More on Joining Interest Groups

More on Joining Interest GroupsAuthor(s): David MarshSource: British Journal of Political Science, Vol. 8, No. 3 (Jul., 1978), pp. 380-384Published by: Cambridge University PressStable URL: http://www.jstor.org/stable/193649 .

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380 Notes and Comments 380 Notes and Comments

between decision makers in different firms it seems likely that CBI membership will be more common than elsewhere.

CONCLUSIONS

It is difficult, then, to agree with Marsh's conclusions. He has not established that the costs of joining the CBI exceed the relevant selective benefits of membership. Given the method he uses, he cannot seriously hope to; this note has suggested other approaches that might be more fruitful. Marsh offers us no theoretical alternative to Olson's general approach, and indeed his postulated rationality threshold would really deny us the possibility of making predictions about political behaviour at all.12 He has certainly shown that Olson's approach needs to be fleshed out rather more but it is difficult to accept the implication that this necessarily involves 'ad hocery' and weakens the usefulness of Olson's model. Obviously a general model of the kind Olson formulates requires modification to take account of the particular problem we are dealing with, but it is surely the strength of a good model that it is flexible and capable of elaboration in a systematic manner.

12 He also neglects to mention the light Olson's approach casts on the history of the CBI: in particular its development as a federation of smaller organizations and the role played by the government in bringing it into being. These are entirely predictable consequences of the difficulties of organizing collective action which Olson was among the first to analyse systematically.

More on Joining Interest Groups DAVID MARSH*

Shackleton's comment on my earlier article seems to me to raise a number of interesting questions. He is very critical of my methodology and suggests alternative ways of testing Olson's model. He places most emphasis on the need to consider aggregate data on the changing patterns of interest group membership over time. In this short note I do not intend to reply at length to Shackleton's criticisms. Instead, I shall re-examine Olson's analysis using aggregate data on the changing patterns of CBI membership in the last decade.1

Nevertheless, I think it essential at this point that I restate my position on Olson. My article did not attempt a general critique of economic analysis. I was mainly concerned to point out some of the weaknesses of Olson's use of that analysis, while at the same time emphasizing that such weaknesses appear most obviously when one attempts to test the model empirically. In particular, Olson's use of some of his key concepts is imprecise. Shackleton argues that Olson's introduction of the concept of a rationality threshhold is 'uncharacteristically sloppy .2

* School of Social Sciences and Business Studies, Polytechnic of Central London. I do not have space here to look at the CBI's precedessors, but Olson's analysis is applied

to this period in W. Grant and D. Marsh, The Confederation of British Industry (London: Hodder and Stoughton, 1977).

2 J. R. Shackleton, 'Dr Marsh on Olson: A Comment', this Journal, p. 377, fn. 7. It is informative to quote Olson on this point: 'The cost of voting and signing petitions is thus insignificant and imperceptible to many people ... The point is that there is a' threshold"' above which costs and returns influence a person's action, and below which they do not.' M. Olson, Jr., The Logic of Collective Action (Cambridge, Mass.: Harvard University Press, 97 1), p. 164.

between decision makers in different firms it seems likely that CBI membership will be more common than elsewhere.

CONCLUSIONS

It is difficult, then, to agree with Marsh's conclusions. He has not established that the costs of joining the CBI exceed the relevant selective benefits of membership. Given the method he uses, he cannot seriously hope to; this note has suggested other approaches that might be more fruitful. Marsh offers us no theoretical alternative to Olson's general approach, and indeed his postulated rationality threshold would really deny us the possibility of making predictions about political behaviour at all.12 He has certainly shown that Olson's approach needs to be fleshed out rather more but it is difficult to accept the implication that this necessarily involves 'ad hocery' and weakens the usefulness of Olson's model. Obviously a general model of the kind Olson formulates requires modification to take account of the particular problem we are dealing with, but it is surely the strength of a good model that it is flexible and capable of elaboration in a systematic manner.

12 He also neglects to mention the light Olson's approach casts on the history of the CBI: in particular its development as a federation of smaller organizations and the role played by the government in bringing it into being. These are entirely predictable consequences of the difficulties of organizing collective action which Olson was among the first to analyse systematically.

More on Joining Interest Groups DAVID MARSH*

Shackleton's comment on my earlier article seems to me to raise a number of interesting questions. He is very critical of my methodology and suggests alternative ways of testing Olson's model. He places most emphasis on the need to consider aggregate data on the changing patterns of interest group membership over time. In this short note I do not intend to reply at length to Shackleton's criticisms. Instead, I shall re-examine Olson's analysis using aggregate data on the changing patterns of CBI membership in the last decade.1

Nevertheless, I think it essential at this point that I restate my position on Olson. My article did not attempt a general critique of economic analysis. I was mainly concerned to point out some of the weaknesses of Olson's use of that analysis, while at the same time emphasizing that such weaknesses appear most obviously when one attempts to test the model empirically. In particular, Olson's use of some of his key concepts is imprecise. Shackleton argues that Olson's introduction of the concept of a rationality threshhold is 'uncharacteristically sloppy .2

* School of Social Sciences and Business Studies, Polytechnic of Central London. I do not have space here to look at the CBI's precedessors, but Olson's analysis is applied

to this period in W. Grant and D. Marsh, The Confederation of British Industry (London: Hodder and Stoughton, 1977).

2 J. R. Shackleton, 'Dr Marsh on Olson: A Comment', this Journal, p. 377, fn. 7. It is informative to quote Olson on this point: 'The cost of voting and signing petitions is thus insignificant and imperceptible to many people ... The point is that there is a' threshold"' above which costs and returns influence a person's action, and below which they do not.' M. Olson, Jr., The Logic of Collective Action (Cambridge, Mass.: Harvard University Press, 97 1), p. 164.



Notes and Comments 381

However, I believe this sloppiness is more widespread. As I pointed out originally, Olson is far from clear on the assumptions he is making about the decision-making situation,3 nor is his discussion of the concept of the 'collective good', as it applies to interest groups, convincing.4 Yet in any deductive model it is essential that all assumptions are stated and that all definitions are precise. Indeed, the very appeal of economic models to students of politics is their apparent precision.

Of course, a more sophisticated model might be developed which met these and other criticisms. Shackleton suggests that Olson's model would work if we used a wider, more adequate, definition of costs and benefits. This may be so, and Shackleton does suggest some interesting directions in which the analysis can be extended. However, I believe we should be circumspect for two reasons. There is no doubt that the more sophisticated the analysis, the larger the problem of measurement; and, with more variables involved, the need for precision is greater. This being so, it is disturbing that Shackleton mentions the possibility of devising 'some crude measures of CBI influence'.5 Not only is the problem of the measurement of influence one of the thorniest in the study of politics and sociology, but a more sophisticated version of Olson's model needs rather more than crude testing.

Nevertheless, such methodological problems might be overcome. A more serious limitation is that the model may become a self-fulfilling prophecy. The model assumes rationality and the researcher looks for a rational explanation of behaviour. If it fails to appear at first he is faced with a temptation to redefine or reclassify the observed behaviour in order to offer a rational explanation. As Barry put it very succinctly: 'The constant danger of "economic " theories is that they can come to explain everything merely by redescribing it.'6 Flexibility is not necessarily an indication of a model's strength or explanatory power.

ON ALTERNATIVE WAYS OF TESTING OLSON

Shackleton strongly criticizes my methodology. I accept that my data have limitations but he appears, following Milton Friedman, to dismiss their utility almost completely.7 This seems to me misguided, particularly as the alternative methodology suggested by Shackleton, and indeed used by Olson himself, has substantial limitations. Shackleton suggests that Olson's model can only be effectively tested by examining changes in the membership of organizations over time and relating them to changes in costs, and to changes in the supply of both the collective good and selective incentives. Such data are useful. Indeed, I shall be considering data of this sort in the main section of this Note. However, such data used in isolation only provide a fairly crude test of Olson's model.

The real problem here is that if we reject the utility of data concerning the individual's perception of the decision-making situation, then it becomes difficult to measure any but the obvious 'objective' variables. Shackleton seems to come close to recognizing this when he claims: 'If businessmen employ a rational calculus on Olson's lines, changes in costs and selective benefits should, ceteris paribus, lead to changes in levels of membership. This should

: D. Marsh, 'On Joining Interest Groups: An Empirical Consideration of the Work of M. Olson Jr.', British Journal of Political Science, vl (1976), pp. 266-8.

4 Marsh, 'On Joining Interest Groups', pp. 268-9. 5 Shackleton, 'Dr Marsh on Olson', p. 378. 6 Brian Barry, Sociologists, Economists and Democracy (London: Collier-Macmillan, 1970),

P. 33. 7 Actually Friedman's views on appropriate methodology are strongly criticized by econ-

omists. See, for example, A. Coddington, 'Positive Economics', Canadian Journal of Economics, v (1972), 1-15.



382 Notes and Comments

be fairly easy to test, at least in relation to the monetary costs of joining the CBI and the direct services it provides. 8 This is just the point. Monetary costs and benefits may be easy to measure and to relate to aggregate data on membership patterns, but it is difficult to see how non-monetary costs and benefits can be measured without interview data. Shackleton is at pains to point out that non-monetary costs and benefits are important, yet he seems to me to advocate a methodology which makes it difficult to take them into account.

OLSON RECONSIDERED: CHANGING PATTERNS OF CBI MEMBERSHIP

The CBI was formed in 1965, but the crucial changes in its membership occurred in the 1970s. As Table I indicates, after steadily increasing its membership in the early 1970s, there was a substantial decline in 1974. This lost membership has not been recovered.

TABLE I Annual Changes in CBI Membership, 197o-76

1970 + %

1971 + I/2%

1972 +2%

1973 + 1%

1974 -8%

1975 -/2 %

1976 +/2%

Our main problem then is to explain the decline in membership in the CBI in 1974. Using Olson's analysis, one would seek to explain this decline in terms of either an increase in membership costs or a reduction in the supply of selective incentives, and indeed, much of the decline in membership can be explained in terms of the increased financial cost of membership.

Until October 1973 each firm paid a subscription on a sliding scale in relation to its number of employees. At this time membership costs, which are still not high by European stan- dards, were particularly low. However, the CBI was unhappy about the level of subscriptions and about the fact that the old system discriminated against labour-intensive industries. The new system for industrial and public-sector members is based upon the member's total United Kingdom salary bill and upon its United Kingdom turnover. This change meant that the

subscriptions of some firms trebled or even quadrupled. It also meant that the CBI's subscription income increased from fi .6m. in I973 to ?2 4m. in 1975. Many firms were not happy about these

changes but at an extraordinary meeting of the Council the overwhelming majority accepted the increases.

There can be little doubt that these figures do show the validity of Olson's analysis. Obviously costs do affect the judgement of many firms in decisions to join and leave organizations like the Confederation of British Industry. However, if we look at the figures in greater depth, and, in addition, pay some attention to certain other factors, I think it is clear that the situation is more complex than appears at first. In particular, it is instructive to reanalyse membership patterns during the relevant period in terms of company size.

As Table 2 indicates, there was actually an increase in the number of large industrial companies in membership during this period. Yet costs had gone up at least as much for such

8 p. 379.



Notes and Comments 383

TABLE 2 The CBI's Industrial Company Membership by Size of Company 1973 and I975

1973 1975

Number of Percentage Number of Percentage industrial of CBI industrial of CBI

companies industrial companies industrial belonging company belonging company

Size of company to CBI membership to CBI membership

Small companies 8,319 74 7,180 71 (under 200 employees)

Medium-sized companies 1,799 i6 1,618 I6

(200-1,000 employees) Large companies 1,124 10 1,314 13

(over I,ooo employees)

firms as for smaller ones. How can we explain this trend? It seems difficult to explain this pattern using Olson's analysis; there was certainly no evident increase in selective incentives for this group. In contrast, from 1972 onwards there were obvious variations in the supply of the collective good, or, more precisely, variations in the membership's perceptions of the supply of the collective good. In addition, it seems difficult to argue that these variations were unconnected to membership patterns.

In 1972 the CBI failed, despite strenuous efforts, to extract any concessions from the Conservative Government on its Industry Act.9 This legislation allowed governments to take equity holdings in assisted companies and was seen by the large majority of the CBI's membership as inviting 'backdoor nationalization'. At the same time, the CBI had failed to affect prices and incomes policy significantly.10 Indeed, by the time of the election in February 1974, many sections of the CBI's membership were unhappy about its effectiveness as an interest group. More specifically, a large number of CBI members believed that the CBI was too passively accepting increased government intervention into the economy in general and industry in particular.

This unrest was accentuated when Campbell Adamson, then CBI Director General, com- menting upon the Industrial Relations Act two days before the February 1974 election, argued: 'I would like to see the next government saying right from the beginning - We will repeal the Act but we will repeal it only when we have some joint agreement that would succeed it.'" Some industrialists were privately in agreement with these remarks, but they naturally became an element in the election campaign, and the Guardian headline next day read, 'CBI slips an ace into Wilson's hand.' It is difficult to estimate what impact, if any, Adamson's remarks had on the electorate, but in a close contest there was naturally concern that the CBI's leader had

9 See Grant and Marsh, The Confederation of British Industry, pp. 156-68, for a detailed discussion of the 1972 Industry Act.

10 See Grant and Marsh, The Confederation of British Industry, pp. 191-7, for a detailed discussion of the CBI's attempts to influence prices and incomes policy.

" From transcripts supplied by the CBI.



384 Notes and Comments

helped ensure a Labour victory. Certainly, there was an adverse reaction from some CBI members, with Group Captain Cecil-Wright, Chairman of the CBI's Midlands Regional Council, declaring, 'the suggestion that the Act should be repealed has angered many influential Midlands businessmen '.12

Overall, then, by 1974 many companies of various sizes were unhappy with the CBI's performance and its ability to influence government, and the CBI was not helped by the new minority Labour government's apparent renewed commitment to nationalization. The unrest resulted in some resignations among large firms. Fairly typical was the reaction of Sir Tatton Brinton, Chairman of Brintons, a major carpet company, who declared, 'Adamson is taken by the media to speak for British industry. He does not speak for our company, and we have today therefore resigned our membership of the CBI.'13 At the same time, some firms, notably Guest, Keen and Nettlefolds, suspended membership, although in reality this amounted to very little as membership subscriptions had been paid and the CBI still sent these firms literature and provided them with services. The point I am making is a simple one. In order to explain the CBI's loss of membership in I974 one has to look further than the rise in membership fees, and particularly at the perceived variations in the supply of the collective good.

Actually, this point needs no emphasizing if we look at the CBI's reaction to its loss of members, and at membership patterns since 1974. The CBI's reaction was immediate and fairly dramatic. No real attempt was made to improve services. Rather, the organization began to adopt a much more aggressive posture towards the Labour Government and its intervention into industry. At the same time the influence of the CBI over government policy increased. This success was reflected in the tax relief on stock appreciation negotiated by the CBI in 1975, which added some ?2,000 million a year to corporate profitability; in the series of changes in the Price Code made in 1976, which improved company profitability by as much as ?1,500 million; and in the emasculation of the radical elements in the Labour party proposal which became law as the 1975 Industry Act. So one could argue that the CBI increasingly stressed the supply of the collective good, and indeed were successful in increasing the supply of the collective good after 1974. The result has been that, although membership has continued to decline marginally, more large firms have been recruited although these large firms have had to pay higher membership fees than they would have prior to 1974.

In conclusion, I wish to take issue with another of Shackleton's points in the light of these data and the material I originally presented. It seems to me unfair to say I have no explanation of why firms join the CBI. Rather, I believe I offer a number of explanations of why firms join. Some firms, rationally in Olson's terms, join for the services. These are mainly, although by no means exclusively, small firms. However, many firms seem to join for the collective good. Some of these may be acting-rationally given their own decision-making scheme, and some appear to be acting irrationally. One of the weaknesses of using Olson's analysis is that it tends to lead to an overdue concentration upon selective incentives. My data show that they are important, but by no means overwhelmingly so, when one looks at the Confederation of British Industry. Indeed, being provocative, one might ask why any interest group continues to attempt to supply the collective good if potential members only join to obtain selective benefits. Why don't interest groups merely supply selective incentives? But that is another question. 12 Birmingham Post, 28 February I974. 13 Birmingham Post, 28 February 1974.



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