Economics of Social Movements

Political participation, social movements, and protests are puzzling for economists. It seems that costs are higher than benefits to the participating individual. One of the more famous examples is the Downs Paradox or the Paradox of Voting. For an individual it seems hugely costly to get up in the morning, get dressed, take transportation to the voting booth, stand in line for an hour; all this for the slightest of changes in national voting data, and a minuscule chance to make any real change in your life by swaying an election. This cost-benefit analysis misses two crucial aspects: PEER PRESSURE and SIGNALING. I will first explain how peer pressure can partially resolve the puzzle. Models explaining political participation via peer pressure are called threshold models or models of diffusion. (I have written a more academic essay with references on the economics of social movements here). Next, I will explain why political participation is rarely linked to belief or ideology, but rather to one’s own benefits via signaling.

Imagine you work at a factory and you have to decide whether to participate in a strike demanding a pay-raise. Are you pro or contra? Well… I guess you have some questions first. How long are we going to strike for? How many other people will Strike? How much more money are we demanding? These are excellent questions! Take the extreme answers:

(1) You are the only one striking for a proclaimed indefinite time wanting a pay raise of 1000%.

Result: You will get fired immediately! (Not a great cost-benefit calculation)

(2) Everyone in your factory strikes apart from you

Result: You can't get your work done so most likely your employer won't pay, and you will have to expect pretty harsh repercussions from your co-workers who think you are a rat.

So answering some of the questions above will give you an estimate of how likely it is that benefits will come your way without losing your job. That’s what it is to make a cost-benefit analysis.

Political participation is no different. Individuals calculate at which point their benefits exceed their costs due to how many participants are engaged. Here everyone has a threshold. This is the tipping point where the cost of participating will be smaller than the cost of not participating. If there are many people with low thresholds then there will be a large base number for political participation. This high base number now leads to people reaching their slightly higher threshold. It is a positive feedback system in which tipping points are broken due to other people’s breaking of the tipping point (I wrote a blog about positive feedback and online shaming here).

Notably, ideology plays a minimal role. Sure, early tipping points are ideology-driven. The first call to action must come from a place of absolute despair since costs are huge and benefits are likely to be zero. But once this ball gets rolling and other people join, any individual is encouraged to join just because of the structure of the threshold, not because of ideology.

Now that we understand the costs and benefits of political participation, we can go deeper into signaling theory. Imagine now that diffusion has occurred, many thresholds were reached, and tipping points lay in the past. You now encounter a mass of people with different tipping points all standing together awaiting the same benefits of actual change and social approval. Well, that’s unfair. Some of those people put in a huge amount of risk at the beginning while others just joined to get the day off and not get weird questions of why they didn’t join. All these individuals will get the same benefits for different costs they have put in.

There is a solution to that: costly signals. You can now build a threshold model on top of a threshold model. I have outlined this in my essay on veganism. I have argued that adopting post-modern values (feminism, environmentalism, LGBTQ+... ) leads to certain benefits because many people (in a certain social network) adopted those values. But if everyone adopted them its not beneficial to hold them anymore. So society has to filter out who is really committed, who will go the extra mile. Here costly signals come in. Veganism is a great way to show just that. It differentiates cheap talk from credible signals. Signing up for a political party (on top of voting), protesting (on top of complaining), and shaming people on Instagram for using a hashtag (on top of using a hashtag) are costly signals on top of costly signals.

From an economic perspective, current political activism regarding BLM, cannot be explained by ideology. It is too costly for an individual when compared to the benefits of that action to that individual. What can explain it is models of diffusion, thresholds, tipping points, and signaling.

Personally, I am a bit torn. I want to show my solidarity with equality, but I know that I would be doing this for my own benefit due to other people’s participation in the movement. It would be more like doing the cinnamon challenge than making a political statement. I think I wouldn’t be alone in that.

Professor Michael Biggs whos class I attended at Oxford has written some interesting papers on this topic:

'Size Matters: Quantifying Protest by Counting Participants', Sociological Methods and Research, online; DOI 10.1177/0049124116629166

‘How Repertoires Evolve: The Diffusion of Suicide Protest in the Twentieth Century’, Mobilization, vol. 18, no. 4 (Frontiers in Social Movement Methodology), 2013, pp. 407-28 ‘Explaining Membership in the British National Party: A Multilevel Analysis of Contact and Threat’ (with Steven Knauss), European Sociological Review, vol. 28, no. 5, 2012, pp. 633-46; DOI 10.1093/esr/jcr031 (with Kenneth T. Andrews) ‘The Dynamics of Protest Diffusion: Movement Organizations, Social Networks, and News Media in the 1960 Sit-Ins’, American Sociological Review, vol. 71, no. 5, 2006, pp. 752-77 ‘Positive Feedback in Collective Mobilization: The American Strike Wave of 1886’, Theory and Society, vol. 32, no. 2, 2003, pp. 217-54