Inefficiency and the Public Good
Olson (1965) noted that because the benefits of a public good are available to all regardless of their personal contributions, it's hard to entice "rational actors' to contribute to it's production unless there are more selective incentives involved. Later (Olson, 1982) expands his theory to include the organizational level. He notes that these "public" organizations can provide benefits to their members in two ways. They can help members operate more efficiently and effectively, expanding the total economic resources of society and thus their share. Or they can help their members get a bigger share of the existing economic resource base. Rational actors, Olson argues, will choose the second option because the first suffers from the "public good" issue.

But the problem is that the inefficiencies caused by the actions of the organization toward their own interests are borne by society in general. "In short, the structure of incentives operating in associations created to advance the intersts of their membership penalizes efforts to increase their overall productive efficiency and rewards attempts to use their power and influence to secure special priveleges for themselves, even at the expense of others. (Scott p. 336). Olson concludes that "the great majority of special-interest groups redistribute income rather than create it, and in ways that reduce social efficiency and output".

Societies tend to collect these "collective associations" and they can start to stagnate the economy as each expends their energies to grab a bigger piece of the pie rather than help make it bigger.