Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy

Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy

Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy

Collective Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy

Synopsis

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 stresses sometimes overlooked implications.

Excerpt

The Dane County Farmers’ Market meets on Saturday mornings at Capitol Square in Madison, Wisconsin. Like many such markets, it is a place where small farmers can sell fresh produce to local customers. Local residents and visitors wander among clean, wellordered stalls with displays of high-quality local produce and clearly marked prices. Farmers compete on the basis of price and readily observable quality. Exchanges are friendly, and most customers leave satisfied. The setting appears to fit an economist’s conception of the benefits of unregulated free-market competition among many buyers and sellers (Basu 2000, 193–96).

Looking somewhat deeper, however, economist Kaushik Basu discovered a rule book. This book details how participating farmer-vendors must behave and stipulates the penalties for specific violations. In addition to rules that regulate fairly obvious concerns, such as how to set up and clean stalls, vendors must file an “Application For Permission to Sell.” Basu (2000, 194) quotes from the rule book as follows:

Raw fruits and vegetables must be grown from cuttings grown by the vendor or from seeds
and transplants…. Purchased plant materials must be grown on the vendor’s premises for
at least 60 days before they can be offered for sale at the market…. Eggs must be produced
by hens which have been raised by the vendor for 75 percent of their production weight….
Sellers must not bring pets into the Market for health and safety reasons. The sale or giving
away of animals on the Capitol grounds is prohibited…. Vendors must discourage sales
to people in vehicles or lengthy double parking by customers…. Vendors selling wild
gathered items must have an application to sell filed with the market prior to arrival at the
market and either have proof of land ownership or show written permission from the land
owner to gather the product…. Vendors must have photocopies of all necessary licenses.

The rule book has 18 pages. Why are there so many detailed regulations for what appears to be a free market? What would happen if vendors failed to discourage double-parking or sold animals? What if vendors sold eggs from chickens they had not raised for 75% of production weight, or sold produce they had not grown on their premises for at least 60 days? What if they resold produce purchased from a supermarket or warehouse at a markup?

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