Olson, whose Logic of Collective Action stands as a landmark work of political economy, died in 1998 before putting the finishing touches on this book. As it stands, it serves as an appropriate coda to Olson's long and productive career, summarizing his major achievements while still contributing new insights to the post-communist debates.
As he grapples with the forces that undermine economic vitality, Olson worries over a central question: Why has economic performance been so much better after the defeat of fascism in Germany and Japan than after the collapse of communism in Soviet-style states? In probing this question, Olson examines the complex relationships between the role of the state and economic performance, arguing that ""there is no way of explaining the extreme poverty of many nations without taking account of the extent to which they are misgoverned.""
The lay reader will easily grasp Olson's broad and practical--if not especially vivid--discussions, and specialists will value his excellent analyses of the economic machinations of Soviet-type autocracies, including a fine reading of Stalin's diabolical manipulation of Russia's tax structures. As the world attempts to salvage what's left of the post-communist economies, it must contend with disablingly high rates of inflation and inefficient, state-owned businesses.
The challenge ahead is not merely to hasten privatization, Olson says. Instead, economists must work to ensure that a ""market-augmenting government"" first secures individual rights to private property and guarantees the impartial enforcement of contracts--in his view the two essential ingredients for prosperity.
Mancur Lloyd Olson, Jr. (January 22, 1932 – February 19, 1998) was an American economist and social who taught economics at the University of Maryland, College Park. His most influential contributions were ininstitutional economics, and in the role which private property, taxation, public goods, collective action, and contract rights play in economic development.
Olson graduated from North Dakota State University and was a Rhodes Scholar at University College, Oxford, before he earned a PhD in economics from Harvard in 1963.
His first job was as an assistant professor at Princeton University. Afterwards, he served as Deputy Assistant Secretary of Health, Education and Welfare for two years in Washington, D.C. In 1969 he left government and joined the economics department of the University, where he remained until his death.
In his first book, The Logic of Collective Action: Public Goods and the Theory of Groups (1965), he theorized that what stimulates people to act in groups is incentive; members of large groups do not act in accordance with a common interest unless motivated by personal gain (economic, social, etc.). While small groups can act on shared objectives, large groups will not work towards shared objectives unless their individual members are sufficiently motivated.
In 1982, he expanded the scope of his earlier work in an attempt to explain The Rise and Decline of Nations (1982). He argues that groups such as cotton-farmers, steel-producers, and labor unions have an incentive to form lobby groups and influence policies in their favor. These policies will tend to be protectionist, which will hurt economic growth; but because the benefits of such policies are concentrated, and their costs are diffused throughout the whole population, there will be little public resistance to them. As distributional coalitions accumulate, nations burdened by them will fall into economic decline. His work influenced the formulation of the Calmfors–Driffill hypothesis of collective bargaining.
In his final book, Power and Prosperity (2000), Olson distinguished between the economic effects of different types of government, in particular, tyranny, anarchy, and democracy. Olson argued that under anarchy, a "roving bandit" only has the incentive to steal and destroy, whilst a "stationary bandit"—a tyrant—has an incentive to encourage some degree of economic success as he expects to remain in power long enough to benefit from that success. A stationary bandit thereby begins to take on the governmental function of protecting citizens and their property against roving bandits. In the move from roving to stationary bandits, Olson sees the seeds of civilization, paving the way, eventually for democracy, which by giving power to those who align with the wishes of the population, improves incentives for good government.
To help bring his ideas to the attention of policymakers, Olson founded the Center for Institutional Reform in the Informal Sector ("IRIS Center"), funded by USAID (United States Agency for International Development, hence "US AID"). Based at the University of Maryland, the Center sought to supply an intellectual foundation for legal and economic reform projects carried out by USAID in formerly communist states that were attempting to make the transition to market-driven democratic governments governed by the rule of law. It was particularly active in East and Central Europe and the former Soviet Union.
The Center also became actively involved in projects in South America, Africa, and Asia, where it became a proponent of judicial independence. It sponsored the first conference on corruption in francophone Africa in the 1990s, when it was a very sensitive subject. The IRIS Center continued to operate after Olson's death, but was eventually folded into other programs at the University of Maryland.
To honor Olson's many contributions, the American Political Science Association established the Olson Award for the best PhD dissertation in Political Economy.
In 2013 the University of Maryland announced the creation of a new endowed professorship—the Mancur Olson Professor of Economics. Maryland Professor of Economics Peter Murrell was the first Mancur Olson Professor.