Exclusion and Compulsion in Collectives

Abstract

Exclusion and Compulsion in Collectives It is often argued that compulsory memberships in collectives can help to protect inexperienced customers of professional service from faulty work and its consequences: Hence, compulsory memberships serve as a typical tool to reduce the harm from asymmetric information. However, there is always some danger of professional cartels to occur that safeguard secured high income among its members and thus might harm welfare by restraining competition. In this contribution we show that, besides standard types, there are several other less obvious types of compulsory memberships. Those usually benefit the collective’s members but do harm the remaining members of the society. At last, we will show that the exploitation by professional and political party elites in command economies can serve as a good example of applied public good theory and should have been examined at a far earlier point in time.