While a number of political leaders, as well as some scholars and opinion makers, argue that the current crisis of EU-style integration can only be overcome by having “more Europe”, this paper argues that there are intrinsic limits to the method integration followed since the founding treaties. Although the limits to collective action have been known to political economists since the path- breaking contribution of Mancur Olson in the 1960s, the basic conclusions of this author have generally been ignored by students of European integration. Olson argued that the larger the group, the further it will fall short of providing an optimal amount of a collective good--such as political or economic integration. If larger groups/organizations do in fact exist this is not because of the collective good they provide, but because of the power of coercion they may enjoy (as in the case of the state) or because of selective (positive or negative) incentives that voluntary organizations may provide. A well-known example of selective incentive in the context of the EC/EU is the Common Agriculture Policy, a positive incentive offered to France for its support of European integration. Unfortunately, the larger the group the more difficult it becomes to provide suitable selective incentives to all the members of the group. The availability of such incentives is limited, in case of the EU, not only by the size of the group but also by the socioeconomic heterogeneity of its members. An even more basic problem in organizing and maintaining socially and economically heterogeneous groups is due to the fact that the members are less likely to agree on the exact nature of whatever collective good is at issue or on how much of it is worth “buying”. In the EU context we have the traditional cleavage between the countries that wish to limit integration to the economic sphere and those that support also political integration. Consensus on such matters is especially difficult because the defining characteristic of collective goods—that they go to everyone in the group if they are provided at all--entails that all the members of the group have to accept whatever level and type of the good is provided. More recently it has been shown that also collective ownership is subject to various limitations—an intuitive result which is also relevant in our case, since it is reasonable to consider the member states as the collective “owners” of the EU- -where ownership, as the term is conventionally used, has two essential attributes: the exercise of formal control and the receipt of residual benefits. The limitations of collective leadership, on the other hand, have been known for a long time. Only an “hegemon” could overcome these intrinsic limitations of collective action, but no member state--not even Germany, the only conceivable candidate—is willing to play such a role. The paper concludes that it is no longer possible to think of European integration as a collective good; rather it has become a “club good”, i.e., a public good from whose benefits countries may be (or may wish to be) excluded. The point is that as an association of states expands becoming more diverse in its preferences and its socioeconomic conditions, the cost of uniformity in the provision of collective goods can escalate dramatically. The economic theory of clubs (James Buchanan) predicts an increase in the number of voluntary associations to meet the increased demand of goods more precisely tailored to the different requirements of various subsets of more homogeneous states. Aggregate welfare is maximized when the variety in preferences is matched by a corresponding variety of institutional arrangements. The economic theory of clubs provides a good conceptual foundation for the functional (rather than territorial) approach to supranational governance—an approach advocated by David Mitrany in the 1940s and by Ralph Dahrendorf in the 1970s.

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