Lumpy Goods and Cheap Riders: An Application of the Theory of Public Goods to International Alliances

Mancur Olson and Richard Zeckhauser's ‘An Economic Theory of Alliances’ has been described as ‘the best known application of the theory’ of collective (or public) goods. In that article, Olson and Zeckhauser advanced the claim that America's Western European Allies (and by implication, Japan as well) are all, more or less, ‘free riders.’ Yet, more than twenty years later, the meaning of this claim remains very much in doubt. This article outlines Olson and Zeckhauser's basic argument and conclusions and the evidence against their argument; explains how application of the ‘free rider’ thesis to the problem of collective security can be revised in the light of contemporary thinking about the provision of collective goods; presents some preliminary tests of this formulation; and suggests a few of the implications of this analysis for the formulation of United States defense policy.