FT: Concentrated benefits, diffuse costs. Why bad ideas imposed on society persist

Key topics:Small groups with concentrated benefits often overpower larger, diffuse-cost groups.Liberal democracies struggle to implement policies against organised minority interests.Public unawareness of costs weakens collective action against debt, tariffs, and stagnation..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up for the BizNews channel here..By Janan Ganesh.Walking from Southfields Tube station to watch Carlos Alcaraz and his liquid forehand last month, I passed banner after irate banner objecting to the proposed expansion of the Wimbledon site. The High Court later issued a ruling that allowed the development to go ahead. (“You cannot be serious”, read the best of the signs outside). Still, this tussle with local residents has cost the All England Club years and unknown fortunes.Those who stand to benefit from killing the expansion can identify themselves and each other, right down to the household. No wonder they are so well organised. The potential losers — those who might be able to watch live tennis for the first time at a bigger Wimbledon, or give the sport a go themselves, or get a job from the extra business generated — are an unconscious blob of people spread around London and further afield. No wonder they are so unorganised.In their poetic style, economists refer to this problem as one of “concentrated benefits and diffuse costs”. In a contest between a small group with lots at stake and a wider society in which everyone has a little at stake, the former tends to win, at least in a liberal democracy. (More on that later).This explains the ordeal of getting anything built in the UK. I wonder how many of the modern world’s other problems have essentially the same root.Tariffs are a bad idea, as everyone agreed until five minutes ago. But the costs — in higher prices, inferior products and misused capital — are spread across all of us. Even if Donald Trump’s protectionism leads to needless pain, it will be hard to organise a broad coalition of citizens against the policy. You would have to persuade them of the causal link between tariffs and higher living costs, then shepherd them into a coherent pressure group. No such problem faces Protected Sector X or Coddled Company Y, which can track how tariffs serve its bottom line, and then lobby with ease. (As can Pampered Union Z). Given the mismatch here, the miracle is not that protectionism is having its day but that free trade ever had its own.Or take that other modern ailment: public debt. State spending has become almost impossible to cut in rich democracies because it always benefits a specific audience in huge and clear ways. French pensioners, who raged against Emmanuel Macron’s increase of the retirement age, are one such group. Some of Britain’s welfare recipients, who forced the government to dilute a benefits reform over the summer, constitute another..Read more:.FT: Investors struggle to adapt as Trump’s policies keep changing.Meanwhile, the cost of this debt eats away at all citizens all the time, but in ways so vicarious as to be undetectable. It is there in the crowding out of private borrowing. It is there in the tax receipts that go to debt interest payments instead of infrastructure and other productive assets. The drag on growth will change the fate of these nations, but the policies that are to blame won’t trigger a protest in Whitehall or on the Champs-Élysées, or perhaps even inform many votes at the next election. Concentrated benefits and diffuse costs.This wasn’t the design fault in democracy that great thinkers had expected. As an aristocrat, albeit one who could see his class with some detachment, Alexis de Tocqueville worried about the tyranny (and mediocrity) of the majority. He was less good at anticipating the opposite problem. Because liberal democracies allow so much room for organised dissent, so many access points for lobbying and judicial appeal, minorities can have immense sway as the majority sleeps. When Mancur Olson said so 60 years ago in The Logic of Collective Action, it was a useful enough contribution to economics and political science. Now, as I look around at the problems of the day, it seems surreally prescient. What was the “woke” era if not a motivated sect, expert in legal and bureaucratic tactics, versus a supermajority who didn’t relish a fight and barely knew one was going on?There might be no solution here. Free societies could turn the dial a fraction back towards majoritarianism. Once an issue is decided politically, the courts and regulators could have narrower scope to challenge it. Opportunities for lobbying could be pared down.Without veering close to authoritarianism, liberal democracies could become a little less liberal and a little more democratic. Those in Britain who preferred things before the incorporation of the European Convention on Human Rights would take us all the way back to that despotism we call . . . 1998.But this kind of reform wouldn’t get to the nub of the issue. The majority has to know it is losing out in the first place, from a tennis court never built, from a tariff on Chinese fridges, from a public debt that exceeds annual national output. The problem is intellectual before it is constitutional. Remember, when Macron raised the retirement age, some of the most tenacious protesters were young: those working to pay for those pensions. The link between the bloated state and their own dashed hopes in life wasn’t obvious to them.They evoke the many Brits I know who seethe at economic stagnation and then cheer on Nimbys for sticking it to the Man. The west is increasingly full of angry people who misidentify their tormentor. As their tormentor is often their fellow citizen, this might not be such a bad thing. I suppose it is a comfort of sorts to not know exactly who you are losing to..© 2025 The Financial Times Ltd.

FT: Concentrated benefits, diffuse costs. Why bad ideas imposed on society persist

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