32. Moral Conditions of Economic Efficiency, Part 3

Note: This post is the thirty-second in a series. Click here for the full listing of the series.

Chapter 4 of 'The Moral Conditions of Economic Efficiency', by Walter Schultz, takes on the notion that even though strict rational eogists may not be able to achieve economic efficiency immediately, their behaviour will settle into an efficient pattern as they (strictly rationally) adopt rules that prevent their selfishness from keeping them from achieving efficient outcomes.

For example, back here, I quoted a Washington Post article which read,

"[Alan] Greenspan had an unusual take on market fraud, Born recounted: "He explained there wasn't a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him."

Schultz first argues that, although coordination type situations (e.g. choosing which side of the road to drive on) enable strict rational egoists to form rules that are to everyone's benefit, exchange is not a coordination type situation. The reason is that a coordination situation allows everyone to achieve an optimal result, whereas in exchange, each person's best option is to get what the other person is offering without parting with anything themselves, by way of force or fraud if necessary. But it's not possible for both parties to come out ahead on exchange by cheating each other, so this makes exchange a collective action or Prisoner's Dilemma type problem.

Next, Schultz argues that 'the shadow of the future', i.e. concerns about what might happen in the future, will not cause strict rational egoists to refrain from force and fraud. I'm not sure I quite follow Schult'z argument on this point, so I'll quote him,

"we have already shown that strict rational egoists will always choose the best feasible means to achieve their most highly valued social state, so when similar situations emerge [in the future] inefficient outcomes result."

As best I can tell, Schultz is arguing that strict rational egoists are not capable of prudence in the sense of weighing the benefits of theft/fraud now against the benefits of cooperation over the long run. Schultz could make the case that this sort of prudence is itself a moral rule that does not belong in our sketch of the strict rational egoist but he doesn't make this argument explicitly.

The question of whether (strict) self-interest leads to cooperative behavior in collective action problems that are repeated is one that has been much studied and I will likely come back to it later on in the series. For now, I'll simply note that despite morals against force and fraud, and the presence of a government that will punish you if you are caught in such activities, we are far from eliminating these behaviours entirely, so the 'shadow of the future' (as game theorist refer to the effect where concerns about future results influence present decisions) may help some, but it seems incapable of playing the role Greenspan imagined it playing, where no rules against fraud are necessary.

In chapter 5, Schultz discusses externalities. He defines externalities as follows: "An externality is an uncompensated cost or benefit that may be intentional, accidental or incidental."

...and clarifies that...

"Acts of theft and fraud directly affect the well-being of consumers and exemplify intentional externalities. Harm resulting from negligence or from an accident exemplifies an accidental externality. Externalities also include incidental effects of the acts of production and consumption."

He goes on to comment that, "To assume that all externalities are absent and that every agent behaves competitively is to set aside the role of morality. The system of moral constraints presented in Chapter 6 secures competitive behaviour and eliminates intentional externalities but makes no provision for the internalization of accidental and incidental externalities."

Schultz then claims that:

1) A system of moral normative constraints precludes externalities due to intentional consequences of nonmarket action.

2) A system of moral normative constraints and conventions rectifies accidental and incidental externalities.

3) Moral normative constraints and conventions coordinate expectations and thereby reduce transaction costs

4) Moral normative constraints are the logical limits of the commodification of desire.

Schultz explains the first 3 points: "We have established the first claim. Claims (2) and (3) are based on the general goals of tort law, property law and contract law, respectively, and have been established."

To be honest, it wasn't clear to me how claims 2 and 3 have been established, but never mind.

Schultz says no more on the first 3 points and devotes the rest of the chapter to an explanation of point 4, arguing that the desires of people that we recognize in calculating the effects of externalities are limited by the rights that people need to have in order to secure economic efficiency. In other words, my desire to have you a slave is not recognized as a valid preference since if you don't have autonomy to make your own decisions we won't achieve the same efficiency that we might have (because you can't pursue your preferences properly, if you are my slave).


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In chapter 6, Schultz sets out what he sees as the moral conditions of economic efficiency. Note that where I might say, for example, that people need to follow a moral rule to 'be honest', Schultz instead says, using the same example, that people have a 'right to true information' and that people also have a moral incentive to respect that right. It amount to the same thing, as far as I can tell.

The Moral Conditions of Economic Efficiency per Schultz:

1) Property Rights - meaning that people can't mess with your stuff and you can do what you want with your stuff.

2) Right to True Information (that is relevant to a potential exchange) - meaning that you shouldn't tell your car insurance company that your car is just for personal use, when really you drive to work and back every day.

3) A right to welfare - Schultz recognizes that given a choice between stealing or starving, people will and should choose the latter because the right to life takes precedence over the efficiency based rights. Plus Schultz makes an insurance argument (that seems a bit out of place) that it is more efficient for basic welfare to be assured centrally than for everyone to self-insure against deprivation.

4) A right to autonomy - without autonomy, people can't make exchanges that match their preferences, so autonomy is a precondition for trade as we understand it even being possible.

Schultz also notes that we need some mechanism by which people are held accountable for their behaviour in recognizing these rights as well as a set of conventions for setting prices and conventions and normative constraints for commodifying desire and for rectifying the results of accidental and intentional externalities.

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I realize that this post doesn't really show all that clearly how Schultz gets to his final requirements, but that's likely because it wasn't all that clear to me reading the book.

16. Free-Riders

Note: This post is the sixteenth in a series. Click here for the full listing of the series.

In economic terms, a 'free rider' is a person who gets receives a benefit without contributing to the cost of generating of that benefit. The term derives from the notion of someone riding public transit without paying a fare. They are 'riding for free'.

In Mancur Olson's 'The Logic of Collective Action' which I covered in the last post, his idea was that as any group trying to generate a benefit grows larger, the temptation to free ride grows, and that rational self-interested people would not choose to cooperate in a group of this nature unless they were able to get some specific benefit from their cooperation (beyond the public good that their cooperation creates).

The Wikipedia entry offers the following example and possible solution,

"Suppose there is a street, on which 25 people live, and which suffers from a litter problem. A weekly street-cleaning service would cost $2,500 annually. Suppose that each person is prepared (i.e., able and willing) to pay $100 or more for the benefit of a cleaner street.

If the service is engaged, everyone will benefit. However, it is possible that some people on the street will refuse to pay, anticipating that the service will be undertaken in any event. Despite the fact they may be prepared to contribute $100, they will claim that they are not prepared to pay, and instead hope that others in the street will pay for the system anyway, and they receive the benefit for no personal expense.

As a result, it may happen that no system will be installed, an example of market failure. This is despite the fact that allocative efficiency would be improved.

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One common solution to the problem is to gather the 25 participants and make them behave like one customer, so the decision is reduced from 25 independent decisions to one. A vote can be taken, but if the answer is yes, everyone will be forced to pay regardless of their individual support. This is why public services such as military defence and police service are almost exclusively provided by governments."

Note that the failure of a collective activity due to free rider incentives is a form of Prisoner's Dilemma, where people have an incentive to defect (free-ride) regardless of whether the other group members are cooperating or free-riding.

Race To Where?

Let's talk about words - two in particular: 'top' and 'bottom'. These words have a huge variety of meanings in a huge variety of contexts but, when it comes to outcomes, their meaning is fairly clear - you'd rather come out 'on top' then 'hit bottom' - better to be a 'top gun' than a 'bottom feeder'.

OK, enough about words, let's talk about jobs. Let's say that you work (i.e. earn a wage) for your living. I'm guessing that, for the most part, you would generally prefer more pay to less pay, a 35 hour week to a 60 hour week, good benefits to no benefits, fewer people looking to take your job, not having to learn another language to keep your job, and, if you are in a union, the government not making it illegal for you to go on strike.

So would it be fair to say, that if you had a job with high pay, reasonable hours, great benefits, little threat of being replaced and a legal right to strike you might feel like you had come out 'on top' - and if you had a job with less pay, really long hours, no benefits, no right to strike and a high likelihood of just being replaced if you ask for anything better then you would be more likely to feel you had 'hit bottom'?

Now perhaps you are wondering, why am I insulting your intelligence with this mind-numbing discussion of the obvious? Well, the reason, dear reader, is that apparently the foregoing is not at all obvious to some people. And not just any some people, some people who study this kind of thing for a living and write for a famous newspaper.

Which brings me to Thomas Friedman's column in the New York Times from the other day. It is titled, 'A Race to the Top'.

And this isn't just the work of some rogue headline writer, the column itself states that, "They [Indians] are not racing us to the bottom. They are racing us to the top"
So let's examine this race for the top, using only Friedman's column for source material:

"French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day. Good luck."

So people will have to work more hours than they do now, or want to, because desperate Indians will work 35-hour days. From our earlier discussion, more work = bad = bottom.

"I feel sorry for Western European blue collar workers. A world of benefits they have known for 50 years is coming apart,"

You know the game by now: fewer benefits = bad = bottom.

"how explosive the next decade in Western Europe could be, as some of these aging, inflexible economies - which have grown used to six-week vacations and unemployment insurance that is almost as good as having a job - become more intimately integrated with Eastern Europe, India and China in a flattening world"

fewer vacations, less unemployment insurance = bad = bottom.

"Are you willing to learn another language to get a job. The Indians are, "A grass-roots movement is now spreading, demanding that English be taught in state schools - where 85 percent of children go - beginning in first grade, not fourth grade. "What's new is where this movement is coming from," said the Indian commentator Krishna Prasad. "It's coming from the farmers and the Dalits, the lowest groups in society." Even the poor have been to the cities enough to know that English is now the key to a tech-sector job, and they want their kids to have those opportunities."

having to learn a new language to get job = bad = bottom.

but wait, what about:

"The dirty little secret is that India is taking work from Europe or America not simply because of low wages. It is also because Indians are ready to work harder and can do anything from answering your phone to designing your next airplane or car. They are not racing us to the bottom. They are racing us to the top."

First I note that lower wages, harder work = bad = bottom.

Second I point out that just because the Indians are doing high value added work doesn't mean they are racing us to the top, it means that the race to the bottom they are part of affects not only our bottom but also our top.

But won't Indian wages just catch up with Western ones and then after a little adjustment period we can all have good benefits like the Europeans do?

It looks promising...

"This is not about wages at all - the whole wage differential thing is going to reduce very quickly," said Rajesh Rao, who heads the innovative Indian game company, Dhruva. It is about people who have been starving "finally seeing the ability to realize their dreams."

but the very next line reads,

"Both Infosys and Wipro, India's leading technology firms, received more than one million applications last year for a little more than 10,000 job openings."

Yeah, I can see a real incentive for them to raise wages when they have 100 applicants for every job. Ever heard of supply and demand? Of course there is a way for workers to earn a reasonable share of the value from the work they do even when there is an oversupply of their labour - it's called unions.¹

But things aren't looking too good on that front.

"The Indian state of West Bengal has the oldest elected Communist government left in the world today. Some global technology firms recently were looking at outsourcing there, but told the Communists they could not do so because of the possibility of worker strikes that might disrupt the business processes of the companies they work for. No problem. The Communist government declared information technology work an "essential service," making it illegal for those workers to strike. Have a nice day."

Strikes made illegal = bad (if you're a unionized worker) = bottom

The thing is, everything Friedman describes in this article is really happening, and it makes for a very graphic depiction of exactly what a race to the bottom is - communist governments banning strikes, downward pressure on wages and benefits, upward pressure on hours, huge numbers of desperate people willing to accept whatever job is offerred - but I can scarcely imagine the cognitive dissonance he had to face down in order to categorize it as a race to the top. And I can only wonder why he would feel compelled to put such a ridiculous spin on the message his own column is trying so hard to get across.


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¹ Of course, the truly effective way to raise wages by limiting supply is by instituting some arbitrary examination requirements (see doctors, lawyers, accountants, actuaries etc.) but I don't see Indian IT workers forming some sort of exclusive IT profession which only admits a limited number of people allowed to work in IT every year, so that's not too relevant to this post.

Economic Progress, Unskilled Labour, and Unions

Over at Babbling Brooks, Damian has an interesting post about the Wal-Mart store closure specifically, and about economic progress in general. Andrew over at Bound by Gravity echoes Damian, adds his own 2 cents, and gets some interesting comments.

While they both make some good points, I think they are confusing two separate issues - both of which are important in their own right, so I felt it was worth a post to try and sort things out.

The first issue is whether it wouldn't be better for people at Wal-Mart to be "doing something far more productive, and far more rewarding with their working lives."

To which I would say, of course. Our economic strength is a measure of how much value everybody creates. So to make progress, either people have to find better ways to do what they already do - or they have to stop doing what they are doing, and do something new which adds more value.

This is in essence the 'Creative Destruction' which Joseph Schumpeter described brilliantly in 'Capitalism, Socialism and Democracy'¹, the process whereby old ways of doing things are destroyed by new ways - crafts are destroyed by assembly lines, switchboard operators are destroyed by automation and so on. In each case, society has an obligation to compensate those who have been left behind, both on moral grounds since they are the inevitable sacrifice we make to keep the system working and on practical grounds since the progress only continues if enough of the displaced people take things into their own hands and go find a new way to add value. But society also has an obligation not to prevent this creative destruction from happening, since it is the driving force which moves people from low value added jobs to high value added jobs.

Damian and Andrew connect this to Wal-Mart by suggesting that since working at Wal-Mart (for example) doesn't seem to add much value, society will be better off without these jobs. And since unionization would lead to higher pay and make these jobs more attractive to people, it is therefore a bad thing.

From my point of view, the exact opposite is true. Much in the same way that labour saving innovations will prosper much more in a society without slaves or cheap domestic servants, innovations (such as automated checkouts) will start to be used when the cost of what they are replacing (unskilled labour) gets high enough. So the surest way to make progress towards eliminating the dead-end, low paying jobs that Wal-Mart provides is to pay the people who do them as much as possible - thus giving Wal-Mart the greatest incentive to find ways to eliminate these jobs.

The second idea is the question of, given that these Wal-Mart jobs exist what is the appropriate amount for the workers to be paid?

To answer this question, I see two relevant numbers. The first is the supply point. That is, what is the minimum amount that Wal-Mart needs to pay to attract people to do the job. The second is the demand point. That is, how much can Wal-Mart afford to pay the workers and still make an acceptable return on investment.

Clearly, it is in Wal-Mart's interest to push wages as close to the supply point (as low) as possible. And clearly it is also in the workers interest to push wages as close to the demand point as possible. The natural advantage that Wal-Mart has in this battle is two-fold:

First, Wal-Mart is a single entity which makes decisions with one voice whereas the workers are all individual decision makers who decide what's best for them individually.

And second, because the jobs are unskilled, the supply of potential workers is larger than the demand for them (if it wasn't, we'd be at risk of inflation and the central bank would raise interest rates to restore this condition). So the individual workers are unable to push for more money because if they do, Wal-Mart will just say take a hike, we have other people who will work for what we offerred you.

This is why a union is needed - in order to level the bargaining playing field and allow the workers to keep for themselves a greater share of the value which they create.

As a final point, I think we should be careful to distinguish between work which is unskilled and work which doesn't add much value.

As the invention of the assembly line showed, it is possible at the same time to both vastly reduce the amount of skill needed to make something and at the same time vastly increase the amount of value added in the process. So while you might look at someone who's just standing by the door and greeting you as you come in and instinctively say, 'that person isn't adding much value', you have to consider that Wal-Mart's profit last year was over $9 billion and with no workers it would have been 0 (actually an enormous loss due to fixed costs, depreciation, etc.) - so clearly, even though the individual jobs are simple, the collective effect is to create a lot of value.

As for the specifics of this case, I can certainly understand why Wal-Mart did what it did. Like most people I can recount any number of union horror stories, and my experience with unionized workplaces is that they are usually pretty unpleasant and inefficient. And I don't know the details of the negotiations so it is possible that the union demands were outrageous and would indeed have made the store unprofitable. What I suspect, as do most people I'm sure, is that Wal-Mart could have afforded to reach a mediated settlement but that they chose instead to take a loss on this store to send a message to all the other ones.

What I find shameful about their decision is that for better or worse Canadian society has been constructed to allow unions to form and for all the problems I see with them, I'd still be awfully nervous about the future of labour conditions and income inequality in this country if they ceased to exist. By closing the store, Wal-Mart is saying that it doesn't want to play by the rules of Canadian society - and while it's (probably) not technically illegal for them to close a profitable store just because it has a union, it is certainly a violation of the spirit of the rules which we expect all companies to follow if they want to operate here.


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¹ I highly recommend 'Capitalism, Socialism, Democracy' (actually just the first part on capitalism, the parts on socialism and democracy aren't as good) to everyone (it's not long and it's quite readable). Schumpeter brilliantly defends capitalism against both 'left-wing' people who would rather see socialism instead and against 'right-wing' people who idolize the perfectly competitive marketplace as an ideal we should be striving for. It's definitely one of the books which had the biggest influence on my own ideas.

Today's collective action problem

Imagine a scenario with the following characteristics:

1) The entire world has a problem.
2) Every nation is contributing to the problem, some much more than others
3) It is agreed that action needs to be taken in order to solve the problem.
4) It is believed that this action would be costly for every nation that takes part
5) The benefits from any action to solve the problem will be distributed equally to every nation, regardless of whether they themselves contributed or not.
6) Due to 4) and 5) any nation which takes action will be at an economic disadvantage vs. any nation which doesn't take any action.

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How would you go about solving this problem?

a) This problem has no solution. Just ignore the problem and hope it goes away.
b) Ask for volunteers and hope that some countries value the gain from helping solve the problem higher than the loss of economic competitiveness.
c) Try to get countries which are wealthier to take the lead in solving the problem, either by going first or by agreeing to take bigger measures
d) Try to get countries which are contributing more to the problem to take the lead in solving the problem
e) Try to get all countries in the world to agree to make contributions to solving the problem
f) Create a global level of government which has the power to force action on everybody in cases like this.

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Think about your options in cases like this (remembering the pressures that will face any government which undertakes some costly action while its neighbours freeload) the next time you hear someone saying that the Kyoto protocol is flawed, or so-and-so hasn't signed it, so we should just ignore the problem of global warming.

It's also worth keeping in mind when people say there is no need for a global level of government.

Post Holiday Book Reviews: Rebel Sell

Of all the various forms of writing, the book review has to be one of the ones I know least about. Of course, if I was going to let something like lack of knowledge of what I'm talking about keep me from posting, this blog wouldn't be here. So far, the most interesting book I've read over the holidays has been, The Rebel Sell, which was first (and second, third and fourth) brought to my attention by Darren Barefoot - so here's the review.

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Reading through the Rebel Sell, I was consistently entertained, but I found it difficult to keep track of the general argument in my mind. Looking back over the table of contents, it's not hard to see why, the book doesn't seem to have any coherent structure to it: the chapters are more like a series of meditations on the same set of basic points, with the occasional digression into just about anything the authors happen to find annoying about left-wing commentary. That said, I found myself generally agreeing with most of what was written and finding some definite insights, so I have made the effort to pull out what I believe to be the main argument:

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1. Society has lots of problems (e.g. there's too much pollution, you find the same stores everywhere, lousy conditions on factory farms, school children way too concerned over what they're wearing, etc.)

From here the argument splits in two: the counter-culture version of how to solve these problems (as described by the authors) and the authors view on how to solve them.

'Counter-Culture' view of the world:

2 a) The 'Counter-culture' (think Naomi Klein, AdBusters, anti-globalization protestors, Rabble.ca etc.) believes that these problems are reflective of a systemic problem with (Western) culture / capitalism / paternalistic institutions (like organized religion, schools, hospitals etc.). Collectively known as 'the system' or 'the man' these institutions enforce statism, conformity, oppression, rationality, stifling of creativity etc.

3 a) Since the specific problems we see are just symptoms of the underlying disfunction of our society / culture / system, the way to solve them is not by addressing them directly, but rather by changing the 'root problem' - i.e. changing the system.

4 a) Since the government, the church and the other institutions are part of the problem, they can't be effective as part of the solution. The way to solve the problems is by taking individual action and by forming together into groups (as long as these don't become too formalized - otherwise they are betraying themselves by becoming part of the system) in order to defeat / change the system.

5 a) Once the system is defeated, the general mass of people will see the light / 'have their consciousness raised' and will be ready to do things the new way (which will then solve all of our problems).

Author's View of the World:

2 b) The authors believe that most (many) of the problems we face are not caused by 'the system' but are instead collective action problems¹. Basically, prisoner-dilemma like situations where what makes sense for each of us individually doesn't make sense for us collectively (e.g. I am safer if I buy a gun and you don't but if we both buy guns then we are less safe than if neither of us did - hence the rationale for gun control).

3 b) Rather than changing the system, what we need to do is improve the system to solve these collective action problems.

4 b) Since, by definition, a collective action problem requires collective action to solve, solutions which disregard our collective institutions (i.e. government) in favour of individual (or unformalized group) action are doomed to failure.

5 b) The way to solve the collective action problems is to institute solutions which apply to everybody. Rather than being coercive limitations on our freedom as the counter-culture would suggest, these rules will instead protect us from harmful prisoner's dilemmas.

6 b) If only counter-culturalists would stop trying to destroy the system they could work towards fixing it, and we would have the necessary political willpower to solve our collective action problems.
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Once we have this framework, the entirety of the book can be seen as a long series of examples which attempt to support the argument (and show that the Author's view is accurate while the counter-cultural one is counter-productive).

A couple of the more memorable examples they give are:

School uniforms: Counter-culturalists reject the oppression of conformity and uniformity they bring while the authors suggest they are just a practical way to stop the collective action problem whereby students are forced to put great effort into buying and wearing the right clothing to avoid being seen as geeks/losers etc.)

Advertising: Counter-culturalists think we can defeat the advertising system by turning brand power against the companies which own them through culture jamming, protesting etc. while the authors suggest that advertising is just a collective action problem in which one company can gain an edge by advertising but then other companies have to respond and then it just keeps escalating like an arms race. What's needed is government rule changes to help companies get away from this self-destructive behavior (they recommend making advertising only 50% tax deductible - a good idea in my view).

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The biggest source of confusion (for me) was that the authors dwelt at great length on one particular example - the example of counter-culturalists trying to defeat 'the system' through their consumption choices. So much so that at first I thought the book was actually just about this particular case and was thus puzzled at all the other unrelated examples they threw in.

So we hear about Adbusters selling their own branded shoes, Naomi Klein living in a loft instead of a suburban house, alternative music instead of the mainstream, free range chickens and on and on, with the Authors consistently asserting that not only are these consumption choices not going to destroy capitalism, they are in fact reinforcing it (because these purchases are only done to achieve status by being unique but eventually what was initially cool (i.e. grunge music) becomes mainstream so the counter-culturalists have to find some new cool trend to buy stuff for, leading to a never ending cycle of consumption in the pursuit of counter-cultural status symbols).

Aside from the confusion caused by not clearly separating this frequently cited example from their core argument, I was surprised the authors would choose this particular example to focus on since it doesn't seem like one of their strongest.

The primary weakness of the consumption example (to me) is that, clearly not all 'counter-cultural' purchases are made in pursuit of distinction or status. Lots of people buy organic produce, not to feel morally superior or just to be different, but because they're willing to pay more to avoid the negative externalities caused by pesticides. If everyone started buying organic food and it started being sold by Kraft or whoever, most of the current organic food advocates would see this as a good thing - not as a sign that organic was no longer cool and that it was time to buy something else.

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Looking at the book as a whole, the big weaknesses were the lack of structure, the over-emphasis of the one (not particularly strong) example, a tendency to argue against their opponents weaker points and ignore their stronger ones and a tendency to sometimes gloss over things a little too quickly.

Strengths were the clear entertaining prose, the wealth of interesting examples, the emphasis on collective action problems and the need for government involvement to solve them, and the broad range of ideas and other points of view that they covered.

The true message at the core of the book comes through when the authors talk about what they call the counter-culture's cardinal sin: opposing (or at least not endorsing) positive changes in the laws/regulations because they were just superficial changes that are all part of the same corrupt, screwed up system. As an example of this, they mention how in Bowling for Columbine, Michael Moore rejects gun control laws as a solution since they don't get to the root of the problem which is the culture of fear in the United States.

I'd go into more detail on the strengths and weaknesses but I've already written too much (writing a book review is hard).

In a nutshell? If you're interested in consumerism or environmentalism this book is the best I've read on the topic in quite a while - even in this long-winded post I've only scratched the surface of what's in it. I just wish they had taken the time to structure their argument in a logical, easy-to-follow manner (it would have saved me some trouble anyway).

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I feel like I haven't really gotten the point across about just how many collective action problems we face so perhaps I will add an (infrequently) recurring post on 'Collective Action Problem for the Day' starting with some of the better ones mentioned in the book and then moving on to whatever seems worthy/relevant/topical as time goes by.

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¹ If you want more background on what is a Prisoner's Dilemma / Collective Action problem, the Wikipedia article is excellent and very readable.