The Rise and Decline of Nations Economic Growth Stagflation and Social Rigidities
User Ratings and Reviews
5 Stars Ray of Sunshine
Like another reviewer, I am puzzled why Olsons work has not become mainstream by now. A comment on page 45 “The argument also has only a lesser applicability to any country in which constitutional and structural factors constrain the number and power of lobbying organizations, as appears to be the case in Switzerland.” sent me to the internet to read the constitution of Switzerland, and provides a ray of sunshine. Perhaps we can loosen the grip of trial lawyers, labor unions, the AMA, defense contractors, multi-national corporations, etc. with a constitutional amendment.
The only weakness in Olsons work is references to “growth” without reference to population increase or decrease, one of three factors (population, productivity, inflation) of growth that must be considered. But that was not an obvious issue 25 years ago when Olson wrote, and does not subtract from the brilliance of his theory. I highly reccommend this book.
4 Stars The Paradox of Wealth
Most people recognize that there is something wrong about special interest groups. While most people think of special interest groups in terms of fairness, Olson examines efficiency issues. Special interest groups, or distributional coalitions, hinder economic growth in industrialized nations. Special interest groups slow the pace of change in industry. We will reorganize production and adopt new technologies more slowly as more coalitions form for the purpose of transferring wealth.
Distributional coalitions are mainly a problem of wealthy nations. Paradoxically, poor nations can experience strong growth due to the fact that they have little to redistribute. Poor nations can therefore develop rapidly. The examples of postwar Japan and Germany fit Olson’s thesis well. Japan and West Germany were devastated and left poor by the War, but developed rapidly afterwards. As Japan and Germany became affluent, distributional coalitions formed to retard further economic development.
Olson does not explain the stagnation of so called third world nations. Why is it that Japan and Germany were able to “take advantage” of their postwar poverty, while many other nations remain “too poor” to support extensive distributional coalitions? Distributional coalitions actually abound in poor nations. The Rise and Decline of Nations does not explain all of history, but this is definitely part of the formula. Its examples are a little dated, but there is some great stuff here.
4 Stars An important work on the dynamics of economic decline
Mancur Olson was a first class thinker and an economist held in high esteem. His “The Logic of Collective Action” is rightly regarded as a classic (not hype in this case). This book is another fascinating product from Olson’s mind. It is not a classic at the level of the book just mentioned, but this volume did have an effect on thinking and research.
The thesis is relatively straightforward. The longer any society experiences political stability and economic success, one natural consequence is the development of an expanded and more active interest group system. The end result? The interest groups work to build preferences into the country’s legislative and administrative structures, with deleterious results on economic growth and vibrancy. Inefficiencies burgeon and economies stagnate. . . .
The thesis, thus stated, is surely plausible. We hear routinely of how interest groups prevent change and lobby hard for protection of their position. Thus stated, Olson’s book develops this thesis nicely and provides some historical examples and other evidence to support the perspective.
Since publication of the book, a number of emprircal studies have been carried out to test Oldon’s thesis–with mixed results.
However, sometimes a book is more important for the thinking that it stimulates rather than for simple tests of the author’s arguments. In some senses, I think that this book had a substantial impact in its day on thinking about the consequences of interest groups from a “big picture” perspective. Worth reading for the thinking that will result! From my perspective? A bit simplistic. . . .
3 Stars The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities
My friends in the social sciences consider this a classic, and it gave me insight into the (discouraging) way the modern world actually works. Including things like why we will not get cost-effective health care in the US any time soon. Unfortunately, it’s turgid beyond the usual requirements of an economics book. By the time you are half way through, the message is pretty clear.
5 Stars Economics at its best
This is economics at its best. A broad theory derived logically (that small coalitions tend to grow in power and reduce economic efficiency in stable societies) and validated with numerous historic examples (mostly countries post WWII and American states). It was impressive how many cases where the theory seemed to be the primary cause (including such diverse areas as stagflation and social rigidities). It also provided another powerful argument for federalism, free trade and relatively free immigration.