William D. Ferguson

This book asserts that successful economic development relies on innumerable exchanges whose presence requires resolution of collective-action problems (CAPs). CAPs, sometimes called social dilemmas, arise when pursuit of individual interest generates undesirable group outcomes. Pollution, crime, and failure to contribute to public goods are typical examples. A social environment of mutual distrust that inhibits exchange indicates unresolved CAPs. The complex exchanges that accompany economic development depend on credible commitments to abide by agreements and contracts. Credibility, in turn, requires coordination, enforcement, and mutual trust—resolution of CAPs. CAPs, moreover, provide the core rationale for policy: policies strive to resolve or ameliorate CAPs—or sometimes create or exacerbate them.

The text merges recent developments in political economy that rarely appear together. Its discussion combines rational-actor theory, information economics, behavioral economics, institutional theory, and social network theory. It incorporates concepts of moral hazard, social preference, social norms, formal institutions, bounded rationality, policy process, and power. Using these concepts, it asserts that resolving the nexus of CAPs that underlie complex exchange requires both motivation and shared understandings; these arise from mixtures of reciprocal behavior, social norms, and formal rules. Moreover, processes of resolving CAPs inextricably link power, distribution, and growth.

To illustrate these points, this book employs a game-theoretic methodology that can represent interactions ranging from two-person exchanges to crowd behavior, or exchanges among nations. This book endeavors to bring the political economy of collective action to the forefront of economic and social scientific debates, curriculum, and policy analysis. It offers an accessible tool for advanced undergraduate economics majors, and sufficient depth for interested graduate students in economics, political science, policy, and sociology. It may also prove valuable to policy research staffers who wish to enhance their grasp of political economy theory—specifically on how collective action relates to exchange and development.

In Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy, William D. Ferguson presents a comprehensive political economy text aimed at advanced undergraduates in economics and graduate students in the social sciences. The text utilizes collective action as a unifying concept, arguing that collective-action problems lie at the foundation of market success, market failure, economic development, and the motivations for policy. Ferguson draws on information economics, social preference theory, cognition theory, institutional economics, as well as political and policy theory to develop this approach. The text uses classical, evolutionary, and epistemic game theory, along with basic social network analysis, as modeling frameworks. These models effectively bind the ideas presented, generating a coherent theoretic approach to political economy that tresses sometimes overlooked implications.