Customer Reviews

The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities

5 star:		(17)
4 star:		(5)
3 star:		(2)
2 star:		(1)
1 star:		(0)

 

 

Olson does a stellar job "proving" his theory using accepted scientific standards. His main thesis is that stable societies, over time, will be stifled by a steady growth of groups each committed to obtaining a disproportionate amount of society's goods. This theory, composed of only nine implications, is parsimonious with wide explanatory power. It helps to explain the post-war growth of coutries such as Japan and Germany, while providing a reason why the growth rates of the United States, and especially Great Britain, have been stagnated. Perhaps the most interesting chapter of the book is the last, in which Olson merges both Keynesianism and monetarism to form a new theory of macroeconomics. By using his theory, he is able to better explain involuntary unemployment than either of the more popular schools of macroeconomic theory. I was amazed at how many phenomena, such as slavery and the Indian caste system, can be at least partially explained by Olson's theory. Anyone seriously interested in knowing the way the world works will want to give this theory substantial consideration.

Professor Olson describes a wide range of social/economic structures and processes (unions, big government, high and rising taxes, regulation, monopolies, etc.) that characterize most economies but more so the aging economies of Western Europe (This book was written before the unification of eastern and western Europe). He then proceeds to show us what these all have in common: They each, together and with time, contribute in increasingly slowing down and stifling a nation's economy. Reading this book leads one to see that the USA is also involved in a similar progression, albeit at an earlier stage. I first read this book as an Economics student about 15 years ago. I enjoyed it tremendously. I also learned from it. His clear and powerful conveyance of concepts have kept the ideas with me. He explains the economics simply yet completely. One need not have studied Economics to follow him. I highly recommend this book. Even though the author's forescast is gloomy, his book is brilliant. Sherry S.

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.

Olson seeks to explain why some nations achieve high rates of economic growth while others suffer bouts of stagflation. He contends that the number and strength of "distributional coalitions," coupled with the length of economic and political stability will influence a nation's rate of economic growth. As such, Olson's hypothesis is two fold. First, Olson argues that states with lower levels of "distributional coalitions" often have higher rates of economic growth. Second, states which have experienced prolonged periods of disorder or armed conflict will have lower numbers of interest-group, or collusion organizations.

Olson's explanation builds upon his early work in The Logic of Collective Action, which holds that "...large groups, at least if they are composed of rational individuals, will not act in their group interest" (18). Rather, the rational actor will seek to further his or her self-interest, and will subsequently free-ride when possible. Olson expands the scope of this logic to encompass not only the rationality of the individual, but the rationality of the firm in explaining The Rise and Decline of Nations.

As the power of the firm expands, the firm seeks to maximize its own utility at the expense of a societal common good. In order to simplify a complex argument, we can think of Olson's theory in this way. An organization or firm will not expend its energy to create a benefit to society writ large, as it, and its members, will only receive a fragment of that benefit in relation to the costs incurred. On the other hand, if the same firm seeks to maximize its utility, it will seek to obtain a larger slice of the social "pie." In so doing, it may lower the benefits of society as a whole, but will significantly expand its own gain and that of its members. Meanwhile the firm will only incur a fraction of the costs such action projects on society at large. As such, Olson writes, "The great majority of special-interest organizations redistribute income rather than create it and in the ways that reduce social efficiency and output" (47).

Olson argues that a society with long-term stability - free from war, and economic and political turmoil - tend to accrue more special-interest and collusion groups. This occurs because it takes time and reasonable amount of stability for such interest-groups to organize, solidify, and begin to achieve some collective benefits for their members. Once collective benefits are seen as the result of organization, a host of other interests will begin to coalesce and seek to obtain gains for themselves. What emerges is a highly pluralistic society.

This leads us to the second part of Olson's hypothesis, those nations with high numbers of special-interest or collusion groups have lower levels of economic growth. Olson writes, "Distributional coalitions slow down a society's capacity to adopt new technologies and reallocate resources in response to changing conditions, and they reduce the rate of economic growth" (65). First, distributional coalitions stymie technological adoption when such innovation stands to benefit a rival group. A present day illustration can be found in a labor unions vehement opposition to the implementation of labor saving machinery. Second, distributional coalitions will attempt to block policy initiatives that change the status quo. When policy needs to be developed to increase economic or social advancement, the special-interest groups are likely to feel a certain displacement and will act to prevent such policy. According to Olson, these actions, coupled with others, often lead to policies which promote policies which have the potential to stifle economic growth.

Olson's book is difficult to classify, since on the one hand, it's not for the general reader, but on the other hand not so forbiddingly dense that it should be classified as scholarly. Lemme put it this way: it's for economically literate people. It makes use of, say, the concepts describing steady-state growth, supply factors, and expeduture-approach identities that one learns about in a college econ class.

If you don't know what I just said, I imagine much of this book will be opaque to you.

But if you can handle such stuff (and don't let me scare you too much: the gist of this book is clear enough even if you can't), man, O man! Olson's thesis is so brilliant it will give you whiplash!

In brief, great empires invariably collapse not because of cultural overstretch, internal discord, or military misfortune, but rather because the very process of building an empire gives rise to myriad vested interests that eventually claw their way so deeply into the neck of the government that they eventually choke it. In other words, empires collapse because they are invariably made sclerotic by special-interest groups.

An idea that is truly, classically brilliant: not obvious, but once developed at length, undeniable and endlessly applicable.

When I picked up this book to begin reading it, I was quite frankly nervous. I'd heard it recommended in so many places that I wanted to read it, but I am not an economist and so was not sure that I was going to be able to follow the arguments that it laid out.

While I'm certainly not going to claim that I understood everything, I think that I did manage to follow the majority of Olson's points. Furthermore, I believe that this owes more to the lucid and well-structured nature of the book than it does to me being blessed with any unusual intelligence.

_The Rise and Decline of Nations_ begins with an explanation of the questions that the book will explore and sets the standards for the consideration of a satisfactory answer. It then works out the logic of the offered argument and breaks that argument down into 9 well-described implications. It then goes on to test and explain that logic and those implications. Olson does a wonderful job of providing adequate support the concepts that he introduces, even to the point of pointing out areas where non-economists might have special trouble or require further information. As a result of all his hard work, the book has the feeling of being exactly as long as it needs to be, and no longer.

I was certainly convinced by his arguments about how special interest groups affect economic growth. I understood why he was unwilling to take it farther into the area of policy, but couldn't help but wonder what the eventual policy implications would be, assuming that his theory is further tested and developed.

I thoroughly enjoyed reading it, and recommend it wholeheartedly.

It surprises me that I haven't reviewed this book..... Anyway, this is one of the classic works on political economy: it builds on the Olson's earlier (and perhaps even better work) 'The Logic of Collective Action' using the logic contained therein to explain why and how different societies have prospered (and declined....) at certain stages in the world's or there own development.

Without writing a short book report for the undergraduate readers of this book, countries he examines are spread across the world; much of his thesis hinges on post-WWII comparisons of the US against Japan and Germany....

For prospective readers of Olson's work: first, I would start with 'The Logic...' BEFORE you read this, though a reading of this book would not be compromised by not having done so. His newer book 'Power and prosperity...' can be safely avoided (it's kinda expensive as it is still only out in hardcover...) having read both of these; you could then waste your political economy-budgeted money on either the works of Douglass North ('Structure and Change in Economic History';'The Rise of the West), Karl Polyani ('The Great Transformation'), or, well, Hemingway or Fitzgerald or something fun to read.....

I do highly recommend this book. Any student of foreign affarirs, politics at any level (though people who don't do IR or comparative stuff might benefit more from 'The Logic...'), economists, or students of history. Perhaps even to more general readers.....

In this extremely well written book Mancur Olson applies his Noble Price winning 'Logic of Collective Action' to the real world. It tries to give a partial answer to the question: why do some countries get rich and others do not? Well: power groups emerge and make a society rigid. The society cannot properly respond to changes anymore. The theory is applied to a very large number of nations throughout recorded histrory: from ancient China and caste India to apartheid South Africa and post-industrial-revolution England. The only country/nation throughout the entire human histry he admids he has trouble understanding with this great theory is France. Read it!

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. . . .

This one-idea book by late professor Olson tries to explain why some countries did better than others in terms of economic growth after World War II - namely Germany and Japan, in contrast with Britain. His explanation is that World War II weakened many institutions in those two countries that, by trying to retain their usual privileges, were holding back economic progress. The weakening of those institutions, permitted the economic miracle in both Germany and Japan. In contrast, England's institutions were not as weakened, so they continue to slow England's progress. I suppose that there are grains of truth in Olson's explanation - though if it was true, then the required policy recommendation would be that is good to suffer a devastating war every once in a while. I think Olson omits another possible explanation: the fact that Germany and Japan had both a strong industrial base before the war, a base that was not completely destroyed by it. Britain was in the 1940s suffering a slow economic decline in its industrial base - which really come back from the late 19th century, when Germany overcome Britain as Europe's leading industrial and economic power. And how would Olson had explained that after he wrote the book (in 1982), Britain went through a much higher economic growth than Germany and Japan - without the intervention of a war. So, while the book is interesting to read, I think its thesis is way too simplistic.