The Rise and Decline of Nations

[Amazon Link]

Last month I noted an interview with Indiana Governor Mitch Daniels, in which he discussed his "best five" books. This was the one I hadn't read. For the record, the other four were Hayek's The Road to Serfdom; Free to Choose by Milton and Rose Friedman; What It Means to Be a Libertarian by Charles Murray; and The Future and Its Enemies by Virginia Postrel.

This one is different from those others; in fact, it sticks out like a sore thumb. It's aimed very much at Olson's fellow scholars and researchers, delving occasionally into technical statistical and economic arguments. And the late Olson's prose style makes Hayek look like Danielle Steele. So when I say I "read" this book, I pretty much mean: I looked at least once at every darn page. I can't claim to have grokked his thesis in all its caveats and subtleties. Bear that in mind as you read on.

The book is a sequel of sorts to one based on Olson's Ph. D. thesis research, The Logic of Collective Action, describing a theory of how common-interest organizations evolve in society, and conspire to further their well-being, possibly at the expense of those outside the group. You don't have to have read Logic, though, Olson summarizes its thesis before covering the new ground.

Simply stated: Olson demonstrates that, other things being equal, those "special interest" groups will (a) work to grab more than their share of the economic pie, and furthermore (b) as special interests become vested interests, they act to protect that disproportionate share against erosion. In stable, long-lived polities, special interests have had plenty of time to develop and cement their effectiveness. The economic effects are straightforward: everyone outside the special interest group is worse off than they would otherwise be, and overall prosperity is damaged. The economy also loses dynamism, since the special interests have every motive to resist true innovation; it can upset their tidy little apple carts.

Olson supports this thesis via investigation of such groups around the world and through the ages. He discusses the features of the Indian caste system, South African apartheid, medieval guilds, etc. This is only sporadically interesting. (YMMV.)

Although Olson's book was written decades ago, you don't have to look any further than the daily paper to find examples of what he was talking about: corporate welfare, unions, regulations and laws that benefit old and entrenched firms over young upstarts, … From Daniels' interview:

It was some of the books on this list that helped me to see that the real reactionary movements in a country like ours are what we call the left. These really are the forces of status quo: they may travel under different banners or masquerade as something else but these are the folks who are more often than not trying to freeze in place arrangements that worked well for the 'ins'. So Olson shows you how that happens, Postrel shows you how this happens, Hayek shows you how this happens.
But, as noted, Hayek and (especially) Postrel are more accessible.

Last Modified 2012-10-02 4:08 PM EDT