The Rise and Decline of Nations

In the preface, the Rise and Decline of Nations promises to provide a partial explanation among other things, like stagflation, declining rates of economic growth, the British class structure, the Indian caste system, South African apartheid, the laggard response of the American economy in the Great Depression, and the rise of Western Europe. The explanations all derive from a simple theory, applied with considerable ingenuity and dexterity. Some will find the twists and turns of the theory sufficient reward for reading the book, but the important contributions of this book are Olson's findings about the prevalence of stagnation and economic decline in the world.

The book is constructed in two parts: theory and applications. The first two chapters review the basic argument of Olson's earlier book The Logic of Collective Action. Groups form to undertake collective action only, when it is possible for the group to provide members with benefits that exceed the costs of the collective action borne by the members. Some of these benefits must be exclusive to group members (selective incentives) or the free-rider problem will make collective action impossible.

The third chapter of the present book is a theoretical sequel to The Logic of Collective Action. A group successfully organized for a narrow purpose has overcome the primary cost of further collective action. The organized group is in a strong position relative to unorganized interests. This strength can be used to pursue policies that may reduce the income of society as a whole as long as the income of group members is, on net, increased. These redistributive policies may be outside the original scope of the organization and they have the reinforcing effect of strengthening the motive for collective action within the group.

Because of their relative strength, these re-distributional coalitions” become entrenched. The number ...