Review of Austrian Economics, 12: 161–173 (1999)
1999 Kluwer Academic Publishers
The Costs of Cooperation
TYLER COWEN firstname.lastname@example.org
Department of Economics, George Mason University, Fairfax, VA 22030
DANIEL SUTTER email@example.com
Department of Economics, University of Oklahoma, Norman, OK 73019
Abstract. Public goods production is not necessarily desirable and involves higher costs than is often recognized.
Speciﬁcally, public goods production may require that a small minority of individuals can collude at the expense
of others or impose strategic sanctions on non-contributors. These facilities may have negative as well as positive
effects. The same conditions that support public goods production also support business cartels and racial discrimi-
nation, for instance. We examine the implications of this perspective for modern debates on economic policy, civic
virtue, communitarianism, and libertarianism.
JEL Classiﬁcation: H40, D23, D62.
Economists, philosophers, sociologists, political scientists, and other social scientists
typically treat cooperation as desirable. Cooperation increases the output of goods and
services and allows individuals to achieve collective ends.
The most formal treatment of the beneﬁts of cooperation is found in the theory of public
goods, which we take as our foil. Cooperation, if successful, allows individuals to produce
a public good at optimal or near-optimal levels. The value of public goods, by deﬁnition,
exceeds their social costs of production. Underproduction of the public good indicates
institutional failure and increased production of the good indicates institutional success.
This logic was stated by David Hume and Adam Smith, and plays a signiﬁcant role in
economics, political science, sociology, and other social sciences.
Belief in the beneﬁts of cooperation also underlies complaints about the decline of com-
munity, a speciﬁc example of a public good. Drawing on Emile Durkheim, some com-
mentators associate modernity with an increase in “anomie” and a lack of cooperative
endeavors. Other commentators point to a decline of values in America, and claim that
in previous eras neighborhoods were more cohesive, social norms were more effective,
the work ethic was stronger, and Americans showed greater willingness to pitch in for
the common good. Robert Putnam (1995), in his well-known study “Bowling Alone,”
notes the modern desire of Americans to bowl alone, rather than in leagues; he asso-
ciates this development with loss of community. We use the phrase “cooperative efﬁcacy”
The authors wish to thank Peter Boettke, Diego Gambetta, Amihai Glazer, Dan Klein, George Hwang, David
Levy, Alex Tabarrok, and Robert Tollison for useful comments and discussions.