The Collective Action of Healthcare Reform

From WTRF News

From WTRF News

How should an institution inspire collective action?  What’s the best strategy?  The conventional wisdom is that to solve a collective problem, the institution should reward contributors and punish free-riders.  To prevent people from littering, fine them; to induce people to donate to charity, reward them; to move people to invent, lure them with intellectual property—as we discussed last week.  The implicit reasoning is that the typical human agent is a rational wealth-optimizer who won’t contribute to a public good unless he or she is incentivized to do.  Yet, as we also discussed last week, the rational actor model isn’t an accurate depiction of human nature.  Just as the average person doesn’t make the “rational choice” in an ultimatum bargain, the average person doesn’t jump to contribute to a public good on account of a mere carrot or stick.  The conventional wisdom—that the optimal solution for the collective action dilemma is incentive-based—is a gross oversimplification; the almighty incentive is only one aspect of a rich, complex puzzle.  Nonetheless, the conventional solution is unquestioned in our popular discourse regarding collective action.

Enter Professor Dan M. Kahan of Yale Law SchoolAs he’s done for quite a while, Professor Kahan challenges the conventional wisdom.  In the “The Logic of Reciprocity: Trust, Collective Action, and Law,” Professor Kahan argues that the traditional solution for a collective problem is often counter-productive, and offers an alternative theory that is grounded in an ecologically valid appraisal of the human animal.

Before exploring Professor Kahan’s theory, though, consider a recent example of the conventional wisdom’s influence on public discourse from an article in Slate entitled, “The Senator’s Dilemma,” published last week.  There, Christopher Beam argues that the Democratic Party’s strategic stance with respect to health care reform can be viewed as a classic collective action problem.  Although Beam’s characterization of the problem is surely correct, his policy prescription is conventional.

From NY Times

From NY Times

Here’s why Beam is correct to assert that the Democratic Party is locked in a collective action dilemma.  Let’s begin by analyzing the situation from the perspective of the Democratic Party as a whole.  It’s in the Democrats’ collective interest to pass healthcare legislation—however watered-down the final version.  Having poured so much energy into the cause of healthcare reform, and having framed healthcare reform as a centerpiece of the President Obama’s mantle, failure to pass a healthcare bill will be politically catastrophic for the Party’s long-term credibility.  In fact, the reputation of the Party and each Democrat would suffer.

Now, let’s analyze the situation from the perspective of each individual Democrat.  Backing controversial legislation—especially legislation as incendiary and arguably unpopular as healthcare reform—is politically risky.  Yet, if the Democratic Party pushes through legislation, then each Democrat will earn political points by virtue of party affiliation.  Therefore, each Democratic should, arguably, choose to shirk—to withhold contributing to the legislation and free-ride on the collective will, earning all the political credit while avoiding the political cost.  (Outright opposition could even be value-maximizing: By signaling a credible threat of opposition, the Democrat can extract a political concession before caving.)  The ironic dilemma, of course, is that if each Democrat thinks “rationally” and elects to shirk, then no Democrat will expend political capital to support healthcare legislation, and no bill will be passed—which is the worst scenario for the Democrats, individually and collectively.

Nonetheless, Beam proceeds to assume that “there are two ways to solve this kind of problem”:

Change the payoff system or promise to return the favor later. Changing the payoffs basically means adding incentives to cooperate. Hence the “cornhusker kickback” Sen. Ben Nelson was able to extract for Nebraska and the “Louisiana purchase” Sen. Mary Landrieu got for her state. Future promises work in repetitive systems, where similar dilemmas come up again. The Senate is a perfect example. If Nelson supports health care reform, for example, Majority Leader Harry Reid will be sure to prioritize Nelson’s pet legislation next time around.

Is Beam’s policy prescription sound?  Is the story so simple?

Re-read the statement, “there are two ways to solve this kind of problem.”  Professor Kahan would argue that this statement is flat wrong.  “Changing the payoff system” and “promising to return the favor later”—each an incentive-based solution—do not describe the entire universe of solutions to “this kind of problem”—i.e., a collective action problem.

Professor Kahan’s theory launches from an assumption of human behavior that is grounded in social science.  Individuals in collective action settings “behave like moral and emotional reciprocators”—not like “rational wealth optimizers.”  That is, if an individual perceives that others in the relevant community are contributing to a public good, then the individual him or herself will likely be inspired to reciprocate with a contribution of his or her own—out of a sense of “honor, honesty, and public spiritedness.” In contrast, if an individual perceives that community members are shirking, then the individual will likely withhold his or her own contribution to the public good, lest he or she feel like a chump.

The result of such reciprocal behavior is a “pattern of collective behavior punctuated by multiple equilibria or tipping points”:

If, for whatever reason, some individuals conclude that those around them are include to contribute, they’ll respond by contributing in kind, prompting still others to contribute, and so forth and so on until a highly cooperative state of affairs takes root.  But if individuals conclude that others are free-riding, then they will respond by free-riding, too, spurring others to do the same, and so forth and so on until a condition of mass noncooperation becomes the norm.

Relying on a growing body of “field and laboratory research,” Professor Kahan proposes that the answer to the collective action riddle is not an incentive-based solution, but is “the promotion of trust”:

If [individuals] can be made to believe that others are included to contribute to public goods, then individuals can be induced to contribute in turn, even without recourse to incentives. . . . [However,] incentives, far from solving collection action problems, can sometimes actually magnify them by dissipating trust.  The simple existence of an incentive scheme can be seen as a cue that other individuals are not inclined to cooperate voluntarily; if they were, incentives would be unnecessary. . . . In addition, the existence of incentives can mask voluntary contributions to public goods, thereby diluting the power of such contributions to trigger reciprocal cooperation.  Relatedly, incentives can crowd out dispositions such as altruism by extinguishing the opportunity of individuals to demonstrate . . . that they are willing to sacrifice material gain for the public good.  And if . . . the advent of a material incentive . . . induces even a few individuals to contribute less to a public good, . . . reciprocity dynamics will induce still others to contribute less, . . . inducing others to do the same, and so forth and so on until collective behavior settles into a new, noncooperative equilibrium.

Kowtowing to the less noble side of human nature, however, Professor Kahan concedes that to kick-start the process, an incentive-regime might sometimes be helpful:

[T]hings are likely to be different if individuals start out with the belief that most other individuals are included to shirk or free-ride.  In that case, the advent of a credible reward or penalty can work – not just by changing individuals material incentives but by changing in a positive way their impression of the willingness of other individuals to behave cooperatively rather than noncooperatively . . . .

And that’s the logic of reciprocity, in a nutshell.  (I apologize for so much block quoting, but who better to outline the theory than the source himself?  Hopefully the reader is intrigued.  Also, a fan of the The Situationist Blog should note that Professor Kahan’s theory is situationist, while the traditional approach is dispositionist).

Returning to the collective action problem of healthcare reform, can we draw a lesson from Profess Kahan’s theory?  Or, like much in academia, is Professor Kahan’s theory merely…a theory?

On the one hand, it’s arguable that the logic of reciprocity won’t have much sway over Congress—because, simply put, Congresspeople aren’t real people.  That is, compared to the average person, Congressmen and women are more likely to resemble “rational wealth-optimizers” and less likely to resemble “moral and emotional reciprocators.”  There’s a correlation between seeking elected office and behaving like a calculating, self-interested person.  (Free associate with the word, “politician”—what comes to mind?)  Therefore, the most effective way to move the typical Democratic Congressperson to support healthcare reform is to sweeten the deal with kickbacks and favors.  The Democratic Party should resort to pork barrel politics; there’s no alternative.

On the other hand, maybe Congressmen and women don’t volunteer their support because of their situation, rather than their disposition.  An atmosphere of distrust pervades Congress, including its Democratic wing.  Among Professor Kahan’s equilibria, the Democratic Party with respect to healthcare reform is stuck in a state of non-cooperation: Because the typical member believes that the rest will shirk and refrain from voluntarily and substantively backing healthcare legislation, most end up shirking.  If, however, the Democratic Party cultivates an internal atmosphere of trust—if it manufactures the internal perception that the Party is an institution of moral and reciprocal men and women, who will back healthcare legislation—then perhaps a few members will volunteer support, followed by a few more, “and so on and so forth”—as Professor Kahan would say—until cooperation becomes a self-sustaining norm and the Party reaches a new, cooperative equilibrium.  Back-channel, informal communication–led by President Obama–is one potential avenue through which to change the Party culture.

What’s the answer?  How should the Democratic Party proceed?  Perhaps the Democratic Party should get the ball rolling by lightly relying on an incentive-scheme—a solution which Professor Kahan himself concedes is appropriate where non-cooperation is rampant.  Over the long-run, however, the Democratic Party shouldn’t ignore the logic of reciprocity.  The appealing feature about cultivating an atmosphere of trust is that it can’t hurt.  And, to the extent that the pork barrel system is a toxin in our political process, Professor Kahan’s reciprocal model can also improve the operation of our democracy.

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One Response to The Collective Action of Healthcare Reform

  1. [...] student of mine wrote a worthwhile post on Law & Mind a few weeks ago about some of the dynamics behind the health care debate.  Here is an [...]

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