Download Book Ultee Chapter 2

Book Ultee Chapter 2
In the present chapter we review systematic studies of societies conducted
before sociology got its name.
We begin by stating Hobbes' question of the extent to which life in particular
societies is peaceful or marked by bloodshed, and Hobbes' answer to it.
A long-standing question in sociology is called Hobbes' problem. Hobbes'
question says: `How is it possible that people live together peacefully?'
The answer Hobbes gave: `only a sovereign state will avert a war of all against
all'.
Sociologists use the expression the problem of order to designate one of their
master questions.
Hobbes' answer to this question can be contrasted with two varieties of answers


One type assumes an invisible yet omnipresent and omnipotent god. The
Bible was God's word and proved His existence.
Other explanations postulated final causes and hidden substances. Those
philosophical answers are vague and unfinished.
Hobbes answer, in contrast to these two types, is informative and testable, and
therefore scientific.
According to Hobbes' solution to the problem of order, every human being has
particular desires and aversions. Every individual needs food and liquid, and
longs for wealth, knowledge and honor. All people try to avoid the situations
they dislike, and they attempt to reach their goals.
Persons, when left to themselves, will pursue with all available means their own
interests, even if this is at the expense of others. This condition Hobbes refers to
as the state of nature.

In the state of nature the way people seek to attain their goals results in
killing, subduing, dispelling, repelling or resisting others. This situation
Hobbes signifies as a war of all against all. Under these circumstances, so
Hobbes holds, life will be lonely, poor, nasty, brutish and short.
According to Hobbes, wealth, knowledge and honor not only are ends, but are
also means to attain more distant goals. They do not simply provide ways to save
one's life momentarily but they offer assurance for a future enjoyable life too.
According to Hobbes, people differ less in bodily strength than in wealth,
knowledge and honor. That is why in the state of nature, people threaten one
another with violence.
According to Hobbes, people in the state of nature eventually forego physical
force. Endowed with reason, they see the necessity of a deal that bans violence.
However, such a pledge is not followed spontaneously. It must be implemented.
When closing this covenant, an organization is erected, and all people agreeing to
refrain from violence. This structure is called the state, and the person
embodying it the sovereign.
People will perform the acts which now are penalized, less frequently than in the
state of nature. Civil war will not occur, nor cases of violence like murder, injury,
burglary or robbery.
The problem of order after Hobbes
Hobbes' solution to the problem of order threw up several questions. Locke
came to add two questions to Hobbes' original question. The first question might
be called the question of oppression, the second that of rebellion.
The question of oppression is about the conditions under which a sovereign
employs force against his subjects.
The question of rebellion is about the circumstances under which the members
of a society use violence against their sovereign.
Will every person acquiesce to any which ever law to raise taxes, or might people
rebel against handing over a part of their possessions to a state?
Locke on the separation of powers
According to Locke, the mere presence of a sovereign is not sufficient to bar
violence from a society. After all, this person can be arbitrary and the sovereign
may even punish people who adhere to all the laws of a country. Locke went on
to ask under which conditions oppression within states will be stronger and
rebellion less likely.
According to Locke, oppression and rebellion are less probable in a situation in
which the legislative tasks of a state are separated from the administration of its
laws. In a state in which legislation is separated from administration, fewer
infringements of laws go unpunished, while law-abiding citizens are less likely to
be penalized. Otherwise judges could acquit friends and convict enemies. In
addition, rebellion of the population against the state will occur less frequently.
Montesquieu on the separation of powers
Locke’s (two) separation of powers lasted until 1748, when Montesquieu
substantiated the hypothesis that the separation of powers should be in three
units.
He held that in states with a separation between the executive, judicial and
legislative branches, fewer people who trespass laws go free and fewer lawabiding citizens are penalized. In addition, Montesquieu stated that in such
societies, violence of persons against other persons, of the state against its
subjects, and of citizens against the state, is less likely.
Bentham on the judiciary
According to Bentham, people seek pleasure and avoid pain, and they perform
those acts that gratify most and distress least. The penalties for acts forbidden by
law, increase the burden of a crime.
Bentham on the executive
Thus Bentham's hypothesis says that the more intensively, longer, and more
speedily a society's judges have punished a crime, and the more likely a society's
members who committed this crime have been arrested and convicted, the less
frequently this act will be performed by this society's inhabitants. Heavier
punishments by judges only do so if the chances of being caught by the police are
sufficiently high.
Hobbes' problem of order involves the violence which people use against each
other. However, when states exist, three other types of violence are possible:
states may oppress their subjects, people may rebel against the state, and states
may wager war against each other. Finally, rebellion comprises revolution and
revolt.
Utilitarian individualism
Utilitarian individualism

Answers to questions on the macro level involve assumptions about
individuals. That is why it is called individualism. And because the main
proposition on individuals holds that individuals maximize their utility, it
is called utilitarian individualism.
The core of utilitarian individualism in a schematic way.
a) each feature of every society is the outcome of certain acts performed by its
inhabitants under certain circumstances;
b) these individuals have specific goals,
c) they have a particular but always limited amount of means,
d) and these individuals employ their means in such a way that they approach
their goals as closely as possible (they choose the act which maximizes their
utility);
e) the circumstances under which people act, affect the extent to which they
reach own their goals in the short run,
f) and the extent to which they reach them in the long run, as well as the extent
that other reach their goals.
Hobbes' elaboration of the core of utilitarian individualism in a state of nature
a) One feature of societies is the extent to which life for its members is peaceful
or marked by bloodshed;
b) the first priority of the members of a society is to avoid death and injury;
their next one is to assuage hunger and quench thirst; and their third one to
secure wealth, knowledge, and honour;
c) almost all members of a society possess physical force;
d) threatening others with and using physical force against others,
e) in the state of nature in the short run helps persons to realize their priorities,
f) and in the long run causes every member of society to die a premature and
violent death.
Hobbes' elaboration of the core of utilitarian individualism with a sovereign state
a) One feature of societies is the extent to which life for its members is peaceful
or marked by bloodshed;
b) the first priority of the members of a society is to avoid death and injury;
their next one is to assuage hunger and quench thirst; and their third one to
secure wealth, knowledge, and honour;
c) almost all members of a society possess physical force;
d) threatening others with and using physical force against others,
e) in sovereign states in the short run has as a consequence that persons no
longer realize their priorities to the extent that they might in the state of nature,
f) and penalization by the sovereign has as a long-run effect that life in sovereign
states is more peaceful than in the state of nature.
Book Ultee Chapter 4
As argued in chapter 1, sociology has three main questions. In this chapter we
expound the sub-questions of one main question, the problem of inequality.
In its most simple form, the problem of inequality runs: "who gets what and why?"
Multiple sociologists looked at this question: Rousseau, Ferguson & Millar, Marx &
Engels.
According to this tradition, societal phenomena - like cohesion, rationalization and
above all inequality - are to be explained by the way people make their living.
Changes in their means of subsistence determine the course of history - hence the
name historical materialism.
Engels and Marx used it to predict that the societies in which they were living
were to show ever-increasing inequalities.
Rousseau held that in the early days of humanity the members of this species
made their living by collecting fruits and hunting game and that they later on did
so by working fields. This shift from one mode of existence to another resulted in
the institution of land ownership and persistent inequality.
Millar, in his turn, broadened the problem of inequality. He was not only
concerned with inequalities between masters and servants but also with
distinctions of rank in general: men ranked above women, fathers above children,
and rulers above subjects.
The propositions of Engels and Marx above all involved the then European
societies with their freedoms of labour and property and a highly developed
division of labour.
After Rousseau had named the origin of inequality and Ferguson and Millar had
investigated how in the past various inequalities had developed, Engels and Marx
indicated what in the future were to happen with the inequalities between
capitalists and workers.
Since property in these societies mostly took the form of individual ownership of
factory halls and machines, also called capital goods, Engels and Marx referred to
the way of living paramount in these societies as the "capitalist mode of
production"
According to them the growth of the total amount of capital in a society, is
accompanied by more and more riches on the side of the owners of capital and
increasing poverty among the members of the working class. They tagged this
hypothesis the general law of capitalist accumulation.
According to the rules of law in a capitalist society all its members have equal
chances, but in actual fact the disparities in the condition of capitalists and the
condition of workers widen.
The core of historical materialism
Why does the capitalist mode of production, with the passage of time, lead to
increasing disparities in the standard of living between a society's members?
An answer to this is stated in the core of historical materialism:
a) Whatever mode of production prevails in a society,
b) every inequality in that society,
c) rests on some form of compulsion resulting from this mode of production;
d) this compulsion leads to a certain type of strife,
e) and sometimes this strife results in the abolition of the old mode of production
with its ensuing forms of compulsion and the disappearance of old inequalities,
f) and under certain circumstances in the coming of equality.
Classic historical materialism
Engels & Marx applied the core of historical materialism to European Societies.
The elaboration of the core of historical materialism by Engels & Marx says:
a) In societies with capital goods as the most important means of production and
universal freedom of property and of labor (capitalist societies) that consist of
inhabitants owning capital goods and of other inhabitants without such property
having to live from employing their labor force (capitalists and workers),
b) wages of workers fall and profits of capitalists rise
c) because of the threat that capitalists dismiss workers and replace them by
machines;
d) this threat results in violence by workers against capitalists,
e) and to the extent that workers become conscious of this compulsion and unite,
they win this strife and abolish private ownership of the means of production, and
f) if the means of production become common property, the distribution of
consumer goods among the inhabitants of this society will proceed according to
their needs.
The so-called centralization hypothesis by Marx & Engels:
a) In capitalist societies
b) the growing amount of capital gets concentrated in the hands of fewer
capitalists
c) because owners of small amounts of capital go bankrupt in the wake of price
cuts by owners of large amounts of capital.
The elaborations of Engels and Marx are known as classic historical materialism.
Revisionism
Eduard Bernstein (1850-1932) also elaborated the core of historical materialism.
Bernstein held that as long as workers do not have the freedom to form trade
unions, as long as the voice of a worker in parliamentary elections does not count
as much as that of a capitalist, and as long as parliament cannot dismiss the
members of a cabinet, the wages of workers will drop compared to the profits of
capitalists. That is, wages fall in a relative sense.
Bernstein's revision of the theory of Engels and Marx holds:
a) In capitalist societies without freedom of assembly, general suffrage for
parliament, one vote for each inhabitant in elections for parliament and
accountability of cabinet members to parliament,
b) workers do not become absolutely poorer, but they do become less well off in
a relative sense;
c) workers improve their condition in an absolute sense, since the substitution of
labor by machines, goes together with an increase in the skills of workers,
whereas skilled workers are less easily compelled to accept lower wages than
unskilled workers; workers become relatively poorer since skills cannot fully
counter the threat that labor will be replaced by machines;
d) under these conditions the struggle of workers against capitalists becomes
focused on the extension of political rights; this strife is not wholly violent and
from time to time successful; and as these rights expand, it becomes syndicalist
and parliamentarian, thus taking on peaceful forms;
e) the more workers unite into trade unions and labor parties, the more they gain
through gradual reforms various social rights;
f) and with the extension of social rights, income disparities between workers and
capitalists will narrow.
Legislation offering people a secure existence (old age pensions, insurance
against unemployment etc.) is an example of a reform making for smaller income
disparities. This legislation creates a third source of income: apart from income as
a result of capital ownership and income from labor now there is income
according to social rights.
Bernstein also furnished an alternative to Marx' elaboration about a second
inequality in capitalist societies:
a In capitalist societies
b the number of small capitalists does not decrease; it increases
c because the growing demand for consumer goods gives rise to new sectors of
production, with large capitalists in old sectors offering little competition to
small capitalists in new sectors.
Since Bernstein revisioned the classic historical materialism as proposed by Engels
& Marx this branch of historical materialism is called revisionist historical
materialism.
In the United States companies had grown in size, as measured by their amount
of capital, but they were owned less and less by one single person or family and
more and more by various shareholders. An analysis of the yearly financial reports
of the larger companies indicated that the number of shareholders had risen. A
larger amount of capital became dispersed over more persons.
These findings brought Berle & Means (1932, 1968) to elaborate as follows the
core of historical materialism:
a In capitalist societies
b capital gets dispersed over an increasing number of shareholders
c because workers invest a part of their higher wages in shares.
In 1941 Burnham went one step further. The growth of companies not only made
original owners raise additional capital by the emission of stock, but also had
them yield tasks to other persons. In addition, a conflict of interests was created
between shareholders and directors.
Burnham proposed the following elaboration:
a In capitalist societies with some inhabitants owning stock in companies and
others deciding how to deploy the capital of these enterprises (shareholders and
directors),
b dividends paid to shareholders fall and salaries and perks for directors rise
c because of the risk that directors might leave their company.
No socialism in the United States
A final elaboration of the core of historical materialism concerns the question of
why there is no socialism in the United States. This question was raised by
Sombart in 1906.
According to Sombart, something was wrong with a third elaboration of classic
historical materialism. It runs:
a In capitalist societies
b all inhabitants with respect to the freedom of labor and the right to own
property are equal before the law; in actual fact, the longer these laws persist,
the more difficult it becomes for workers to start their own enterprise and
accumulate capital;
c this is the case since established capitalists corner newcomers.
Feudal societies, societies of the type that in Europe preceded capitalism, were
both de jure (according to law) and de facto (in actual fact) closed. Capitalist
societies were de jure open. They recognized universal economic freedoms such
as those of enterprise, occupation and property. Those wishing to set up shop no
longer required permission from guilds, people with a creed different from the
state religion now were allowed to practice law, and purchase of land ended
being limited to nobles. Yet de facto little had changed since the introduction of
universal economic rights. The class of capitalists with the passage of time
became more and more closed to persons from the working class.
Sombart provided an alternative to this classic elaboration:
a In capitalist societies without a feudal past and with uncultivated land not yet
private property
b more workers start their own business, making them upwardly mobile;
c they do so because dismissal is less of a threat in these societies;
d and since the workers of these societies experience upward mobility, their
struggle against capitalists takes on peaceful forms.
The United States did not have a feudal past. This de jure open society also was
de facto open. In this situation, according to Sombart, no socialism could arise in
the United States.
Mobility as a subquestion of the problem of inequality
Sombart's question is that of whether persons during their whole life belong to
one and the same class (the capitalist class, the working class) or whether they
move from one class to another. How much mobility (upward mobility, downward
mobility) of individuals between the classes of a society does occur?
According to Engels and Marx small capitalists would disappear as a result of
competition by large capitalists (something impossible without downward
mobility from the small proprietors to the workers), while Bernstein maintained
that small owners, as a consequence of the rising standard of living of workers,
become more numerous (which must involve upward mobility from the working
class to the small owners).
Questions on inequality thus can be divided into two parts: questions of disparity
and questions of mobility. Questions about disparities at one point in time, do not
make questions about mobility in the course of time superfluous, and the other
way around. Both are part of the problem of inequality.
Book Ultee Chapter 5
Sociologists often use the expression the problem of order to designate one of
their master questions.
Structural functionalism is a second important tradition within contemporary
sociology. The main question of this tradition sometimes is called Hobbes'
problem. Hobbes' question says: `How is it possible that people live together
peacefully?'
Emile Durkheim is the genuine initiator of what later came to be called structural
functionalism.
Durkheim's studies show that the problem of order belongs to an overarching
one. That problem may be termed the problem of cohesion.
The question `How is it possible that people live together peacefully?', has been
understood in two ways. One reading stresses the word `peacefully'. It is clarified
by adding: `... and why do societies not fall apart into groups hostile to one
another?'
Durkheim also dealt with the question: “why do societies not consist of peaceful
but unattached people, persons whose lives barely touch one another?”
Durkheim held that if the inhabitants of a society use more violence against each
other, this indicates that this society is less cohesive.
Durkheim also held that a higher incidence of suicide, the severest form of
violence persons may use against themselves, indicates less societal cohesion too.
When limited cohesion of societies is equated with violence against others,
sociologists speak of the problem of order
When limited cohesion of societies is equated with violence against themselves,
sociologists speak of the problem of cohesion.
The core of structural functionalism
The core of Durkheim's structural-functional answer to the problem of cohesion
runs as follows:
a Every society displays a certain degree cohesion
b in as far as it consists of certain intermediary groupings (possesses some
structure),
c and certain generally shared norms and values (which is to say, has a culture);
d and to the extent that the members of a society are more strongly integrated
into these groupings, they are more likely to live up to these norms and values,
e which results in a more cohesive society.
General concordance – idea by Comte; according to him order is impossible
without consensus.
According to Tocqueville, one of the regularities of human society is that in
societies where people are equal before the law, the people stay civilized as long
as they master the art of forming associations.
Yet Durkheim also was concerned with the effects of intermediary groupings.
a A low incidence of suicide indicates strong cohesion;
b families, religious associations, and political organizations are instances of
intermediary groupings,
c one such norm is (legal or public) disapproval of suicide, a norm generally
prevailing in (almost) every society;
d and the stronger the integration of the inhabitants of a society in families,
religious associations and political organizations, the more these persons follow
the interdiction to take one's life,
e which lowers their chances to commit suicide.
Example 1
(14) The more the inhabitants of a society are integrated in any whatsoever of its
intermediary groupings, the lower their chances of suicide.
(15) A religious association is an intermediary grouping.
------------------------------------------------------------------------------------------------(2) The more strongly persons are integrated in a religious association, the lower
their chances to commit suicide.
Example 2
(14) The more the inhabitants of a society are integrated in any whatsoever of its
intermediary groupings, the lower their chances of suicide.
(16) A family is an intermediary grouping.
-----------------------------------------------------------------------------------------------(7) The more strongly persons are integrated in a family, the lower are their
chances to commit suicide.
Integration in groupings that do not fully disapprove of suicide
Durkheim now brings in one auxiliary assumption, namely the assumption that
the intermediary grouping has to disapprove suicide:
(18) The more strongly persons are integrated in any intermediary grouping of
some society, the more likely they are to follow the norm of this grouping on
suicide.
(19) All intermediary groupings of a society disapprove of suicide.
------------------------------------------------------------------------------------------------(14) The more the inhabitants of a society are integrated in any whatsoever of its
intermediary groupings, the lower their chances of suicide.
If the norms of some intermediary grouping under particular circumstances
approve of suicide, then stronger integration does not lead to lower, but to
higher chances of suicide.
Parsons' socialization- and internalization hypothesis
According to Durkheim, a society consists of intermediary groupings. Stronger
integration in them would lead to higher chances of following their norms.
Parsons accepts Durkheim's proposition and he attaches a proposition of himself:
“To the extent that the members of a society have been socialized more strongly
into its norms and values, and to the extent they have internalized them, these
persons more strongly live up to these norms and values.”
Durkheim’s theory of anomie
According to Durkheim, a society's suicide rate is not only lower when its
members are more strongly integrated in its intermediary groupings. It is lower
too when the elements of its culture are more attuned to one another.
A society has values about the goals which its members should pursue and norms
about the means with which they should pursue these goals.
However, sometimes societies lack a culture which makes the goals held up to its
members agree with the means they should employ.
Durkheim names this situation anomie. A lack of such norms makes persons aim
for things far beyond their means, which in the long run makes for higher chances
of suicide.
So his elaboration is:
To the extent that the norms and values of a society attune the goals and means
of the members of this society to one another, the more the members of this
society live up to its interdiction of suicide.
If the goals of persons go far beyond their means, their chances of suicide are higher.
Example: after the crash of the stock exchange in Paris in 1882, the suicide rate for
the whole of France rose. According to Durkheim not only a crises in the ordinary
sense of the word contribute to suicide, a `happy crisis' does so too.
A society may be anomic in more than one respect. Apart from economic anomie,
he pointed towards domestic and conjugal anomie.
The higher suicide rate of widowed men compared with married men is an effect
of domestic anomie.
The higher suicide rate of divorced man compared with married men is a
consequence of conjugal anomie.
Why the word structural is used, will have become clear in what has been said: a
society displays cohesion to the extent that it has a structure.
The word functionalism is already suggested by Durkheim's delineation of
sociology as the science of the emergence and functioning of societal institutions.
Book Ultee Chapter 9
We now have arrived at the problem of rationalization, the third main question of
sociology. In the present chapter we break down the problem of rationalization
into its constituents.
The last couple of centuries, sweeping and profound changes have occurred in a
number of human societies. They sometimes are referred to as `the Rise of the
West'.
 Perhaps the diffusion of highly efficient ways of making material goods in
massive quantities comes most to the mind.
The driving force behind this upheaval, supposedly is the triumph of scientific
thinking and technical ingenuity.
An important consequence of this overall rationalization, is the vast increase in
the standard of living.
The uniqueness of the western world
According to Weber, an important question is what is unique for the West? What
explains the fast rationalization in this part of the world?
Weber's answer to this question sometimes is referred to as the interpretative
tradition.
According to Weber, rationalization happened within Western societies in most
areas of life; not only in fields where it might be expected but also art & religion.
However, rationalization is not a process which proceeds in all areas equally fast,
The partition of the problem of rationalization
Weber believed to have ascertained that Western civilization, deviates in
numerous respects from other highly developed civilizations like old Babylon.
So, which are these characteristics supposedly making the Western World unique?
Technological progress – the Western World at the beginning of modern times
lagged in technology Only later the West gained an ever larger lead.
Rise of science – made the technological developments possible and is the
second unique feature of the West. Only in the West the things can be found
which are typical for science in the contemporary sense of the term:
mathematical foundations, logical proofs, and empirical experiments,
Professionalized arts – Western painting consequently applied perspective and
only in the West, music was composed in a note script. They professionalized.
States – they differed from those elsewhere in the fact that they had trias
politicas.
Production process – material goods were produced differently in the West.
Production within the enterprise became separated from household
consumption. Goods are produced in companies which have been formed by
paying in capital, and which are being conducted by profit expectations.
Weber brings these five differences down to one denominator with the thesis
that in the Western World rationalization processes have progressed further than
elsewhere.
Weber's problem of rationalization comprises a larger number of questions. This
partition of an overarching problem within sociology is depicted in figure 10.1.
Weber was not the first person to wonder why certain forms of what he called
rationalization had progressed so far in the West.
Simmel (1858-1918) had argued that the invention and employment of money as a
means of exchange, advances trade. But Weber points out that despite the
introduction of money the economy remained traditional.
Sombart (1863-1941) proposed that population growth contributed to the rise of
Western capitalism. However, Weber shows that population increased strongly in
China from the middle of the 17th to the end of the 19th century, without the
economy changing much.
Weber held that all these explanations invoke possibilities to produce goods more
efficiently. However, according to Weber, supplementary hypotheses are
necessary which inform on the strength of the urge to utilize these opportunities.
An interpretative answer
Weber showed that the shift in Northwestern Europe from catholicism to
protestantism, involved a more frequent utilization of the rights of
entrepreneurial capitalism. These findings raise the question of how a religion
contributes to a more efficient production of goods
The core of Weber's answer to the question of the utilization of the freedoms of
entrepreneurial capitalism now is as follows:
a Every highly developed pre- and early modern society,
b has a certain religion
c with a certain world-view;
d this world-view for the members of this society fixes within certain limits a
certain ultimate goal of salvation, e and provides them with an urge to reach this
goal with certain means (fixes within certain limits some way of life as the right
one),
f and certain ways of life contribute more, and others less, to utilizing various
opportunities to produce material goods more efficiently.
The full-blown theory
The protestant world-view is to a particular degree activist, and it provides
believers with a drive to a practical-rational way of life.
The world-view of medieval catholicism was less activist, with all consequences
thereof. The duties of the estates have been fixed by God, and citizens and
farmers ought to accept their lot.
Little activist too is the world-view of confucianism, with effects resembling those
of catholicism
That of hinduism is least activist, or in other words, most passivist and quietist. It
exhorts a way of life in which people resign themselves to what happens.
If a religion avails of such means of salvation, a practical- rational way of life gets
unfolded to an even lesser extent than among catholicism and confucianism.
So to summarize, the conclusion of Weber's argument is:

To the extent that the world-view of a religion is more activist, this religion
provides its adherents with a more practical-rational way of life, and a
stronger urge to utilize more efficient ways of producing goods.
People with a religion which maintains that a person's occupation is this person's
calling and people can administer the world, stand a higher chance of being an
entrepreneur.
The more activist the world-view of a certain religion, the stronger the urge of its
adherents to a practical-rational way of life; if the freedoms of entrepreneurial
capitalism prevail, people have more opportunities to produce goods more
efficiently.
Although Weber stressed the effects of technology and law to the rise of
capitalism in the Western world, these factors were external circumstances to a
practical-rational way of life.
Yet, to utilize these opportunities, an inner urge is required. This inner urge can
be provided by the world-view of the religion you adhere.
World-views not only motivate, they legitimate too. That is why the expression
`the interpretative tradition' is quite an appropriate name for a theoretical
tradition within sociology.
Book Ultee Chapter 12.5
In chapter 2, we mentioned the hypothesis of Smith that to the extent markets
are more free, the production of goods and services more closely approaches
optimality.
According to the economic theory of collective decision making, free markets
sometimes fail. They are effective and efficient when it comes to producing
private or individual goods. In contrast, collective goods are not produced
optimally by free markets.
Individual or private goods - goods whose ownership is exclusive and whose
utilization is rivalizing. Exclusive means that it is up to the owner to exclude others
from using this good or not. Rivalizing means that the claims of some persons to
utilize a good, narrow the utilization of this good by others.

When somebody has bought an apple, this person does not have to share this
good with someone else, and if the first person has eaten this apple, the
other cannot consume that apple any more.
Collective goods - goods which, once they have been made available to one
person, can be made available to other persons without additional costs. Their
ownership is not exclusive and their utilization not rivalizing. The utilization of this
good by later persons, does not reduce the claims of the first person.

Nowadays in most lecture halls of universities some seats remain unfilled.
There is space available and the quality of the lectures for the original
students would not decrease.
In addition, there are collective ‘bads’: other people beside car-drivers, are
affected by the exhaust of motor vehicles.
The production of a goods brings with it effects for other persons, or externalities.
Characteristic of free markets is that it rests on the exchange of exclusive
property rights and rivalizing rights. However, collective goods to not involve
rivalizing utilization. That is why, according to the new political economics, free
markets miss out when it comes to producing collective goods.
However rational persons may be, and however strong their interests in a
collective good are, they will not succeed in optimally producing this good.
According to the economic theory of collective decision making, the laws of a
state pertain to collective goods, and their production is optimal only if the
legislative powers are chosen by general suffrage and if offices or bureaus are
charged with executing these laws or if services supervise their adherence.
Individual rationality vs. collective rationality
The hypothesis of the new political economics seems paradoxical: “rationality
does not lead to rationalization”.
The puzzle is solved when it occurs to us that rationality of individuals and
rationalization of societies are different things. Individual rationality when
producing a collective good does not lead to collective rationality. This is because
every separate person maximizes his utility, no one of the involved persons in the
end has an optimal quantity of a collective good.
If individuals are rational, then the production of collective gods will be sub-optimal.
The prisoners dilemma
The main question is, how rational prisoners will act in this situation.
The common interest of both men is to keep silent.
A concludes that whatever B does, confession is the rational course. If B does not
confess, my best option is to confess. If B confesses, it is best for me to confess once
more.
B concludes that whatever A does, it is wise to confess.
So, what happens? Both suspects confess and each suspect goes to jail for ten
years. Although they were rational, they did not realize their collective interest.
If two people cannot deliberate together, individual rationality leads to collective
irrationality.
It must be added that the prisoners' dilemma is something of a bad example.
The prisoners dilemma applied
n-persons dilemma – A situation in which there are many persons making
decisions independent of one another.
In a situation in which many persons make independent decisions, a lot of persons
have an interest in a collective good. Yet they do not succeed in producing this
good optimally. Why not?
Because it is profitable for every person that the collective good is produced
without having contributed to its production.
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If no one else contributes to the production of a collective good, it is not
wise to contribute.
If everybody else contributes, it is not wise to contribute, because a person
can utilize it anyway.
If the production of collective goods remains a matter of individual decision, only
a few persons voluntarily will contribute to the production of collective goods.
This reasoning makes clear that those involved act like parasites, hitchhikers or
free-riders.
Free riders – Persons who try to utilize a collective good without contributing to
the costs of it.
But this has as an effect that others with a strong interest in this good, will
postpone their decision, which is called the `after you'-effect.
Olson proposed that as groups become larger, the production of collective goods
declines.
Avoidance of the prisoner dilemma
In societies like the Belgium, Germany, and the Netherlands, the way out of this
dilemma, has been sought in `the free consultation of the social partners'.
A limited number of interest groups negotiate voluntarily and without obligation
with each other on the production of collective goods.
However, game theory makes clear that even with a limited number of interest
groups, negotiations will be slow and difficult.
Now, what if negotiations are not voluntarily? Suppose the parties decide on
making unanimous decisions on the production of collective goods. It will be clear
that under this condition decisions rarely will be taken.
Conclusion
We have seen that decisions on the production of collective goods lead to
suboptimal results if they are being left to the markets, free negotiations, or
decision by unanimity.
If one wishes to produce collective goods, a less strict rule has to be applied that
the rule of unanimity: the rule of a majority