Mancur Olson

(1932-98) American economist with huge influence on political science. His first name was pronounced with a soft ‘c’. He wrote three big books—big in ideas although not in bulk. The most influential was the first, The Logic of Collective Action (1965). Olson pointed out that all lobbies aim to change policy, and a policy is, in the technical sense, a public good: it is jointly supplied (everybody gets it) and non-excludable. Some policies are, indeed, more public than others: environmental or income-tax policy affects everybody, whereas a tax break or protection for a particular industry benefits only those in that industry, although it is still a public good from the point of view of those in the industry. There is always a temptation to free-ride on public goods. Almost always, the good will either be provided even if I do not contribute to the lobby for it, or will not be provided even if I do. Only in the case where the beneficiaries are few and the benefit per beneficiary large is it at all likely that my individual decision to contribute or not will make any difference to the chances of the lobby's success. Classical pluralists had argued that there were as many, and as intense, interest groups as there were interests, and that the interplay of those groups was the essence of democracy. Those groups that succeeded represented the largest and/or most intense interests, and therefore all was as it should be. Olson showed that this could not be so. Each lobby must overcome its own free-rider problem. The fewer the potential members of the group, and/or the greater benefit per member from the desired policy, the fewer will be the free-riders. Normally there are fewer producers than consumers in any industry, and among the producers, fewer capitalists than labourers. Therefore, expect trade associations to be the strongest lobbies; trade unions weaker; and consumers the weakest of all. In turn, therefore, expect policies to be biased in favour of producer interests such as industrial protection and against consumer interests such as free trade.

In The Rise and Decline of Nations (1982) Olson went on to argue that the older the traditions of free association in a polity were, the more ‘sclerotic’ would be its policies, because producer interests would have the strongest hold over policy. Therefore polities like Britain, the northern USA, Australia, and India were growing slowly, whereas those like Japan or Germany (whose special interests had been destroyed by war and conquest), the US south and west, or the newly industrializing countries of Asia were growing rapidly. When growth rates changed in the 1990s, with Anglo-Saxon capitalism doing better than Rhenish or Asian capitalism, some said that Olson had got it wrong; others that policy-makers had listened to Olson and broken up their producer-group lobbies. Certainly, the UK, Australia, and New Zealand did so. In Power and Prosperity (2000), Olson shifted ground. He first showed that it is better to be ruled by a stationary bandit than by a roving bandit. Even a Stalin or a Saddam Hussein has a rational interest in allowing his citizens to continue to lay enough golden eggs to be taken in future years, rather than in plundering and moving on. And the wider the suffrage, the more ‘encompassing’ becomes the interest of the rulers in the wealth and growth of the polity they rule. So the fast-growing countries are now those that have got good institutions, where investors have reasonable confidence that they will not lose their returns through default or expropriation. And the former Soviet empire was exposed as a place where, after Stalin's reign of terror ended, business could continue only by the cooperation of special interests, thus explaining its low or negative growth after the collapse of communism.

Olson died before the tensions between his second and third books could be resolved.

Mancur Olson

New institutional economics
Birth	January 22, 1932(1932-01-22) Grand Forks, North Dakota
Death	February 19, 1998 (aged 66)
Nationality	United States
Institution	University of Maryland, College Park
Field	Institutional economics
Alma mater	Harvard University University of Oxford North Dakota State
Influences	James M. Buchanan

Mancur Lloyd Olson, Jr. (pronounced /ˈmæŋkər/; January 22, 1932 – February 19, 1998) was a leading American economist and social scientist who, at the time of his death, worked at the University of Maryland, College Park. Among other areas, he made contributions to institutional economics on the role of private property, taxation, public goods, collective action and contract rights in economic development.

Olson focused on the logical basis of interest group membership and participation. The reigning political theories of his day granted groups an almost primordial status. Some appealed to a natural human instinct for herding, others ascribed the formation of groups that are rooted in kinship to the process of modernization. Olson offered a radically different account of the logical basis of organized collective action.

In his first book, The Logic of Collective Action: Public Goods and the Theory of Groups, he theorized that “only a separate and ‘selective’ incentive will stimulate a rational individual in a latent group to act in a group-oriented way”; that is, only a benefit reserved strictly for group members will motivate one to join and contribute to the group. This means that individuals will act collectively to provide private goods, but not to provide public goods.

In 1982, he expanded the scope of his earlier work in an attempt to explain The Rise and Decline of Nations. The idea is that small distributional coalitions tend to form over time in countries. Groups like cotton-farmers, steel-producers, and labor unions will have the incentives to form political lobbies and influence policies in their favor. These policies will tend to be protectionist and anti-technology, and will therefore hurt economic growth; but since the benefits of these policies are selective incentives concentrated amongst the few coalitions members, while the costs are diffused throughout the whole population, the "Logic" dictates that there will be little public resistance to them. Hence as time goes on, and these distributional coalitions accumulate in greater and greater numbers, the nation burdened by them will fall into economic decline. Olson's idea is cited as an influence behind the Calmfors-Driffill hypothesis of collective bargaining.

In his final book, Power and Prosperity, Olson distinguished between the economic effects of different types of government, in particular, tyranny, anarchy and democracy. Olson argued that a "roving bandit" (under anarchy) has an incentive only to steal and destroy, whilst a "stationary bandit" (a tyrant) has an incentive to encourage a degree of economic success, since he will expect to be in power long enough to take a share of it. The stationary bandit thereby takes on the primordial function of government - protection of his citizens and property against roving bandits. Olson saw in the move from roving bandits to stationary bandits the seeds of civilization, paving the way for democracy, which improves incentives for good government by more closely aligning it with the wishes of the population.^[1]

To honor Olson's many contributions to the fields of Economics and Political Science, the American Political Science Association introduced the Olson Award to the best PhD dissertation in Political Economy.^[2]

Selected works

• The Logic of Collective Action: Public Goods and the Theory of Groups, Harvard University Press, 1st ed. 1965, 2nd ed. 1971. Description and chapter-previews links, pp. ix-x.
• The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities, Yale University Press, 1982. Description and chapter-preview links.
• Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships, Oxford University Press, 2000. Description and chapter-preview links.
• "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," (with Martin C. McGuire) in The Journal of Economic Literature, 1996, 34(1), pp. 72-96 (press +).

References

1. ^ http://www.humboldt.edu/~ee3/econ306/olson.html
2. ^ http://www.apsanet.org/~polecon/awards.html#Past%20Winners

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