inciting other persuasive lobbies to organize and promote the next cause.*23

4.3.42

Behind every worthy cause there stretches a queue of other causes of comparable worthiness. If cancer research deserves state support, should not the fight against poliomyelitis also be assisted, as well as other vital areas of medical research? And don't the claims of medical research help to establish a case for supporting other valuable sciences, as well as the arts, and physical culture, and so on in ever-widening ripples? It is easy to visualize the rise of successive pressure groups for research, culture, sport, while an avowedly anti-culture or anti-sport pressure group seems simply unthinkable. Once again, the bias of the situation is such that its development will be onward and outward, to embrace more causes, to press home more claims, to redistribute more resources, hence stimulating more new demands—rather than the other way round, backward and inward, to a less pronounced group structure and a less redistributive, more "minimal" state.

4.3.43

Anchored in the subconscious of educated liberal public opinion, there has for long been a sense of distinction between good and bad redistribution, between the honouring of just deserts and the currying of favours. In a recent, thoroughly sensible book, Samuel Brittan has done much to make the distinction explicit.*24 It is on the whole good to redistribute income so as to produce social justice and security, health and education. It is bad to redistribute to favour special interest groups. Farm subsidies, "industrial policy," rent control, accelerated depreciation, tax relief on home-mortgage interest or on retirement saving are on the whole bad, because they distort the allocation of resources—in the sense of making national income lower than it would otherwise be.

4.3.44

Two observations should briefly but urgently be made. One is that (unless we first define "distortion" in the way required to produce the answer we want), nothing really allows us to suppose that taxation to raise revenue for a worthy objective or to dispense distributive justice, does not "distort" the pre-tax allocation of resources. A priori, all taxes (even the one-time Holy Grail of welfare economics, the "neutral" lump-sum tax), all transfers, subsidies, tariffs, price ceilings and floors, etc. must generally change the supplies and demands of interrelated products and factors. When we say that they distort them, all we are really saying is that we do not approve of the change. It is mildly self-delusive to assure ourselves that our approval is much more than the reflection of our prejudices, that it is an informed diagnosis, a function of some "objective" criterion such as allocative efficiency reflected, somehow or other, in national income (rather than in the more controversial "total utility" or "welfare"). Whether the after-tax, after-welfare subsidy, after-tariff, etc. allocation of resources has given rise to a higher or lower national income than the pre-tax, pre-tariff, etc. one would have done, is an index number problem which has no wertfrei "objective solution." It is not a matter of knowledge, but of opinion, which may of course be "sound opinion." Most reasonable men might share the judgement that if all state revenue were raised by, say, a heavy excise tax on a commodity like salt which people simply must have, and all of it were spent to gratify the whims of Madame de Pompadour (an engagingly simple view of the bad old days to which few would own up though many still half-believe in), national income (let alone utility) would be less than under most other redistributive configurations known to history.*25 Less fanciful revenue-expenditure patterns, however, might give rise to genuine perplexity as to their incidence on the national product. Even those least inclined to agnosticism might honestly question the "non-distortive" nature of some revenue-raising tax, however virtuous the cause in which it was levied.

4.3.45

The other observation is plainer and more important. It is simply that it really makes no practical difference whether we are able "objectively" to tell good from bad redistribution. If we have one, we will have the other, too. A political system which, by virtue of competitive bidding for consent, produces redistribution we regard as conducive to equality or justice, will also produce redistribution we will regard as pandering to interest groups. By no means is it clear that there are "objective" criteria for telling which is which. Still less evident are the means which could possibly constrain or stop the one while letting through the other.

4.3.46

To sum up. While in a political system requiring consent and allowing competition the state seems logically bound to engender redistribution, it does not in the everyday sense "determine" its scope and scale. Once begun, the addictive nature of redistribution sets in motion unintended changes in individual character and the family and group structure of society. Though some may be regarded good and others bad, no selective control over them appears practicable. These changes react back upon the kind and extent of redistribution the state is obliged to undertake. Probabilities increase that a variety of cumulative processes may be set in motion. In each such process, redistribution and some social change mutually drive each other. The internal dynamics of these processes point ever onward; they do not seem to contain limiting, equilibrating mechanisms. Attempts by the state to limit them provoke withdrawal symptoms and may be incompatible with political survival in democratic settings.


Notes for this chapter


13.
Herbert Marcuse may be credited with reviving a somewhat elliptical version of the old-time belief in redistribution degrading the beneficiary's character. He saw the individual injuring himself in acquiescing in his own dependence on the welfare state. (An Essay on Liberation, 1969, p. 4.)
14.
The OECD reported in 1983 that over the period 1960-81, public expenditure on health, education, old-age pensions and unemployment benefits rose from an average of 14 per cent to 24 per cent of GNP in its seven largest member countries. This rise was not primarily due to greater unemployment, nor to demographic bad luck (the effect of the latter is still mostly in the future). The OECD states that "populations which have become increasingly dependent on the welfare state will continue to expect support" and in order for continuing support to absorb no more than the actual proportion of GNP, i.e. for its relative weight to be stabilized, some quite ambitious assumptions about the future growth of the cost of existing entitlements and of the economy would have to hold true. The OECD refrains from pronouncing on the likelihood of actual performance measuring up to these assumptions.
15.
There is, in all circumstances, a general reason for regarding social choice as a fictitious concept, namely that while majorities, leaders, caucuses, governments etc. can make choices for society (except in unanimous plebiscites about simple proximate alternatives), choices cannot be made by society. No operative meaning can be credited to such statements as "society has chosen a certain allocation of resources." There is no method for ascertaining whether "society" preferred the allocation in question, and no mechanism by which it could have chosen what it supposedly preferred. It is always possible to agree to some question-begging convention whereby certain actual choices made for society shall be called "social choices," for instance if they are reached by the mechanism of a state mandated by majority vote. The convention will create a fictitious concept, whose use cannot fail to bias further discourse.

There may, in addition, be other reasons for objecting to the concept in particular circumstances. If a certain pattern of redistribution is addictive like drug-taking, it is a euphemism to say that society "chooses" to maintain or accentuate that pattern. At bottom, this is the general problem of today's wants substantially depending on their satisfaction yesterday and through all previous history (cf. also pp. 20-1). We should, however, recall that addiction is not the only conceivable relation between what we get and what we want. There is a range of possibilities between the extremes of addiction and allergy. The proper field of choice theories is the middle region of the range. But even in the middle, it is not "society" that chooses.

16.
I am choosing the example of the bus because it makes the free-rider problem more palpable, and not because I believe that buses can only be provided cooperatively. A universe where all buses are run by private operators for a profit is conceivable. A universe where this is true of streets may not be conceivable.
17.
This thesis is put in Mancur Olson, The Logic of Collective Action, 1965, p. 36. Cf. also the same author's The Rise and Decline of Nations, 1982, for the argument that "encompassing organizations," e.g. the association of all labour unions, all manufacturers or all shopkeepers in a corporative state, "own so much of the society that they have an important incentive to be actively concerned in how productive it is" (p. 48), i.e. to behave responsibly. The encompassing organization is to society as a person is to a small group.
18.
For a review of various authors' contrasting conclusions about the effect of group size on free riding within the group, cf. Russell Hardin, Collective Action, 1982, p. 44.
19.
It is perhaps tempting, in this light, to regard interest groups as miniature states and the theory of the state as a case in some general theory of interest groups. If we did this, the traditional dividing line in political theory between state of nature and civil society would get washed away. There are major objections to such an approach. (1) The state has a unique attribute—sovereignty. (2) The approach is question-begging. It treats as axiomatic that for the potential members of the "group" (i.e. all members of society), "group reward" exceeds "group burden," i.e. there is a pay-off from tackling the free-rider problem. But how does the pay-off manifest itself? It is usually accepted that the pay-off from forming a trade union is higher wages or shorter hours, and the pay-off from forming a cartel is excess profits. The pay-off from the social contract is the realization of the general will, obviously a different category of pay-off; even its algebraic sign depends entirely on the values of the interpreter of the general will—the Sympathetic Observer of the "social welfare function." (3) The theory of interest group formation may have room for the state which only imposes cooperative solutions that make some better off and none worse off. It has not enough room for the state that imposes solutions that make some better and others worse off, i.e. that is a group redistributing benefits within itself. Nor is it suited to accommodate the state that has its own maximand, pursues its own ends in opposition to its subjects.

The very enumeration of what could or could not be adequately handled by assimilating the state to interest groups with coercive features shows what a strait-jacket the contractarian approach is for the theory of the state.

20.
For the fundamental difference between "groups" (including political communities) where people can "vote with their feet" and others where they cannot, see Albert Hirschman, Exit, Voice and Loyalty, 1970.
21.
K. Marx, "The Eighteenth Brumaire of Louis Bonaparte," in K. Marx and F. Engels, Selected Works in One Volume, 1968, p. 169.
22.
Like the American senator, referring to the deliberations of the Senate Finance Committee: "A billion here, a billion there and before long you are talking real money." My source is hearsay, but "se non e vero, e ben trovato."
23.
Cf. W. Wallace, "The Pressure Group Phenomenon," in Brian Frost (ed.), The Tactics of Pressure, 1975, pp. 93-4. Wallace also makes the point that causes feed on the mass media and the mass media feed on causes, from which it may be possible to infer further that some kind of cumulative process might get going even in the absence of the state. Would, however, people in the state of nature watch so much television? That is, isn't the habit of prolonged television-watching a product, in part, of people being less interested in doing state-of-nature things, either because it is no fun any more or because the state is doing them instead?
24.
Samuel Brittan, The Role and Limits of Government: Essays in Political Economy, 1983.
25.
Madame de Pompadour would spend all her income on Sèvres china, and the rest of the people all their income on salt if the salt tax was set high enough to leave them no money for anything else. Note that since the demand for salt does not vary with its price, taxing it (rather than articles in more elastic demand) should not cause much distortion! Nevertheless, as all the national income is spent on salt and china, we may judge that it would be reduced by the salt tax.

End of Notes


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