THE RISE AND DECLINE OF MANCUR OLSONS VIEW OF THE RISE AND DECLINE OF NATIONS J. Barkley Rosser, Jr.

Department of Economics MSC 0204 James Madison Uni ersity !arrison"#r$, %& 22'0( US& tel) *40+*,'+-2.2 Email) rosser/"0/m#.ed# 1e"r#ary, 200( JE2 Codes) B-., !00, 300, 400 5ey6ords) collecti e action, encompassin$ or$ani7ations, rent seekin$, transition economies &"stract) 89e e ol#tion of Manc#r :lson;s ie6s of 9is "ook, The Rise and Decline of Nations <.='2>, t9e middle of 9is t9ree main "ooks, is e?amined. @t e?pands and e?tends to 9istory and t9e 6orld ar$#ments presented in 9is The Logic of Collective Action <.=,*>. A9ile 9e ne er a"andons t9e idea t9at t9e acc#m#lation of interest $ro#ps in a democratic society may lead to its economic sta$nation, 9o6 t9is comes a"o#t and can "e o ercome c9an$es some69at "y t9e time of 9is final "ook, Power and Prosperity <2000>, 69ic9 foc#ses on t9e pro"lems of t9e transition economies and proper political $o ernance. & si$n of t9e $reater comple?ity of 9is later ie6s emer$es in 9is analysis of t9e U.S. So#t9, presented in 9is presidential address to t9e So#t9ern Economic &ssociation <.='->.

&ckno6led$ements) 89e a#t9or 6is9es to t9ank Ro$er R. Betanco#rt and 89omas C. Sc9ellin$ for pro idin$ eit9er #sef#l comments or materials, and Dennis Coates and Jac C. !eckelman for caref#l editin$ of earlier drafts of t9is paper. 3one is responsi"le for any remainin$ errors or misinterpretations.

1. Introduction A9ile Manc#r 2loyd :lson, Jr.;s first main "ook,. The Logic of Collective Action <.=,*>, 9as "een cited more and can "e ie6ed as more f#ndamentally inno ati e at t9e t9eoretical le el, its s#ccessor, The Rise and Decline of Nations <.='2> B9encefort9, RADONC 9as "een more 6idely translated and is ar$#a"ly t9e ma$n#m op#s of 9is career, t9e $rand application of 9is earlier ideas to t9e 6orld and 9istory at lar$e.2 89e earlier 6ork laid o#t t9e pro"lems t9at $ro#ps 9a e in t9eir collecti e $oals as t9ey "ecome lar$er, 6it9 a $reater dis/#nct#re "et6een t9e interests of t9e indi id#al and of t9e collecti e $ro#p arisin$. @n t9e final c9apter of t9is 6ork 9e s#$$ested t9at 9is ar$#ment co#ld lead to an o ert#rnin$ of t9e Dort9odo?E t9eory of press#re $ro#ps t9at sa6 t9em as a positi e force for democracy and efficiency <2#ce, .=24F Commons, .=*0>. Special interest $ro#ps representin$ small n#m"ers of firms in oli$opolistic ind#stries co#ld s#pport monopolistic or protectionist le$islation. S#c9 le$islation co#ld dama$e t9e "roader economy, especially $ro#ps #na"le to or$ani7e t9emsel es t9at 6o#ld t9en 9a e to Ds#ffer in silence.E A9ile 9e rarely #sed t9e term, t9is ar$#ment can "e seen as fores9ado6in$ t9e later t9eory of rent seekin$, and in 9is later 6orks 9e more openly reco$ni7ed t9e affinity of 9is ideas 6it9 t9e p#"lic c9oice sc9ool of t9o#$9t..

4rior to The Logic of Collective Action, :lson p#"lis9ed t9e lar$ely #nkno6n The Economics of Wartime hortage <.=,-a>, 69ic9 reflected 9is e?perience ser in$ in t9e United States &ir 1orce after ret#rnin$ from st#dyin$ in t9e 49ilosop9y, 4olitics, and Economics pro$ram at :?ford and "efore 9e completed 9is economics dissertation at !ar ard. 2 @n t9e 1ore6ord to Power and Prosperity <2000, p. ? i>, 69ic9 appeared after :lson 9ad died, C9arles Cad6ell reports t9at 69ile Logic 6as more cited, it 6as only translated into = lan$#a$es 69ereas RADON 6as translated into .2 lan$#a$es. 89e Logic 6as ori$inally :lson;s 49.D. t9esis at !ar ard, first o erseen "y Ed6ard !. C9am"erlin. &fter C9am"erlin;s deat9 in .=,2, it 6as o erseen "y 89omas C. Sc9ellin$, 69o arran$ed for its p#"lication in t9e !ar ard Economic St#dies series. McG#ire <.==', p. 2*(> ar$#es t9at it 6as RADON t9at D a#lted :lson to academic cele"rity.E A9ile 9e tended to a oid citin$ m#c9 of t9eir 6ork later, in t9e Logic :lson 9ea ily cited B#c9anan and 8#llock;s The Calc!l!s of Consent <.=,0> 6it9 e ident appro"ation. A9ile t9is 6ork of :lson;s is often ie6ed as a fo#ndin$ te?t of p#"lic c9oice t9eory, its core ar$#ment deri ed from more traditional p#"lic finance t9eory, t9e t9eory of ol#ntary e?c9an$e of Erik 2inda9l as analy7ed "y M#s$ra e <.=-=>, 69o "ro#$9t it to :lson;s attention. !e 6o#ld e ent#ally ser e as 4resident of t9e 4#"lic C9oice Society.

&lt9o#$9 9e added a n#m"er of ar$#ments, t6o cr#cial inno ations appear in RADON t9at #nderlie its central t9esis. :ne is t9e distinction "et6een distri"!tional coalitions, 69ic9 are seen as leadin$ to o#tcomes inimical to economic $ro6t9, and encompassing coalitions, 69ic9 are seen as potentially aidin$ economic $ro6t9 in a society. Beca#se of t9eir $reater si7e, t9e latter are seen as 9a in$ tro#"le or$ani7in$ t9emsel es and ac9ie in$ infl#ence, alt9o#$9 t9ey may 9a e a "etter c9ance of doin$ so in a smaller and more 9omo$eneo#s society s#c9 as S6eden. !is ot9er inno ation is t9e ar$#ment t9at o er time a sta"le democracy 6ill tend to acc#m#late more and more distri"#tional coalitions 69ose political po6er 6ill acc#m#late, t9#s $rad#ally impedin$ t9e economic $ro6t9 of t9e society. 89is "ecomes t9e key to 9is most famo#s ar$#ment in RADON. !e especially foc#sed on t9e post+ Aorld Aar @@ performance of Germany and Japan as compared 6it9 t9e United 5in$dom, ar$#in$ t9at t9e defeat of Germany and Japan in t9e 6ar 9ad led to t9e o ert9ro6 of t9e po6er of narro6 special interest $ro#ps t9at impeded $ro6t9 69ereas in t9e U5 s#c9 $ro#ps reac9ed a peak of po6er t9at 6as responsi"le for t9e relati ely 6eak performance of t9e Britis9 economy. !e emp9asi7ed t9at t9is 6as not a s#dden de elopment, "#t t9at after leadin$ t9e 6orld in economic $ro6t9 d#rin$ t9e @nd#strial Re ol#tion d#rin$ t9e Dlon$ ei$9teent9 cent#ryE <.,''+.'-4>, Britain "e$an to fall "e9ind in t9e mid+.=t9 cent#ry compared to s#c9 risin$ po6ers as Germany and t9e United States, t9is deceleration and relati e decline only 6orsenin$ in t9e aftermat9 of Aorld Aar @@. A9ile 9e disc#ssed a ariety of ot9er e?amples, t9is 6as t9e "ook;s central inspirin$ case.

:f co#rse, e en as RADON 6as "ein$ p#"lis9ed, t9e U5 "e$an to #nder$o a s#"stantial political and economic transformation d#rin$ t9e period of r#le "y Mar$aret 89atc9er t9at tri$$ered a $lo"al mo ement to pri ati7ation and marketi7ation, e en t9o#$9 Britain 6as not in aded and did not e?perience a iolently re ol#tionary #p9ea al. 89#s 9is central e?ample #nderc#t 9is ar$#ment a"o#t t9e ine ita"ility of sta$nation in a sta"le democracy. 89e po6er of special interest $ro#ps co#ld "e "roken, and a sta$nant economy co#ld re$ain $ro6t9 and dynamism t9ro#$9 peacef#l democratic means. A9ile :lson lar$ely a oided disc#ssin$ t9e case of 89atc9er;s Britain in 9is later 6ork, it is H#ite likely t9at its e?ample 9elped mo e 9im to6ard e?pressin$ stron$ly pro+ democracy positions in t9e final pa$es of 9is last "ook, Power and Prosperity.4 @f Britain 6as t9e primary inspiration, t9e e?ample t9at pro ided t9e data for t9e econometric s#pport of 9is ar$#ment in RADON came from comparin$ t9e states of t9e United States. 4#llin$ t9e states of t9e Confederacy aside, 9e fo#nd a stron$ ne$ati e relations9ip "et6een 9o6 lon$ a state 9ad "een in t9e Union and its rate of economic $ro6t9. !e identified t9is also 6it9 t9e presence of older ind#stries in t9e older states alon$ 6it9 some e idence of more entrenc9ed and n#mero#s special interest $ro#ps. !e also "riefly disc#ssed t9e special case of t9e Confederate states, a disc#ssion e?panded in 9is presidential address to t9e So#t9ern Economic &ssociation <.='->. !e 6o#ld attempt to fit t9e So#t9 into 9is frame6ork, "#t it in ol ed ot9er factors s#c9 as transportation and social pec#liarities t9at complicated t9e main line of 9is ar$#ment. !o6e er, it m#st "e reco$ni7ed t9at 69ile 9e presented 9is main ar$#ment forcef#lly in most of RADON,

@t is only in t9e 3otes to t9e 1ore6ord "y Cad6ell to Power and Prosperity t9at t9ere is a reference to t9e 89atc9erite e?perience in Britain. Cad6ell cites Ra#c9 <.==4> as notin$ 89atc9er;s Great Britain as t9e only clear e?ample of Dreform 6it9o#t crisis,E alt9o#$9 :lson cited Ra#c9;s 6ork else69ere in t9is "ook.

9e reco$ni7ed in certain places <pp. .*, '(> t9at Dmonoca#salE t9eories of 9istory and economics are inadeH#ate, t9#s openin$ t9e door to t9is later ad#m"ration. @n 9is final "ook, t6o t9emes emer$e as paramo#nt, one t9eoretical, one political+ 9istorical. 89e t9eoretical 6as t9e de"ate 6it9 a main ri al to 9is $rand 9istorical t9eory, t9e new instit!tionalist perspecti e of Do#$lass C. 3ort9 <.='., .==0> 6it9 its emp9asis #pon a Coasean analysis of transactions costs as determinin$ t9e H#ality of economic instit#tions and 9ence economic o#tcomes. 89e ot9er 6as t9e attempt to apply 9is ideas to t9e pro"lems of t9e transition economies after t9e fall of t9e So iet Union, a pro/ect t9at 9e 9ad "een specifically in ol ed in since .==.. A9ile 9e contin#ed to defend 9is main t9esis from RADON 9is foc#s s9ifted some69at to t9e disc#ssion of appropriate $o ernin$ and instit#tional str#ct#res in t9e transition economies and de elopin$ economies more "roadly, 6it9 a reco$nition of t9e importance of 3ort9;s emp9asis on protectin$ property ri$9ts and t9e a"ility to enforce contracts. @n t9e 4reface to 9is final "ook 9e posed t9e H#estion of 69y some co#ntries are ric9 and some are poor and fo#nd t9e ans6er in t9e H#ality of instit#tions. @n t9e final pa$es of t9e "ook 9e ar$#ed t9at t9e #nderpinnin$ of H#ality instit#tions 6o#ld "e democratically fo#nded indi id#al li"erties and also t9e a"sence of predation "y eit9er t9e pri ate or p#"lic sectors, a mar#et$a!gmenting government. 89#s, if in RADON 9e 6o#ld 9i$9li$9t t9e potential for democracies to lead to economic sta$nation, in 9is final 6ork 9e 6o#ld affirm t9eir f#ndamental importance in $#aranteein$ lon$+term economic $ro6t9.

2. From The Logic to RADON

Martin C. McG#ire <.=='> ar$#es t9at The Logic of Collective Action 6as not initially appreciated 69en it appeared, indeed, t9at it almost did not appear as :lson;s final ma/or professor and t9e editor of t9e !ar ard series, 89omas Sc9ellin$, initially re/ected it as a t9esis #ntil after it 6as s#"stantially re ised, a re/ection so se ere t9at :lson 6as preparin$ a completely different possi"le t9esis topic as an alternati e #ntil it 6as accepted.* McG#ire ar$#es t9at 69at e ent#ally made The Logic into a classic 6ere t9e e?tensi e footnotes 6it9 t9eir disc#ssion of t9e many ariations and possi"le e?tensions and cases in ol ed "eyond t9e "asic ar$#ment. 89ese possi"le e?tensions and cases 6o#ld inspire a s#"stantial cotta$e ind#stry of researc9 in 6orkin$ t9em o#t more formally o er t9e ne?t se eral decades, 6it9 all of t9is effort #ltimately referrin$ "ack to t9e fo#ndational 6ork "y :lson. 89#s t9e "ook only emer$ed o er time as t9e classic t9at it no6 clearly is. Some of t9is de elopment of ideas 6as carried o#t "y :lson 9imself, at times 6it9 coa#t9ors. :ne of t9e more important s#c9 e?tensions in ol ed 9is famo#s paper 6it9 Ric9ard Ieck9a#ser <.=,,>, D&n Economic 89eory of &lliances,E and t9eir later <.=(0> D89e Efficient 4rod#ction of E?ternal Economies.E 89e earlier paper partic#larly took off from some "rief remarks in The Logic <p. -,> re$ardin$ 9o6 in t9e 3&8: alliance it seemed t9at a disproportionate s9are of t9e cost "#rden 6as "orne "y t9e lar$er co#ntries. 89is o"ser ation 6as part of t9e $eneral ar$#ment t9at as $ro#ps e?pand in si7e it "ecomes 9arder for t9em to pro ide an optimal le el of t9e collecti e $ood. @n t9e .=,, paper :lson and Ieck9a#ser posed t9e famo#s form#lation of t9e De?ploitation of t9e $reat "y t9e smallE t9at can occ#r 6it9in a closed $ro#p t9at pro ides itself a p#re
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Bot9 in pri ate comm#nication and in 9is 1ore6ord to !eckelman and Coates <200->, Sc9ellin$ reports t9at 9is main inp#t 6as to enco#ra$e :lson to red#ce t9e le el of tec9nicality of 9is presentation in order to make it accessi"le to political scientists, sociolo$ists, ant9ropolo$ists, and le$al sc9olars.

p#"lic $ood "y ol#ntary contri"#tion, 69ic9 made t9is paper :lson;s first to attract 6idespread attention 6it9in t9e economics profession. 89is res#lt 6o#ld "e refined "y later economists <Aarr, .='-F Ber$strom, Bl#me, and %arian, .=',F &ndreoni, .=''> to s9o6 t9at if preferences are identical 6it9in t9e $ro#p, t9ere 6ill "e a definite c#toff in income "elo6 69ic9 a mem"er 6ill contri"#te not9in$. Reco$nition t9at e?ternalities and t9e de$ree of collecti ity aries in e?tent led :lson <.=,=a> to p#"lis9 9is D89e 4rinciple of 1iscal EH#i alence) 89e Di ision of Responsi"ilities amon$ Different 2e els of Go ernment,E in effect a t9eory of fiscal federalism. 89e ar$#ment is t9at t9e appropriate le el of $o ernment to s#pply a partic#lar kind of collecti e $ood is t9at 69ic9 comes closest to encompassin$ t9e e?tent of its collecti ity or t9e e?ternalities associated 6it9 it. A9ile t9is no6 seems an int#iti ely o" io#s res#lt t9at 6o#ld seem to "e almost a tr#ism, it 9ad not "een pre io#sly artic#lated in precisely t9at form., D#rin$ t9is period 9is foc#s on e?ternalities $ot :lson in ol ed in 9is one ma/or foray into $o ernment 69en, as an &ssistant Dep#ty Secretary for t9e t9en !ealt9, Ed#cation, and Aelfare <!EA> Department, 9e 6rote a report <.=,="> a"o#t 9o6 ario#s social indicators s9o#ld "e constr#cted to meas#re H#ality of life "eyond merely meas#rin$ real per capita income. 89is idea 9as "ecome entrenc9ed in t9e J#ality of 2ife inde?es no6 re$#larly constr#cted for t9e United 3ations and ot9er "odies. &s part of t9is pro/ect :lson also "ecame concerned 6it9 t9e pro"lem of ne$ati e e?ternalities and 9o6 rapid economic $ro6t9 co#ld "e socially desta"ili7in$ "eca#se of t9ese pro"lems. !e 6o#ld e?press t9ese ideas in se eral p#"lications <.=,=c, .=((>.(
,

@t can "e ar$#ed t9at t9is 6as a precise and lo$ical implication of t9e lon$+ar$#ed principle of Ds#"sidiarity,E t9at a 9i$9er le el or$ani7ation s9o#ld not do 69at a lo6er le el one can do, a point noted pri ately "y Ro$er R. Betanco#rt. ( !e fores9ado6ed t9ese ar$#ments in one of 9is fe6 p#"lications prior to The Logic <:lson, .=,-">.

!o6e er, 9e apparently prepared a more or less "ook len$t9 e?position of t9ese ideas as an e?tension of 9is !EA report t9at 9as ne er "een p#"lis9ed. !e disc#ssed it at some len$t9 in a footnote in RADON <pp. 24=+2*0> in 69ic9 9e noted t9e possi"ility t9at economic $ro6t9 may not al6ays "e a $ood t9in$, /#st t9e opposite of 69at 9e 6as ass#min$ t9ro#$9o#t t9e rest of t9at partic#lar 6ork. @n t9is footnote 9e pro ided t9e title DBeyond t9e Meas#rin$ Rod of MoneyE for t9is ne er+to+"e+p#"lis9ed 6ork and said of it <.='2, p. 24=>, Dt9is is a "ook @ ery nearly decided to p#"lis9 in t9e .=(0s, "#t @ decided t9is s#"/ect 6as so ast t9at it needed years of additional t9o#$9t K @ 9ope to finis9 re isin$ it soon after t9is "ook is p#"lis9ed.E B#t t9is did not come to pass.

. T!" M#in Ar$um"nt McG#ire <.==', p. 2*,> claims t9at one day o er l#nc9 in t9e mid+.=(0s 69ile at t9e Uni ersity of Maryland <:lson;s 9ome "ase from t9e late .=,0s to 9is deat9>, :lson ar$#ed t9at t9e e?tremes of laisse7+faire and a command socialist economy 6o#ld a oid rent+seekin$, 69ile a mi?ed economy 6o#ld "e s#"/ect to it. !e 6as s9arply c9allen$ed on t9is claim, 69ic9 led 9im to form#late an idea t9at essentially $oes a$ainst 9is earlier ar$#ment a"o#t lar$er $ro#ps "ein$ #na"le to o"tain collecti e $oods) t9e encompassing organi%ation. 89e distinction "et6een t9is kind of $ro#p, 69ose interests coincide 6it9 t9e "roader social collecti e interest, and t9e narro6er distri"!tional coalition, t9e special interest, rent+seekin$ $ro#ps t9at slo6 do6n economic $ro6t9, "ecame t9e key to 9is ar$#ment in 9is .='2 Rise and Decline of Nations &RADON'( @n t9e first c9apter of t9is "ook 9e posed t9e "asic data on t9e post+Aorld Aar @@ performance of t9e ma/or nations, 9i$9li$9tin$ partic#larly t9e relati ely poor

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performance of t9e U5 as compared 6it9 <Aest> Germany, Japan, and e en 1rance. @n t9e second c9apter 9e lar$ely reiterated 9is "asic ar$#ments from The Logic of Collective Action. @n t9e cr#cial t9ird c9apter, D89e @mplications,E 9e introd#ced 9is distinction "et6een encompassin$ and distri"#tional or$ani7ations and 6orked t9ro#$9 9o6 t9ey affected 9is earlier ar$#ments. Dra6in$ on a ariety of 9istorical e?amples, 9e s#mmari7ed 9is ar$#ment 6it9 a set of $eneral implications t9at 9e t9en listed at t9e end of t9e c9apter after disc#ssin$ t9em indi id#ally. 89ey constit#te t9e central core of RADON, and t9ey are as follo6s <.='2, p. (4>. .. 89ere 6ill "e no co#ntries t9at attain symmetrical or$ani7ation of all $ro#ps 6it9 a common interest and t9ere"y attain optimal o#tcomes t9ro#$9 compre9ensi e "ar$ainin$. 2. Sta"le societies 6it9 #nc9an$ed "o#ndaries tend to acc#m#late more coll#sions and or$ani7ations for collecti e action o er time. -. Mem"ers of DsmallE $ro#ps 9a e disproportionate or$ani7ational po6er for collecti e action, and t9is disproportion diminis9es "#t does not disappear o er time in sta"le societies. 4. :n "alance, special+interest or$ani7ations and coll#sions red#ce efficiency and a$$re$ate income in t9e societies in 69ic9 t9ey operate and make political life more di isi e. *. Encompassin$ or$ani7ations 9a e some incenti e to make t9e society in 69ic9 t9ey operate more prospero#s, and an incenti e to redistri"#te income to t9eir mem"ers 6it9 as little e?cess "#rden as possi"le, and to cease s#c9 redistri"#tion

#nless t9e amo#nt redistri"#ted is s#"stantial in relation to t9e social cost of t9e redistri"#tion. ,. Distri"#tional coalitions make decisions more slo6ly t9an t9e indi id#als and firms of 69ic9 t9ey are comprised, tend to 9a e cro6ded a$endas and "ar$ainin$ ta"les, and more often fi? prices t9an H#antities. (. Distri"#tional coalitions slo6 do6n a society;s capacity to adopt ne6 tec9nolo$ies and to reallocate reso#rces in response to c9an$in$ conditions, and t9ere"y red#ce t9e rate of economic $ro6t9. '. Distri"#tional coalitions, once "i$ eno#$9 to s#cceed, are e?cl#si e, and seek to limit t9e di ersity of incomes and al#es of t9eir mem"ers9ip. =. 89e acc#m#lation of distri"#tional coalitions increases t9e comple?ity of re$#lation, t9e role of $o ernment, and t9e comple?ity of #nderstandin$s, and c9an$es t9e direction of social e ol#tion. 89e final piece of 9is t9esis 6as to add t9at sta"le democracies 6it9o#t defeat, re ol#tion, or some ot9er s#"stantial internal #p9ea al tend to acc#m#late more and more of t9ese distri"#tional coalitions o er time. 89is t9en e?plains t9e sta$nation of lon$+ sta"le democracies s#c9 as post+Aorld Aar @@ Britain as compared to t9e /#st+defeated Germany and Japan.

%. Furt!"r A&&'ic#tion( o) t!" Ar$um"nt @n t9e remainin$ fo#r c9apters of RADON :lson applies t9is "asic ar$#ment to a ariety of cases in different parts of t9e 6orld and at different periods of time. 89e fo#rt9 c9apter, DDe eloped Democracies since Aorld Aar @@,E presents 9is main cases, t9e

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contrast of "oomin$ <Aest> Germany and Japan 6it9 sta$nant Great Britain. 89is is t9e re en$e of t9e defeated nations, li"erated from t9eir rent+seekin$ distri"#tional coalitions. 1rance is also incl#ded as part of t9e "oomin$ $ro#p, and it certainly e?ceeded "ot9 t9e U5 and t9e United States in GD4 $ro6t9 rate in t9e decades immediately follo6in$ t9e 6ar, alt9o#$9 it is some69at more pro"lematic in terms of t9e story t9at :lson tells.' :lson also e?plains t9e apparently anomalo#s $ood performance of S6eden as d#e to its special interest $ro#ps "ein$ of t9e encompassin$ nat#re, 6it9 its la"or and mana$ement $ro#ps ne$otiatin$ at t9e national le el to ac9ie e a sta"le macroeconomy. = 89e c9apter concl#des 6it9 an econometric analysis of t9e United States, s9o6in$ t9at older states are $ro6in$ more slo6ly t9an ne6er states, correctin$ for ot9er aria"les, 6it9 a "rief disc#ssion of t9e special circ#mstances of t9e &merican So#t9. 89e fift9 c9apter, DJ#risdictional @nte$ration and 1orei$n 8rade,E foc#ses on 9o6 Britain "ecame t9e center of t9e ind#strial re ol#tion, ar$#in$ t9at it 6as t9e first nation in E#rope to ac9ie e /#risdictional inte$ration and a #nified national market after t9e Glorio#s Re ol#tion of .,'' sta"ili7ed t9e nation, follo6in$ t9e #p9ea als of t9e Ci il Aar of t9e mid+.(t9 cent#ry. 89is /#risdictional inte$ration #nderc#t t9e po6er of t9e local distri"#tional coalitions t9at 9eld "ack t9e nation and contin#ed to operate in s#c9

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@t is tr#e t9at Germany defeated 1rance and occ#pied it to some e?tent d#rin$ t9e 6ar. B#t it is also tr#e t9at m#c9 of it 6as r#led "y a local p#ppet, t9e %ic9y re$ime, t9at did not #pend or disr#pt most $ro#ps in society, alt9o#$9 t9e more o ertly left+6in$ ones 6ere s#ppressed, only to emer$e after t9e 6ar stron$er t9an "efore it <2e y, .===>. :lson ar$#es rat9er #ncon incin$ly t9at t9is defeat com"ined 6it9 lon$ internal conflicts led to t9e o#tcome in 1rance, 69ic9 is certainly a s#"stantial ariation on 9is main ar$#ment, $i en t9at 1rance 6as marked "y s#"stantial contin#ity of instit#tions t9ro#$9 t9e 6ar. &r$#a"ly t9e $ro#ps 6ere kept #nder control d#rin$ t9e immediate post6ar period "y a com"ination of indicati e central plannin$ and t9e infl#ence of t9e emer$in$ E#ropean Economic Comm#nity <no6 E#ropean Union>, 6it9 s#c9 stron$ly centrali7in$ leaders as C9arles de Ga#lle <Estrin and !olmes, .='-F C9anter and Jenkins, .==,>. = :lson <.==0, .==*a> 6o#ld later e?press fr#stration and disill#sionment 6it9 S6eden and t9e D8e#tonicE nations more $enerally, ar$#in$ t9at t9eir pre io#sly Dencompassin$E or$ani7ations Dde ol edE into mere distri"#tional coalitions t9at impeded inno ation and $ro6t9, 6it9 t9e endin$ of t9e national le el 6a$e "ar$ainin$ in S6eden in .=', t9e cr#cial si$n of t9is pro"lem.

..

ri als as 1rance. M#c9 as in 9is disc#ssion of t9e U.S., :lson ar$#es t9at t9e ind#strial re ol#tion arose in pre io#sly smaller cities, s#c9 as Manc9ester and 2i erpool, 69ic9 displaced some earlier lar$e cities s#c9 as 3or6ic9 and Lork <p. .2->. &#stralia and 3e6 Iealand are posed as ne$ati e cases like t9e later Britain, sta"le democracies t9at "ecame constrained "y e?cessi e tariffs, clearly e?9i"itin$ t9e po6er of stron$ distri"#tional coalitions. 89e c9apter ends "y 6arnin$ t9at if t9e coalitions are stron$ eno#$9 t9ey can o ercome e en t9e ad anta$es of free trade, 6it9 t9e U5 as t9e e?ample. 89e carteli7ations and e?cessi e #nion po6er of t9e Britis9 coalitions s9o6 #p in t9e sectors not competin$ in international trade. 89e si?t9 c9apter, D@neH#ality, Discrimination and De elopment,E mo es to 9istory and t9e less de eloped 6orld, "lamin$ sta$nation in pre+Comm#nist C9ina on t9e entrenc9ed po6er of stron$ $#ilds <Morse, .=0=> and t9e sta$nation of @ndia on its caste system, despite t9e 9i$9ly laisse7+faire system t9at t9e Britis9 maintained t9ere d#rin$ t9e Ra/ <&nsley, .=*2>. !e also ar$#es t9at $#ilds 6ere pro"lems in ancient Mesopotamia. 1ollo6in$ t9e pro ocati e analysis of !#tt <.=,4>, :lson "lamed t9e pro"lems of So#t9 &frica on t9e distri"#tional coalitions set #p "y fearf#l 69ite 6orkers. 89e final c9apter, DSta$flation, Unemployment, and B#siness Cycles,E mo es to macroeconomic pro"lems in t9e United States d#rin$ t9e tro#"led period of t9e .=(0s 69en most of t9e "ook 6as 6ritten. !e foc#ses on so#rces of price and 6a$e ri$idities, 69ic9 9e sees as poorly e?plained "y "ot9 5eynesians and monetarists, as 6ell as "y t9e rational e?pectations sc9ool, and 69ic9 9e sees as leadin$ to a "ad nat#ral rate of #nemployment. Uns#rprisin$ly 9e emp9asi7es t9e po6er of "ot9 #nions and carteli7ed ind#stries. 89is leads 9im to ad ocate essentially 4ost 5eynesian incomes policies in

.2

69ic9 ta? incenti es are pro ided for cost+side restraints on 6a$es and prices <:lson, .=(=>, alt9o#$9 it m#st "e noted t9at t9ese 9a e not "een serio#sly attempted any69ere. @n any case, as already noted, t9e s#ccess of RADON 6o#ld lead to n#mero#s 9onors and appointments for Manc#r :lson. Besides t9e presidencies of t9e So#t9ern Economic &ssociation and t9e 4#"lic C9oice Society, 9e 6o#ld "e named president of t9e Eastern Economic &ssociation and %ice 4resident of t9e &merican Economic &ssociation, as 6ell as mem"ers9ip in t9e &merican &cademy of &rts and Sciences and an !onorary 1ello6s9ip of Uni ersity Colle$e at :?ford Uni ersity. A9ile The Logic of Collective Action may 9a e "een :lson;s #ltimately most inno ati e and infl#ential 6ork, The Rise and Decline of Nations 6as t9e 6ork t9at made 9im most 6idely famo#s, and it 6as a6arded t9e Gladys M. 5ammerer &6ard for t9e "est "ook of .='- "y t9e &merican 4olitical Science &ssociation.

*. M#ncur O'(on on t!" Am"ric#n Sout! @f 1rance 6as a some69at pro"lematic case for :lson in RADON, t9e &merican So#t9 6as also. @n 9is presidential address to t9e So#t9ern Economic &ssociation <:lson, .='-> 9e e?panded #pon 9is "rief remarks in t9e "ook re$ardin$ t9e So#t9. Gi en :lson;s $eneral ar$#ment 6as t9at defeat led to economic $ro6t9 as entrenc9ed $ro#ps 6ere o ert9ro6n or #nderc#t, t9e H#estion arises as to 69y t9e So#t9 did not $ro6 after its st#nnin$ defeat in t9e &merican Ci il Aar. 1#rt9ermore, t9e H#estion arises as to 69y it t9en later took off into dramatic $ro6t9 after Aorld Aar @@. 89e ans6ers do not f#ndamentally #nderc#t 9is main t9esis in RADON, "#t t9ey do s#$$est t9at t9in$s can "e

.-

more complicated and n#anced t9an 9is #s#al story, 6it9 t9e So#t9 demonstratin$ t9at indeed economic $ro6t9 is often a Dm#lti+ca#salE matter. 1or one t9in$, t9e e ents after t9e Ci il Aar do not clearly contradict 9is main line, as 9e notes an initial emer$ence of ind#strial de elopment after t9e 6ar t9at 6o#ld t9en $et c#t off, nota"ly a ,4M increase in man#fact#rin$ esta"lis9ments "et6een .',0 and .'(0 <Ari$9t, .='2>. @n e?plainin$ t9e ind#strial sta$nation after t9is period, :lson follo6ed an earlier president of t9e So#t9ern Economic &ssociation, Ailliam !. 3ic9olls, 69ose .=,0 6ork o!thern Tradition and Regional Progress emp9asi7ed t9e roles of Da$rarian al#es, a ri$id social str#ct#re, an #ndemocratic political str#ct#re, conformity of t9o#$9t and "e9a ior, and an irresponsi"le ne$lect of p#"lic ed#cationE <:lson, .='-, p. =2*>. 89is pattern emer$ed after t9e end of t9e Reconstr#ction in .'(,, alt9o#$9 it did so only $rad#ally as t9e DJim Cro6E system spread from to6n to to6n t9ro#$9o#t t9e So#t9, not "ecomin$ f#lly entrenc9ed #ntil after t9e "e$innin$ of t9e 20t9 cent#ry <Aood6ard, .=(4>. @n effect, t9e pre io#sly dominant distri"#tional coalitions reasserted t9emsel es and restrained ind#strial de elopment, 69ic9 6as seen as a t9reat to t9e traditional so#t9ern social order of 69ite s#premacy and racial se$re$ation. 89is social order 6o#ld spectac#larly "reak do6n 6it9 t9e ci il ri$9ts mo ement of t9e .=,0s, 69ic9 $ot $oin$ initially in t9e .=*0s and 6o#ld coincide 6it9 t9e emer$ence of re$ionally rapid economic $ro6t9 relati e to t9e rest of t9e U.S., especially t9e pre io#sly predominant 3ort9east. A9ile :lson does see t9is collapse of t9e pre io#s r#lin$ distri"#tional coalitions as important, 9e ends #p ar$#in$ t9at t9is 6as pro"a"ly less important t9an t6o ot9er factors) lack of #nions and impro ed

.4

transportation..0 @ronically, t9e former pro"a"ly reflected t9e infl#ence of t9e pre io#sly e?istin$ political and social order, 69ic9 tended to s#ppress t9e de elopment of #nions. :lson 6o#ld ar$#e t9at in t9e end DAorld Aar @@ 6as more important for t9e So#t9 t9an t9e Ci il AarE <i"id. p. =2=>. 89e reason 6as t9at t9is 6as t9e period of most rapid #nioni7ation in t9e rest of t9e nation, especially t9e esta"lis9ed ind#strial 7ones of t9e 3ort9east and Mid6est, t9e older sections of t9e co#ntry t9at 6o#ld come to sta$nate after t9e 6ar compared 6it9 t9e ne6er states in t9e Aest and t9e ne6ly re i ed ones in t9e So#t9. 89#s, after t9e 6ar t9e So#t9 stood as t9e location of lo6 6a$es and nort9ern ind#stries, especially te?tile ones, 6o#ld mi$rate so#t96ards, and t9e so#t9ern ind#strial "oom 6o#ld "e on... 1inally, :lson also emp9asi7es a factor t9at 9as not9in$ to do 6it9 distri"#tional coalitions or t9eir po6er, transportation costs. :lson dra6s on Bar$er <.=*.> to ar$#e t9at "efore t9e 20t9 cent#ry railroad costs 6ere too 9i$9 to /#stify nort9ern man#fact#rers takin$ ad anta$e of t9e lo6 6a$es in t9e So#t9 <alt9o#$9 t9e 6a$e differential 6as not as $reat as it 6o#ld "e after #nioni7ation took 9old later in t9e 3ort9>. !o6e er, costs of railroads steadily declined o er t9e first 9alf of t9e 20t9 cent#ry, #ndoin$ t9is disad anta$e. 89e emer$ence of alternati e modes of transport, t9e a#tomo"ile and t9e airplane, and #ltimately t9e constr#ction of t9e interstate 9i$96ay system, 6o#ld e ent#ally alter t9is sit#ation s#c9 t9at t9e So#t9 6o#ld no lon$er s#ffer a transportation cost disad anta$e and t9#s co#ld take ad anta$e of its lo6er 6a$e rates to attract ind#strial de elopment. So, :lson sees ot9er factors at 6ork "esides 9is distri"#tional
.0

:lson i$oro#sly re/ected anot9er 6idely claimed factor, t9e in ention and spread of air conditionin$, notin$ t9at 9ot 6eat9er did not restrain t9e rise of ancient ci ili7ations. .. :lson also notes t9at t9is period coincided 6it9 efforts "y local comm#nities in t9e So#t9 to s#"sidi7e ind#strial de elopment as 6ell <Co"", .='2>, ar$#in$ t9at t9ey reali7ed t9e Jim Cro6 system 6as comin$ to an end, so t9at t9ey needed to ind#striali7e, alt9o#$9 t9e earliest of t9ese efforts datin$ to t9e Great Depression in t9e .=-0s 6o#ld seem to predate s#c9 clear perceptions.

.*

coalitions, alt9o#$9 of co#rse it is t9e emer$ence of t9ese coalitions in t9e form of #nions in t9e 3ort9 t9at is partly responsi"le. :lson concl#des 9is disc#ssion "y forecastin$ t9at Dt9e So#t9 6ill fall a$ain,E <i"id., p. =-2> as it "ecomes like t9e rest of t9e U.S. and "e$ins to acc#m#late its o6n set of distri"#tional coalitions, Dt9e same le el of carteli7ation as t9e 3ort9east and t9e older Middle Aest.E !e $oes so far as to say t9at it 6ill De en fall o#t of si$9t,E as it loses its distincti eness alon$ 6it9 its Dold e ils and t9e old romance.E @t 6ill "ecome Done 6it9 t9e nation as a 69ole,E alt9o#$9 t9is is less certain from today;s perspecti e. 89#s, :lson is lar$ely a"le to fit t9e &merican So#t9 into t9e frame6ork of RADON, e en if 9e 9as to introd#ce some additional elements in order to do so.

+. T!" Co''#&(" o) Communi(m #nd t!" Ro#d to Power and Prosperity Manc#r :lson 6o#ld ne er openly a"andon t9e frame6ork 9e esta"lis9ed in RADON, "#t 9is later career in ol ed mo in$ f#rt9er and f#rt9er a6ay from its ar$#ments, 6it9 more emp9asis on political factors. 89e central tri$$erin$ e ent 6o#ld "e t9e collapse of So iet+"loc comm#nism "et6een .='= and .==., 6it9 :lson "ecomin$ in ol ed in t9e st#dy of t9is e ent and t9e transition processes in its aftermat9, initially 6it9 9is collea$#e at t9e Uni ersity of Maryland, 4eter M#rrell <M#rrell and :lson, .==.> and on 9is o6n, especially after 9e esta"lis9ed t9e pro/ect on @nstit#tional Reform and t9e @nformal Sector <@R@S>, 69ic9 6o#ld "ecome in ol ed in a ariety of pro/ects aro#nd t9e 6orld..2 A9ile some of 9is later 6ork foc#sed specifically on t9e pro"lems of transition <:lson, .==*"> most of it attempted to de elop a "roader political economic
.2

A9ereas many identify t9e informal economy as a pro"lem for $o ernments <Sc9neider and Enste, 2002>, :lson 6as more inspired "y t9e 6ork of de Soto <.='=> to see it as a potential so#rce of economic $ro6t9 if it can "e le$ali7ed and "ro#$9t 6it9in an esta"lis9ed system of enforcea"le contracts and property ri$9ts.

.,

approac9 to pro"lems of economic $ro6t9 and de elopment, e en if m#c9 of t9e analysis 6as dri en "y t9e pro"lems of t9e economies in transition <:lson, .==., .==-, .==,F McG#ire and :lson, .==,>, 6it9 all of t9is c#lminatin$ in 9is final <and post9#mo#sly p#"lis9ed> "ook in 2000, Power and Prosperity. @t can also "e ar$#ed t9at in t9ese later 6orks 9e endea ored to deal 6it9 and incorporate to some e?tent ri al ideas comin$ from t9e ne6 instit#tionalists, especially 3ort9 <.='., .==0>, 6it9 m#c9 of 9is ar$#mentation foc#sin$ on cases in ol in$ encompassin$ or$ani7ations dominatin$ political systems rat9er t9an t9e rent+seekin$, distri"#tional coalitions of RADON. @t 6as contemplatin$ Stalin;s So iet Union in t9e aftermat9 of its final collapse t9at led :lson to de elop 9is idea of t9e a#tocratic r#ler as a stationary "andit. :lson considered a primiti e pre+state 6orld dominated "y Dro in$ "anditsE 69o 6o#ld en$a$e in 6idespread predation. !o6e er, if a "andit "ecame stationary some69ere, 9e 6o#ld "e$in to act like one of :lson;s irt#o#s Dencompassin$ or$ani7ationsE from RADON, reco$ni7in$ t9at 9e needed to 9a e t9ose aro#nd prosper to some e?tent if t9ere 6o#ld "e anyt9in$ for 9im to steal from t9em <:lson, .==->. !is interests 6o#ld increasin$ly coincide 6it9 t9eirs, at least to some e?tent, and o#t of s#c9 a process, states 6o#ld emer$e. Stalin 6as t9#s t9e #ltimate stationary "andit. 3o6 t9e $reat pro"lem for :lson and 9is e?istin$ frame6ork of analysis 6as to e?plain 9o6 it 6as t9at after t9e defeat of fascism t9ere 9ad "een t9is o#t"#rst of economic $ro6t9 in Aest Germany and Japan, 69ereas in t9e aftermat9 of t9e defeat of comm#nism <69ic9 6as an internal collapse rat9er t9an an e?ternally imposed military defeat, of co#rse> t9ere 6as t9is massi e collapse of economic o#tp#t in most co#ntries, e en if it 6as not as $reat as officially meas#red d#e to t9e rise of #nder$ro#nd

.(

economies in m#c9 of t9e former So iet "loc..- &ttemptin$ to maintain contin#ity 6it9 9is ar$#ments from RADON 9e ar$#ed t9at d#rin$ t9e comm#nist years po6erf#l distri"#tional coalitions 9ad arisen in t9e state+o6ned ind#stries in partic#lar, 6it9 an important si$n of t9is p9enomenon "ein$ t9e emer$ence of t9e soft "#d$et constraint in t9e more market+oriented of t9ese economies <5ornai, .==2, C9ap. 24>. 89ese $ro#ps 6ere not necessarily o ert9ro6n after t9e fall of comm#nism, "#t rat9er asserted t9emsel es in corr#pt pri ati7ations and t9e rise of t9e #nder$ro#nd economy. 89ey "e$an to participate in pri ate predation, 69ereas pre io#sly t9ey 9ad participated in p#"lic sector predation. @ronically t9is s#$$ested t9at slo6er pri ati7ations mi$9t "e preferred to more rapid ones, as t9e latter 6ere more likely to simply 9and o er t9e pre io#sly state+o6ned assets to t9eir e?istin$ mana$ers and interest $ro#ps, 6it9 res#ltin$ corr#ption, as in R#ssia. Grad#al pri ati7ations, as in 4oland, !#n$ary, and C9ina, 6ere more likely to res#lt in restr#ct#rin$s and ne6 mana$ement 6it9 less corr#ption and $reater efficiency <!a rylys9yn and McGetti$an, 2000>. @n addition :lson 6o#ld ar$#e t9at for C9ina in partic#lar, t9e Maoist C#lt#ral Re ol#tion destroyed t9e old elites and coalitions, t9ere"y layin$ t9e fo#ndation for more rapid $ro6t9 later <:lson, 2000, pp. .,,+.,(>, e en t9o#$9 comm#nism remains in political control t9ere..4

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Rosser, Rosser, and &9med <2000, 200-> esta"lis9 a stron$ correlation "et6een increasin$ ineH#ality in some transition co#ntries, s#c9 as R#ssia, and t9e rise of t9e #nder$ro#nd economy. S#c9 an ar$#ment is consistent 6it9 t9e ar$#ments of McG#ire and :lson <.==,> a"o#t redistri"#tion, social capital, and sta"le democracies t9at respect contracts and pri ate property. Cla$#e, 5eefer, 5nack, and :lson <.===> 6o#ld la"el s#c9 #nder$ro#nd markets as Dirrepressi"le.E :t9er markets 6o#ld reH#ire state s#pport to f#nction and 6o#ld $enerate contract$intensive money. .4 @t can "e ar$#ed t9at C9ina is anot9er case t9at does not fit ery 6ell in :lson;s t9eories, especially in its a"ility to contin#e to $ro6 rapidly despite its lack of democracy, reported 6idespread corr#ption 6it9 lack of enforcement of contracts and property ri$9ts in recent years <Aon$ and Din$, 2002>. B#t, :lson foc#sed more on t9e nations of t9e former So iet "loc, and 9e is 9ardly alone in not "ein$ a"le to f#lly e?plain 69at is 9appenin$ in C9ina.

.'

:lson;s meditations #pon failed $o ernments led to 9is effort to de"ate t9e ne6 instit#tionalists <Di?it and :lson, .=='F :lson, 2000, C9aps. - and 4>, la"elin$ t9em D4an$lossiansE and D#topians.E !e noted t9at t9e fo#ndation for t9eir approac9 6as t9e transactions cost approac9 of Coase <.=-(> and 9is related Coase 89eorem <.=,0>, 69ic9 ar$#ed t9at in t9e a"sence of transactions costs and 6it9 6ell+defined property ri$9ts people 6o#ld en$a$e in efficient ol#ntary e?c9an$es. 89is ar$#ment 6o#ld "e e?tended to politics as 6ell as economics, res#ltin$ in ar$#ments t9at democratic o#tcomes m#st reflect s#c9 efficient e?c9an$es as inefficient political o#tcomes 6o#ld "e dri en o#t of t9e system <Becker, .='-F Aittman, .='=>..* :lson sa6 t6o key pro"lems 6it9 t9is approac9. :ne 6as a ret#rn to 9is ar$#ment from The Logic of Collective Action t9at in lar$e $ro#ps t9ere 6ill "e a dis/#nct#re "et6een t9e indi id#al;s interest and t9e $ro#p;s interest, leadin$ to prisoner;s dilemma pro"lems and t9e "reakdo6n of s#ccessf#l collecti e action, e en in t9e a"sence of transactions costs. 89e ot9er 6as 9is more pessimistic o"ser ation re$ardin$ $o ernments, t9at t9ey can #ndermine t9e 6ell+defined property ri$9ts necessary for t9e operation of t9e Coasean #topias. DBad t9in$s often 9appen, e en to rational peopleE <:lson, 2000, p. *'>, and D89ere is no 6ay of e?plainin$ t9e e?treme po erty of many nations 6it9o#t takin$ acco#nt of t9e e?tent to 69ic9 t9ey are mis$o ernedE <i"id., p. *=>. @n 9is famo#s essay, DBi$ Bills 2eft on t9e Side6alk) A9y Some 3ations are Ric9, and :t9ers are 4oor,E <.==,> 9e 6o#ld call for economic ad isers of de elopin$ nations to D6ise #p,E to

.*

@ronically t9ese ar$#ments amo#nted to a re i al of t9e older ar$#ments of 2#ce <.=24> and Commons <.=*0> t9at :lson 9ad ar$#ed a$ainst in 9is first "ook.

.=

$et t9e str#ct#re of incenti es and t9e instit#tions Dri$9t,E so t9at t9e "ills sittin$ on t9e side6alk 6ill $et picked #p. @n Power and Prosperity, a $o ernment t9at 9ad t9e incenti es and t9e instit#tions ri$9t 6o#ld "e a mar#et$a!gmenting government.., S#c9 a $o ernment 6o#ld "e fo#nded #pon democracy, 69ic9 pre ents an a#tocratic state from en$a$in$ in predation, t9ere"y maintainin$ a "alance of po6er, /#st as t9e leaders of t9e Glorio#s Re ol#tion so#$9t s#c9 "alance in t9e Britis9 parliament from eac9 ot9er <e en as s#c9 "alances mi$9t lead to RADON+style sta$nation in t9e lon$er r#n>..( B#t s#c9 a $o ernment 6o#ld 9a e eno#$9 a#t9ority t9at it can enforce property ri$9ts and contracts. D89ere is no pri ate property 6it9o#t $o ernment,E :lson 6o#ld declare on one of t9e final pa$es of 9is final "ook <:lson, 2000, p. .=,>. !o6e er, alon$ 6it9 an a"sence of p#"lic predation, t9ere m#st "e an a"sence of pri ate predation, t9e carteli7ations t9at 9e deno#nced so i$oro#sly in RADON..' @t is per9aps t9e final irony of Manc#r :lson;s intellect#al career t9at at its endpoint 9e 6o#ld em"race a position t9at descri"ed an optimal state as "ein$ one of middle+of+t9e+road "alance "et6een laisse7+faire and a#tocracy. 89e irony is t9at t9is is e?actly t9e opposite of t9e ar$#ment t9at 9e made in t9e mid+.=(0s t9at set 9im off on t9e road to 6rite RADON, t9e ar$#ment t9at t9ere 6o#ld "e no rent+seekin$ in eit9er p#re laisse7+faire or p#re command socialism.
.,

89is p9rase 6o#ld ser e as t9e title for one of t9e ol#mes p#"lis9ed in :lson;s 9onor after 9is deat9 <&7far and Cad6ell, 200->. .( 1or disc#ssion of t9e relations9ip "et6een 3ort9ian and :lsonian ie6s re$ardin$ t9e Glorio#s Re ol#tion, see Mokyr and 3ye <200(>. 89e cr#cial role of ci il li"erties in t9e instit#tions #nderlyin$ $ro6t9 9as "een f#rt9er st#died "y &cemo$l# and Jo9nson <200*>, 6it9 BenLis9ay and Betanco#rt <200,> f#rt9er #n"#ndlin$ t9is ar$#ment to foc#s on t9e role of personal a#tonomy and indi id#al ri$9ts. .' D/anko , Glaeser, 2a 4orta, 2ope7+de+Silanes, and S9leifer <200-> 6o#ld p#rs#e s#c9 an ar$#ed tradeoff "et6een t9e costs of pri ate predation and p#"lic predation to pose t9e instit!tional possi"ilities frontier t9at s#$$ested total social transactions costs 6o#ld "e minimi7ed 6it9 some intermediate form of $o ernment. Rosser and Rosser <200(> pro ide a critiH#e of details of t9is ar$#ment.

20

,. Conc'u(ion( 89ro#$9o#t 9is intellect#al career, Manc#r :lson 6as concerned 6it9 t9e pro"lem of 9o6 $ro#ps decide to do t9in$s and 69en t9ose decisions 6ill "e socially optimal or not. @n 9is early masterpiece, The Logic of Collective Action 9e laid o#t t9e $eneral pro"lem and 9o6 it is 9arder for lar$er $ro#ps to ac9ie e optimality or ali$n t9eir interests 6it9 t9ose of t9e mem"ers of t9e $ro#p. !e ar$#ed t9at small $ro#ps co#ld e?ercise po6er in a democratic society in t9e form of rent+seekin$ special interests t9at co#ld #ndermine social efficiency, in contrast 6it9 earlier ideas a"o#t politics. :n t9e 6ay to 6ritin$ 9is most 6idely famo#s "ook, The Rise and Decline of Nations, :lson de eloped t9e idea of encompassin$ or$ani7ations 69ose interests may correspond "roadly 6it9 t9ose of society at lar$e. !o6e er, 9e ar$#ed t9at o er time, sta"le democracies 6o#ld tend to acc#m#late t9e ot9er kinds of $ro#ps, t9e rent+seekin$ distri"#tional coalitions t9at 6o#ld en$a$e in carteli7ation and protectionism t9at 6o#ld distort incenti es and impede tec9nolo$ical and or$ani7ational pro$ress, and t9#s 9inder economic $ro6t9. !e 6o#ld #se t9is po6erf#l ar$#ment to e?plain a 6ide ariety of 9istorical o#tcomes, e en as t9e ar$#ment 6o#ld 9a e pro"lems 6it9 certain cases. @n 9is later years, c#lminatin$ in 9is final "ook, Power and Prosperity, 9e 6o#ld mo e more directly to a consideration of 9o6 $o ernments come to po6er and r#le, moti ated "y 9is concern for t9e pro"lems of t9e post+socialist transition economies and t9e fail#re of t9e prediction t9at t9ey 6o#ld "oom /#st as t9e defeated fascist economies 9ad after Aorld Aar @@. A9ile many of 9is ar$#ments from 9is earlier 6orks carried o er, 9e de eloped ne6er ideas and emp9asi7ed 9is de"ate 6it9 t9e ne6 instit#tionalists.

2.

@n s9ort, 9e emp9asi7ed t9at t9e ne6 instit#tionalists co#ld not e?plain t9e "ad o#tcomes t9at one o"ser es in t9e 6orld, 6it9 its poor and poorly $o erned nations, 9o6 it is t9at D"ad t9in$s 9appen, e en to rational people.E A9ile in t9e Rise and Decline of Nations 9e 9ad emp9asi7ed t9e pro"lems t9at can arise in sta"le, lon$+lastin$ democracies, at t9e end of 9is career 9e emp9asi7ed t9e irt#es of democracies t9at can defend property ri$9ts and protect people from t9e predations of "ot9 an o erly po6erf#l pri ate sector and an a#tocratic state.

R")"r"nc"( &cemo$l#, Daron and Simon Jo9nson. 200*. Un"#ndlin$ instit#tions. )o!rnal of Political Economy ..-)=4=+=*. &ndreoni, James. .=''. 4ri ately pro ided $oods in a lar$e economy) 89e limits of altr#ism. )o!rnal of P!"lic Economics -*)*(+(-. &nsley, %era. .=*2. The economic development of *ndia, 4t9 edition. 2ondon) 2on$mans, Green. &7far, :mar and C9arles Cad6ell, editors. 200-. +ar#et a!gmenting government. &nn &r"or) Uni ersity of Mic9i$an 4ress. Bar$er, !arold. .=*.. The transportation ind!stries, -../$-/01. 3e6 Lork) 3ational B#rea# of Economic Researc9. Becker, Gary. .='-. & t9eory of competition amon$ press#re $ro#ps for political infl#ence. 2!arterly )o!rnal of Economics =')-(.+400. BenLis9ay, &riel and Ro$er R. Betanco#rt. 200,. Ci il li"erties, t9e #n"#ndlin$ of instit#tions and economic $ro6t9. Mimeo, Uni ersity of Maryland. Ber$strom, 89eodore C., 2a6rence Bl#me, and !al R. %arian. .=',. :n t9e pri ate pro ision of p#"lic $oods. )o!rnal of P!"lic Economics 2=)2*+4=. B#c9anan, James and Gordon 8#llock. .=,0. The calc!l!s of consent3 Logical fo!ndations of constit!tional democracy. &nn &r"or) Uni ersity of Mic9i$an 4ress.

22

Cad6ell, C9arles. 2000. 1ore6ord. @n Power and prosperity3 O!tgrowing comm!nist and capitalist dictatorships, Manc#r :lson. 3e6 Lork) Basic Books. C9anter, J#ny and Brian Jenkins. .==,. 4rance3 4rom the cold war to the new world order. 3e6 Lork) St. Martin;s 4ress. Cla$#e, C9ristop9er, 49ilip 5eefer, Step9en 5nack, and Manc#r :lson. .===. Contract intensi e money) Contract enforcement, property ri$9ts, and economic performance. )o!rnal of Economic 5rowth 4).'*+20=. Coase, Ronald. .=-(. 89e nat#re of t9e firm. Economica 4)-',+40*. Coase, Ronald. .=,0. 89e pro"lem of social cost. )o!rnal of Law and Economics -).+44. Co"", James C. .='2. The selling of the o!th3 The so!thern cr!sade for economic development, -/61$-/.7. Baton Ro#$e) 2o#isiana State Uni ersity 4ress. Commons, Jo9n R. .=*0. The economics of collective action. 3e6 Lork) Macmillan. De Soto, !ernando. .='=. The other path3 The invisi"le revol!tion in the third world. 3e6 Lork) !arper N Ro6. Di?it, & inas9 and Manc#r :lson. .=='. Does ol#ntary participation #ndermine t9e Coase t9eoremO Economics Letters ,.)-+... D/anko , Simeon, Ed6ard Glaeser, Rafael 2a 4orta, 1lorencio 2ope7+de+Silanes, and &ndrei S9leifer. 200-. 89e ne6 comparati e economics. )o!rnal of Comparative Economics -.)*=*+,.=. Estrin, Sa#l and 4eter !olmes. .='-. 4rench planning in theory and practice. 2ondon) Geor$e &llen N Un6in. !a rylys9yn, :le9 and Donal McGetti$an. 2000. 4ri ati7ation in transition co#ntries. Post$ oviet Affairs .,)2*(+',. !#tt, Ailliam !arold. .=,4. The economics of the colo!r "ar. 2ondon) Merritt and !atc9er 2td. 5ornai, JPnos. .==2. The socialist system3 The political economy of comm!nism. 4rinceton) 4rinceton Uni ersity 4ress. 2e y, Jona9 D. .===. Toc8!eville9s revenge3 tate, society, and economy in contemporary 4rance. Cam"rid$e) !ar ard Uni ersity 4ress. 2#ce, Ro"ert. .=24. Legislative assem"lies. Boston) !o#$9ton Mifflin.

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McG#ire, Martin C. .=='. Manc#r 2loyd :lson, Jr. .=-2+.==', personal recollections. Eastern Economic )o!rnal 24)2*-+,-. McG#ire, Martin C. and Manc#r :lson, Jr. .==,. 89e economics of a#tocracy and ma/ority r#le. )o!rnal of Economic Literat!re -4)(2+=,. Mokyr, Joel and Jo9n 3ye. 200(. Distri"#tional coalitions, t9e ind#strial re ol#tion, and t9e ori$ins of economic $ro6t9 in Great Britain. o!thern Economic )o!rnal, t9is iss#e. Morse, !osea Ballo#. .=0=. The g!ilds of China. 2ondon) 2on$mans, Green. M#rrell, 4eter and Manc#r :lson. .==.. 89e de ol#tion of centrally planned economies. )o!rnal of Comparative Economics .*)2-=+,*. M#s$ra e, Ric9ard &. .=-=. 89e ol#ntary t9eory of p#"lic economy. 2!arterly )o!rnal of Economics *-)2.-+-(. 3ic9olls, Ailliam !. .=,0. o!thern tradition and regional progress. C9apel !ill) Uni ersity of 3ort9 Carolina 4ress. 3ort9, Do#$lass C. .='.. tr!ct!re and change in economic history. Cam"rid$e) 3orton. 3ort9, Do#$lass C. .==0. & transactions cost t9eory of $o ernment. )o!rnal of Theoretical Politics 2)-**+,(. :lson, Manc#r. .=,-a. The economics of wartime shortage. D#r9am) D#ke Uni ersity 4ress. :lson, Manc#r. .=,-". Rapid $ro6t9 as a desta"ili7in$ force. )o!rnal of Economic :istory 2-)*2=+*2. :lson, Manc#r. .=,*. The logic of collective action3 P!"lic goods and the theory of gro!ps. Cam"rid$e) !ar ard Economic St#dies .24, !ar ard Uni ersity 4ress. :lson, Manc#r. .=,=a. 89e principle of Qfiscal eH#i alence;) 89e di ision of responsi"ilities amon$ different le els of $o ernment. American Economic Review, Papers and Proceedings *=)4(=+'(. :lson, Manc#r, .=,=". Toward a social report, U.S. Department of !ealt9, Ed#cation, and Aelfare. Aas9in$ton) U.S. Go ernment 4rintin$ :ffice. :lson, Manc#r. .=,=c. 89e relations9ip of economics to t9e ot9er social sciences. @n Politics and the social sciences, edited "y Seymo#r Martin 2ipset. 3e6 Lork) :?ford Uni ersity 4ress, pp. .-(+,2.

24

:lson, Manc#r. .=((. 89e treatment of e?ternalities in national income statistics. @n P!"lic economics and the 8!ality of life, edited "y 2o6don Ain$o and &lan E ans. Baltimore) Jo9ns !opkins 4ress for Reso#rces for t9e 1#t#re and Centre for En ironmental St#dies, pp. 2.=+4=. :lson, Manc#r. .=(=. :n $ettin$ really f#ll employment 6it9o#t inflation. @n ol!tions to inflation, edited "y Da id C. Colander. 3e6 Lork) !arco#rt Brace Jo ano ic9, pp. .'-+'(. :lson, Manc#r. .='2. The rise and decline of nations3 Economic growth, stagflation, and social rigidities. 3e6 !a en) Lale Uni ersity 4ress. :lson, Manc#r. .='-. 89e So#t9 6ill fall a$ain) 89e So#t9 as leader and la$$ard in economic $ro6t9. o!thern Economic )o!rnal 4=)=.(+-2. :lson, Manc#r, Jr. .==0. :ow "right are the northern lights; ome 8!estions a"o!t weden. 2#nd) 2#nd Uni ersity 4ress. :lson, Manc#r, Jr. .==.. &#tocracy, democracy, and prosperity. @n trategy and choice, edited "y Ric9ard J. Ieck9a#ser. Cam"rid$e) M@8 4ress, pp. .-.+*(. :lson, Manc#r, Jr. .==-. Dictators9ip, democracy, and de elopment. American Political cience Review '()*,(+(,. :lson, Manc#r, Jr. .==*a. 89e de ol#tion of t9e 3ordic and 8e#tonic economies. American Economic Review, Papers and Proceedings '*)22+2(. :lson, Manc#r, Jr. .==*". A9y t9e transition from comm#nism is so diffic#lt. Eastern Economic )o!rnal 2.)4-(+,.. :lson, Manc#r, Jr. .==,. Bi$ "ills left on t9e side6alk) A9y some nations are ric9, and ot9ers poor. )o!rnal of Economic Perspectives .0<2>)-+24. :lson, Manc#r. 2000. Power and prosperity3 O!tgrowing comm!nist and capitalist dictatorships. 3e6 Lork) Basic Books. :lson, Manc#r and Ric9ard Ieck9a#ser. .=,,. &n economic t9eory of alliances. Review of Economics and tatistics 4')2,,+(=. :lson, Manc#r and Ric9ard Ieck9a#ser, .=(0. 89e efficient prod#ction of e?ternal economies. American Economic Review ,0)*.2+.(. Ra#c9, Jonat9an. .==4. Demosclerosis. 3e6 Lork) 8ime Books. Rosser, J. Barkley, Jr. and Marina %. Rosser. 200(. & critiH#e of t9e ne6 comparati e economics. Review of A!strian Economics, in press.

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Rosser, J. Barkley, Jr., Marina %. Rosser, and E9san &9med. 2000. @ncome ineH#ality and t9e informal economy in transition economies. )o!rnal of Comparative Economics 2').*,+(.. Rosser, J. Barkley, Jr., Marina %. Rosser, and E9san &9med. 200-. M#ltiple #nofficial economy eH#ili"ria and income distri"#tion dynamics in systemic transition. )o!rnal of Post <eynesian Economics 2*)42-+4(. Sc9ellin$, 89omas C. 200-. 1ore6ord. @n Collective choice3 Essays in honor of +anc!r Olson, edited "y Jac C. !eckelman and Dennis Coates. !eidel"er$) Sprin$er+%erla$. Sc9neider, 1riedric9 and Dominik !. Enste. 2002. The shadow economy3 An international s!rvey. Cam"rid$e) Cam"rid$e Uni ersity 4ress. Aarr, 4eter G. .='-. 89e pri ate pro ision of a p#"lic $ood is independent of t9e distri"#tion of income. Economics Letters .-)20(+... Aittman, Donald. .='=. A9y democracies prod#ce efficient res#lts. )o!rnal of Political Economy =().-=*+424. Aon$, Jo9n and 2# Din$. 2002. China9s economy into the new cent!ry3 tr!ct!ral iss!es and pro"lems. Sin$apore) Aorld Scientific. Aood6ard C. %ann. .=(4. The strange career of )im Crow, -rd edition. 3e6 Lork) :?ford Uni ersity 4ress. Ari$9t, Ga in. .='2. 89e stran$e career of t9e ne6 so#t9ern economic 9istory. Reviews in Economic :istory .0).,4+'0.

2,