# Collective rationality

Disembedded, embedded, and embodied rationalities describe individual forms of rationality. Let’s explore how groups act to understand the world and make decisions. Collective rationality takes two forms: collective action and collective reasoning.

## Collective Action

Collective action occurs when individuals make self-interested choices that add to other people’s decisions to result in group action.

For example, let’s say we had three companies that produced soap in a city, and they were trying to reduce the carbon footprint of their industry.

• Company A decided to invest in eco-friendly technology. As a consequence, it reduced its annual output of carbon dioxide by one tonne.
• Company B decided to make the same investment, reducing its carbon dioxide output by one tonne also.
• Company C, however, was uninterested in reducing its carbon footprint and refrained from making the same investment.

Collectively, all three companies reduced carbon dioxide emissions by two tonnes. Rather than coordinate activity, each company made their choice independently. The collective action was the total of all those individual choices.

Collective action is based on two assumptions.

1. First, individuals make choices in their self-interest.
2. Second, if a person belongs to a group, and their fortunes rise and fall with that of the group, then they will make individual choices that are in the group’s best interest.

Though there are many situations where those assumptions hold, there are many circumstances where they fall apart. Examples of these circumstances include the Prisoner’s Dilemma, Tragedy of the Commons, and Arrow’s Impossibility Theorem. The following example explores the Tragedy of the Commons.

The Tragedy of the Commons: A Failure of Collective Action

A ‘commons’ is a shared resource. For example, fisheries share a fishing stock, cattle ranchers share pastureland, or farmers share a river’s water.

A tragedy of the commons occurs when several individuals sharing a resource make self-interested choices that undermine the collective good.

We see this in international efforts to combat climate change by reducing reliance on fossil fuels. (Not everyone who reads this textbook may believe that human activity drives climate change, but those nations seeking to reduce their dependence on fossil fuels do. This example takes the perspective of one of those nations.)

In this example, the commons is our climate. Every country shares the climate in common.

Reducing reliance on fossil fuels is difficult and requires nations to make significant investments into their energy infrastructure. The benefit of this investment, however, is a hoped-for reduction in the severity of climate change caused by the burning of fossil fuels.

Let’s say Nation A chose not to make these investments needed to reduce fossil fuels. As long as every other nation still made those investments, Nation A would receive the benefits (because global reliance on fossil fuels declined) without any of the costs. It is, therefore, in Nation A’s best interests to continue using fossil fuels and let other nations invest in changing.

Nation B notices the same thing and chooses to continue using fossil fuels, too. So does Nation C. Now, so few nations are participating that the benefits are no longer there because of the reneging countries’ carbon dioxide output. Without any benefit, there is no reason for the remaining nations to invest in reducing fossil fuel use either.

In this example, it is in every nation’s best interests to reduce the severity of climate change by collectively decreasing reliance on fossil fuels. If countries based their decisions purely on self-interest, though, the result would be that no nation would invest in reducing fossil fuel use. This situation is a tragedy of the commons.

Sometimes, collective action does not result in the common good.

## Collective Reasoning

Collective reasoning is a form of rationality where individuals put forth ideas for public debate. It is deliberative democracy. Proponents of an idea put forth arguments. Individuals within the group debate these arguments. As this process progresses, the group discards weak ideas and strengthens good ones until they agree on a course of action.

The collective process of deliberative democracy often leads to better decisions. This process, however, can be challenging to implement in businesses because businesses are not democracies–they are private property. Individual rationalities tend to dominate in private property (that is, owners make decisions; employees carry them out).

Key Takeaways

• Collective rationality defines how groups act to understand the world and make decisions. It takes two forms:
• Collective action
• Collective reasoning
definition