Mancur Olson

IN THE early 1950s, when travelling in Europe, Mancur Olson was puzzled why West Germany was blossoming economically, while Britain was floundering. Germany had lost the second world war, while Britain was a victor. The two countries were similar in many important ways. Why, then, the difference in performance?

A decade later, in 1965, Mr Olson took his first step towards an answer. In “The Logic of Collective Action”, the book that has come to be regarded as his most important contribution to economics, he examined the incentives that lead people to band together and collude for advantage. Five motor-car companies could be induced to form a cartel or a lobbying group fairly easily, since each would reap a fifth of any gains from price increases or government subsidies. But organising 5m drivers to fight back was a hard task, because each driver could hope for a free ride on the efforts of the others, and none had much to gain personally by joining the group.

The conclusion was striking. Narrow, self-serving groups had an inherent, though not insuperable, advantage over broad ones that worry about the well-being of society as a whole. How might that insight explain the fate of nations? In 1982, in “The Rise and Decline of Nations”, he offered an answer.

In any human society, he said, parochial cartels and lobbies tend to accumulate over time, until they begin to sap a country's economic vitality. A war or some other catastrophe sweeps away the choking undergrowth of pressure groups. This had happened in Germany and Japan, but not in Britain, which, although physically damaged in the war, had retained many of its old institutions. Surely there was some less cataclysmic route to renewal? Yes, said Mr Olson, a nation's people could beat back the armies of parochialism, but only if the danger were recognised and reforms embraced. Make these points to a student of economics or politics today and he or she will say, “Of course.” But the ideas were obvious only after Mr Olson made them so.

From the prairies

Mancur Olson was born in the farming state of North Dakota. His father, who seems to have been an intellectual but without much formal education, grew the hard red spring wheat of the northern prairies. Mancur (pronounced with a soft “c”) is a local name of uncertain origin. Mr Olson guessed it came from mansour, an Arabic word for “victorious”, although how it arrived in the Red River Valley where he lived is a puzzle he never solved. He went to a local secondary school of 49 pupils, then via the state university to a Rhodes scholarship at Oxford, a Harvard doctorate and eventually to Maryland University, where he spent most of his career. He considered at one time going into politics (and he spent two years in Washington working for the government), but it was the theoretical lattices of economics that claimed him.

In his 1982 book, he brought politics and economics together. As parochial lobbies form, he said, each gains, then fiercely defends, some benefit for its members, usually with government help. Subsidies, trade protections and other economic distortions accumulate, and resources increasingly flow to a specialised class of lawyers, bureaucrats and lobbyists who know how to work the system. Redistributive struggles displace productive ones. The result, if medicine is not taken, is a pattern of economic decline.

In his later years, it was to “medicine” that Mr Olson turned. He emphasised the importance of sound institutions and sensible policies in improving the lot of poorer nations, many of which rotted from the entrenched depredations of a self-serving governing class. Safe property rights, secure contracts and sensible economic policies make all the difference between wealth and poverty, he said. Indeed, they go much further than capital stock, natural resources, education, or the other usual suspects of textbook economics, towards explaining why a worker's productivity rises so astonishingly when he merely crosses the political boundary between Mexico and the United States. Mr Olson's passion on this point led him to establish, in 1990, a centre devoted to helping post-communist and developing economies find their way. Word of his death first reached this newspaper by way of an e-mail from Armenia.

Had he lived, his theory of collective action might well have won him a Nobel prize in economics, though not a wholly uncontroversial one. Some economists viewed him as a one-idea thinker—and worse, they whispered, his idea had reverberated less loudly within economics than outside of it; for example, in political science. The charge would not have troubled Mr Olson for a moment. He was as disdainful of parochialism in the life of the mind as in the life of a nation. “Look for a problem that is interesting and important—never mind how it is classified—and tackle it,” he once said, in the prairie-flat cadences that stayed with him all his life. “That is my advice to Mancur Olson, and that is my advice to everyone else.”