Why Global Challenges Exist: The Collective Action Problem

In an era of grave threats to human civilization—climate change, the destruction of biodiversity, weapons proliferation, and epidemic diseases, among many others—international cooperation is more important than ever. The United Nations and other multilateral bodies have had some success in promoting cooperation, most notably when the interests of the great powers align. But, because of undemocratic voting rules, inconsistent and inadequate funding, and an inability to enforce agreements, they have not catalyzed coordinated action on these pressing issues.

The failure of a group to organize effectively, despite common interests among its members, is the collective action problem (CAP). In brief, the CAP exists because group members need assurance that they will not bear the risks and costs of action alone. Nations are unwilling to unilaterally reduce greenhouse gas emissions or scale back their weapons arsenals, for instance, because they fear that others will not follow suit. Successful cooperation, however, is everywhere. At the global level, the reduction of chlorofluorocarbons and recovery of the ozone layer, the eradication of smallpox and other diseases, and improved humanitarian access to war zones are important examples. Locally, labor unions, social movements, producer, consumer, and worker cooperatives, community natural resource management organizations, and many other institutions illustrate the diversity of cooperative arrangements. So why is cooperation sometimes achieved and other times not?

This is the most important question in politics. The CAP has been recognized for a long time—appearing in some form in the writings of Hobbes, Hume, and Smith, among many others—but only in the past half-century have social scientists analyzed the issue systematically (Hardin 2003; Ostrom 2014). Their conclusions can be summarized by examining the two most important human institutions tasked with resolving CAPs: markets and states.

The Status Quo: What States and Markets Can, and Can’t, Do

Each person has unique abilities, which they use to make goods and provide services. Each person also has unique tastes; different people value the same good or service differently. The fundamental economic CAP is this: how do we exchange our labor and goods in a way that everyone agrees is fair? Adam Smith offered an answer: the invisible hand of the market, which aggregates an immense amount of information—the preferences of billions of consumers and the supply of millions of goods and services—into the single, compact signal of price. When every market player has equal access to information, property rights are enforceable, and there are no major barriers to production, consumption, or trade, no one can manipulate prices. For many goods, these conditions hold relatively well: the invisible hand solves the collective action problem and everyone is better off.

There is a special class of goods, however, for which at least one—and usually more—of the above conditions does not hold. These “collective goods” have the essential characteristic of shared public access: property rights for these goods are difficult to define and enforce. Collective goods come in two subtypes. First, public goods are those that everyone can consume without reducing the overall stock available, such as clean air, information, and health. Second, common-pool resources are goods for which consumption by one person may reduce the overall stock available for another; groundwater, forests, and fisheries are examples. The market struggles to put a price on collective goods because people who have not paid for the good may still consume it. Because collective goods tend to be distributed over a large area, gathering information about each individual’s activities, and thus enforcing rules for sustainable use, is difficult. Public access can lead to overexploitation.

Within national boundaries, states can address these problems. A central authority with the power to tax its residents, enforce agreements, and punish violators can manage collective goods well. Taxes directly fund the provision of public goods, for example by training military and police forces for security, building safe water systems to prevent epidemics, and offering emergency medical services. Regulations, backed by tax-funded monitoring systems, protect water basins from overuse and prevent air and water pollution. All of this is made possible by the state’s power to impose fines and prison sentences; no one can refuse to adhere to the social contract without suffering punishment. In democratic states, the social contract itself—and thus the state’s role in addressing the failures of the market—is revised by the will of the people as interests and ideas evolve.

The affairs of government, however, are also fraught with difficulty. Fairly aggregating the political views of tens of millions of voters, protecting minority rights, and balancing the needs of future generations with the exigencies of short political cycles are all problems that even the most democratic states still have not solved. But, within the borders of democratic nation-states, the mechanisms for a slow, evolving resolution of the CAP are at least in place.

This is not so at the international level. The last one hundred years of world history suggests that creating a strong global government that can correct transnational market failures by imposing taxes, regulations, and punishments may not be possible. Even in the face of existential challenges, countries value their sovereignty—or perhaps more accurately, political elites in countries, whether motivated by public spirit or personal ambition, value their autonomy—too highly to cede power to a higher body.

Peace, Health, and Nature: The World’s Collective Goods

We focus in this proposal on the governance of three global collective goods: peace, human health, and the natural environment.

Peace is a global collective good. Weapons of mass destruction pose the greatest existential threat to human society, but conventional weapons are also a major threat. Controlling the expanding arms trade will not end political violence, but will provide space to create forums for conflict prevention and resolution, helping to resolve underlying grievances. Cross-border terrorism, fueled by the spread of extreme ideologies across traditional and modern social networks, is perhaps the most striking sign of how such grievances have become globalized.

Health is a global collective good. Developing countries, with underfunded health services, unsafe water and sanitation systems, and frequent exposure to natural disasters and conflict, are especially vulnerable to infectious diseases. In an increasingly mobile and connected world, however, pandemics cross borders with ease, as the recent history of HIV/AIDS, avian influenza, and the Zika virus makes clear. With respect to bacterial infections, the problem is exacerbated by the misuse of antibiotics; the resistance of pathogens to these drugs is becoming one of the world’s most serious public health problems. Obesity and associated diseases claim millions of lives every year.

Nature is a global collective good. Climate change is increasing the frequency of extreme weather events, reducing crop yields, sparking conflict, and rapidly changing ecosystem structure. The loss of biodiversity is accelerating, not only due to climate change but also as a result of habitat destruction and air, water, and soil pollution; we are in the midst of one of the great mass extinction events since the beginning of life on Earth. The exact social and economic costs of such destruction are unknown, but the biological foundations of agriculture, medicine, and a host of other industries are under threat.

In the absence of a global government, protection of these goods internationally is stymied by the collective action problem. The great powers have often vetoed meaningful international action to control the arms trade, and more generally to prevent or end political violence. Emerging economies argue that emissions reductions and biodiversity conservation will stunt economic growth. Pandemics are often dismissed by the industrialized world as a problem of poor countries.

The Quadrillion Dollar Scale: The Value of Global Collective Goods

The human and natural capital that collective goods embody are the basis of the global economy. When war, hunger, and disease destroy livelihoods, or when ecosystems are razed for short-term profit, these stocks of capital degrade and lose value. Durable peace, high-quality health care systems, and the sustainable use of the world’s ecosystem services, in contrast, unlock human potential, engender innovation, and lead to growth in the value of human and natural capital stocks.

The stakes are very high. The net present value (NPV) of the current stock of human capital is at least $1.2 quadrillion (Korn Ferry Institute 2016). If market and state failures were corrected and human capital developed to its full health and educational potential, this figure could increase by $800 trillion (World Economic Forum 2017). Meanwhile, the stock of natural capital—the value of all ecosystem services on the planet—is degrading by $4.3-20.2 trillion every year, according to one estimate (Costanza et al. 2014; 1997). Stopping, and perhaps reversing, this decline in value through effective collective goods management thus represents gains of hundreds of trillions of dollars over just the next several decades.

In the pages that follow, we describe an institutional architecture to manage global collective goods effectively. Our proposed solution is neither a state nor a market, but rather another kind of human organization specialized to address collective action problems: the cooperative. Cooperatives are groups of people who pool their stocks of human and financial capital—in 2016, cooperatives across the world had a total turnover in excess of $2 trillion—for a democratically agreed-upon set of goals. Unlike states, membership in cooperatives is not necessarily constrained by political borders. Unlike (most) market firms, decision-making in cooperatives is democratic, profits are shared equitably, and survival is not necessarily tied to short-term profitability or competitiveness; cooperatives can function as vehicles for long-term social change. Our proposal mixes these traditional features with a digital infrastructure to build a model for flexible collective goods governance.

How Collective Goods are Managed: The Global Cooperative

The mission of the Global Cooperative is to involve the world’s people in the work of restoring, maintaining, and enhancing the value of the world’s collective goods. To carry out this mission, the Cooperative relies on the pooling of ideas and resources, facilitated by a digital infrastructure; global delegative (“liquid”) democracy; and a diverse, coordinated set of collective goods, policies, programs, and projects (P3s) implemented in partnership with states and markets.

The Core Design Principle: Empowering Individuals to Cooperate

The workings of the Cooperative are based on communication and negotiation between individuals, not nations or other identity groups. This focus on the empowerment of individuals acknowledges two fundamental facts.

First, digital infrastructures greatly lower communications and transaction costs, making more widespread transnational cooperation possible. As a result, peer production—a form of labor relying on self-organized groups of individuals—has emerged as an important new mode of production (Benkler 2006). Typified by flagship projects such as Linux or Wikipedia, peer production’s lack of hierarchy, contractual relationships, and direct financial compensation does not result in low-quality output or social conflict. On the contrary, peer-produced solutions tend to be as (or more) innovative, comprehensive, and resilient as private products and services. In addition, strong communities form through open, and fundamentally meritocratic, governance mechanisms. Reputation and transparency are central to this process: when the eyes of the community are everywhere, watching who supports and who undermines the common good, global cooperation is possible.

Second, there is clearly a strong appetite around the globe for a more participatory democratic process. Mobilization around a host of issues, in the streets and online, reflects the desire of ever-more educated citizens to be actors, rather than spectators, in the global decision-making process. Though the impact of these movements remains marginal, they suggest that individuals worldwide are searching of new forms of political expression that transcend national borders.

Based on these observations, we propose that global collective goods can (only) be managed by self-organized groups of individuals, through a decentralized organization complementary to states and markets.

How the Cooperative Creates Solutions: A Network of Ideas

The Cooperative begins by conferring voting shares. Every woman and man in the world age 18 and older is entitled to a voting share in the Cooperative; this share signifies “virtual citizenship” in a global community. Through their participation in the Cooperative, these adults serve as trustees of the world’s collective goods—temporary custodians for the next generation.

Once their identity is verified, in partnership with existing national registration systems, citizen-trustees are digitally linked to an online identity they construct themselves. Their true demographic information is protected, and they may participate in the Cooperative under an alias if they so choose. Anonymity can provide a safeguard against discrimination on the basis of sex, gender, race, class, ethnicity, age, or other markers of identity.

Citizen-trustees engage with one another within the Cooperative’s social network, a structure that enables communication, sharing of information, and co-creation of ideas to manage collective goods. This social network is accessible through digital technologies, especially smartphones and computers. While access to these technologies may still be a barrier for some individuals, the number of mobile phone subscriptions worldwide exceeded the global population in 2016, and nearly half the world is using the internet (World Bank 2017). Digital technologies are now reaching even poor and isolated populations, and coverage will continue to increase; in addition, the Cooperative will prioritize enabling access to digital technologies in its initial stages of operation.

At the core of the Cooperative’s social network is an open-source platform for citizen-trustees to collaboratively build ideas on how to restore, safeguard, or enhance collective goods. Ideas can take the form of policies: guidelines for common behavior to be followed by a given community—global, national, or local—as well as mechanisms to collectively monitor and enforce these guidelines. These policies can be linked to existing policies of national states, or can be entirely new directives. Ideas can also take the form of programs: a cohesive set of projects to protect collective goods. Each program’s set of projects will be unified by a common mission, e.g., the creation of social institutions to prevent conflict. Finally, ideas can be project-based: a single intervention to accomplish a geographically or thematically well-bounded goal, for example a crop insurance instrument for drought-prone areas. The community can also seek to change the design of the Cooperative, which is itself a collective good.

Citizen-trustees choose their own teams to build these ideas, and the entire Cooperative community can provide feedback. Ideas may be initiated in private domains, but can only be voted on by the community once the ideas have been made open-source for a sufficient, pre-determined period. The platform makes use of a key feature of open-source peer production: the possibility of “forking” and “merging” ideas. Once an idea is made open-source, other citizens can start their own thread to build on it, in parallel. Modifications made in parallel threads can be reinserted into the original idea with the consent of the idea’s originator, or live a life of their own.

In order to facilitate the evaluation of P3s, the community also manages an information repository. The primary objective of this repository is to assess the ongoing and potential impact of P3s on the value of each specific collective good—that is, the expected stream of benefits, economic and non-economic, accruing from these goods over a given time frame. The information repository works like a Wiki, inviting edits and updates from all citizens. Where critical information gaps need to be filled, the Cooperative will engage citizens to conduct primary research. Like all aspects of the Cooperative, the information repository is itself a public good.

Experience with peer-production platforms such as GitHub (the main repository for open source software) and Wikipedia suggests that carefully designed reputation metrics enable top-quality output and lively social interactions; they enhance a sense of community and lead to the emergence of influential thought leaders. Participation in the social structure—initiating, developing, and forking ideas, assisting others in problem-solving, and maintaining the information repository, among other tasks—improves citizens’ reputations, as others give their approval; negative actions, meanwhile, can lower reputation. Highly reputable citizen-trustees are entrusted with moderator privileges (i.e., they can flag a proposal as inappropriate, resolve minor disputes, etc.), and their voice, as producers and evaluators of P3s, becomes influential in the community.

Overall, this social structure is designed to eliminate the informational and communication-related barriers to collective action. It also provides the foundation for the Cooperative’s political processes, described below.

How the Cooperative Chooses Solutions: Liquid Democracy

The political structure of the Cooperative—how decisions are made on P3s—is explicitly designed to address some of the most pressing problems of democracy in the world today. Formal and informal veto players at the international and national levels—great powers, heads of state, business interests, etc.—obstruct the possibilities for global collective action. Direct democracy sometimes leads to majoritarian tyranny, while representative democracy often results in the creation of a professional class of policymakers difficult to hold accountable between elections, and the attendant risks of collusion and corruption. Citizens lack a source of objective information on which to base decisions; ideological echo chambers reinforce, instead of challenge, pre-existing beliefs. In sum, citizens’ participation in politics all over the world is characterized by feelings of frustration, isolation, and helplessness.

The Cooperative is a delegative “liquid” democracy (Ford 2014; Beherns et al. 2014; Blum & Zuber 2016). Decisions are made in three distinct voting processes. The first process is the election o f individuals to serve on three Councils, called the Council of Peace, the Council of Health, and the Council of Nature. These Councils meet monthly to make final financing decisions for the Cooperative, as explained further below. Each Council has seven seats, and the seven top vote-getters for each Council at the time of the monthly convening serve as Councilors for that session.

Each citizen-trustee has three votes to cast at any given time, one for each Council. They have flexibility in how they cast their votes, however: they can partition their vote across as many or as few candidates as they wish, and can again vote directly or chose a delegate. For example, a voter may partition her Council of Health vote across two candidates, while voting for single candidates in the Council of Peace and Council of Nature races. Any citizen-trustee whose reputation exceeds a predetermined threshold may run for a council seat at any time; the reputation condition protects the community against unproductive members who may attempt to “buy”—financially or otherwise—delegations to further their own special interests. Finally, any citizen-trustee may choose to delegate part or all of her/his vote to a trusted proxy—an environmental expert, for example, to vote for a Council of Nature candidate.

The second voting process is concerned with proposed P3s. As with voting for Councilors, all citizen-trustees vote—either directly or by delegating their vote to a proxy of their choice—on the P3s they judge to have the greatest potential for managing collective goods effectively. P3s that meet a high threshold of support automatically move to the second stage, where they are introduced in one of the three Council bodies for the final approval voting process.

Within each council, the elected Councilors have the responsibility of choosing a cohesive set of P3s for the collective good they are tasked with managing. To allow for such cohesiveness, the council meets regularly to vote on alterations in the existing structure of collective goods management, including the adoption of new proposals. Updated estimates of the NPV of collective goods are central to the deliberations of the council bodies. Each Councilor has equal voting power within their respective council, and the minutes of the meeting are public and fully transparent. Overall, the liquid democratic process ensures continuous accountability from Councilors—poor performance results in rapid removal from the Councils—but also opens up the possibility for political and policy continuity, as trusted, effective Councilors are not restricted by term limits. Political behavior is monitored and checked through the power of open-source community vigilance.

Finally, disputes—for instance, when a minority constituency is threatened by a majority-approved P3—are adjudicated by a High Council consisting of nine members: the five citizen-trustees with the highest reputation, and four individuals nominated by the United Nations General Assembly. The High Council also has the responsibility to ensure that P3s do not interfere with states’ sovereignty or violate any other provision of the Constitution of the Global Cooperative (Section 3). If such violations occur, the High Council can block a P3’s financing, though this P3 can be reintroduced in revised form through the Cooperative’s regular process. With members both internal and external to the Cooperative, the High Council provides an important check to the organization’s liquid-democratic structure, while keeping engaged with the broader global governance agenda.

How the Cooperative Funds Solutions: The Collaborative Economy

The Cooperative’s impact on real-world collective goods comes through its financing of a coordinated set of P3s. In order to build the pool of capital necessary for such financing, the Cooperative sells investment shares at a fixed price. In addition to funding P3s, the capital raised from shares funds the operations of the cooperative, including maintenance of the social network, information repository, and so on. The Cooperative will also raise funds to distribute shares to those who cannot afford the share price, concentrating especially on individuals and groups who have a strong real-world reputation for effective collective goods management. The amount of total shares available is unlimited; any capital that the Cooperative cannot meaningfully invest in P3s will be placed in a social impact investment portfolio proposed and approved through the Cooperative’s regular process.

P3s can be managed in partnership with state, market, and civil society actors outside the Cooperative; such partnership must be proposed in the initial design of P3s, and thus voted on by all Cooperative members. Social impact bonds (SIBs) are one particularly promising vehicle for Cooperative-public sector partnership (Ramsden 2016). In the SIB model, investors fund socially beneficial projects. The projects, implemented either by the public sector or by intermediaries, then produce social returns which save the public sector money. For example, conflict prevention programs can mitigate later costs in law enforcement and incarceration. Repayment to investors—in this case, the Cooperative—is contingent on social outcomes being achieved.

SIBs are examples of project ideas that may produce a market return while protecting collective goods. Other examples are carbon trading schemes, tourism or patent proceeds from conservation, weather insurance programs, and subsidized water and sanitation systems. The P3 design should specify the expected market return; these estimates are subject to revision by community analysis, based on technical information in the repository. A portion of P3-monetized value will be repaid to the Cooperative, which then distributes this revenue in the form of dividends to shareholders. In effect, the voting process results in the provision of P3 loans at varying rates of interest, with the rate dependent on expected returns as well as the social value of the P3. Some loans will demand market-competitive returns; others will have concessional terms.

Some P3s—for example, side payments to governments to protect biodiversity and forgo revenue from extractive activities—are not expected to generate market returns. These P3s nevertheless enhance collective goods. Cooperative members capture some of the benefits, but some benefits are (acceptably) leaked to non-members. This willingness of the Cooperative to bear some of the costs of collective goods management is in line with the ethos of the organization; the Cooperative’s mission is not to maximize value for shareholders, but rather to perform a social function, to increase the value of collective goods. If the Cooperative has unused capital not allocated to P3s, these funds will be invested in socially responsible index funds that take into account environmental, social, and governance criteria.

From an economic perspective, the councils are tasked with increasing the long-term value of collective goods while generating acceptable shorter-term returns for the Cooperative’s members. The exact value of these short-term returns reflects the judgment of the council members, who, through the direct and delegative voting systems, themselves reflect the values of the Cooperative’s citizens. As revenue from P3s increases and the value of cooperation becomes more apparent, choices about the investment portfolio may also change, focusing more on long-term value.

To further increase security and guard against the volatility of global financial markets, transactions are conducted in a digital “cryptocurrency” created specifically for the Cooperative; shares, however, are able to be resold at any point for any currency, at current exchange rates. The underlying distributed database—the “blockchain” (Nakamoto 2008; Narayanan et al. 2016 )—provides a secure, transparent repository of all transactions, as well as of all other operations of the Cooperative, including votes, delegations, and so on. This cryptocurrency also has the advantage of being strongly tied to the success of the P3s. Higher P3 market returns increase the demand for shares—and consequently, demand for the cryptocurrency in which the shares are valued. Greater demand increases the currency’s price, catalyzing a virtuous cycle: better management of the world’s collective goods raises revenue for Cooperative citizens, attracts even more potential shareholders, and thereby enlarges the pool of available capital for investment.

In its vision of a network of individuals sharing ideas, a liquid-democratic voting structure, and common financing of collective goods P3s, the Cooperative builds the foundation for a new kind of economy and polity: participatory and geared towards socially valuable work, with rewards coming through not only monetary returns but also social reputation and, hopefully, personal fulfillment.

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