Mancur Olson

Mancur Lloyd Olson Jr. was born on 22 January 1932 in Grand Forks, North Dakota, into a family of Norwegian descent, and died on 19 February 1998 in College Park, Maryland. He studied at North Dakota Agricultural College, at Oxford as a Rhodes Scholar and at Harvard, where his doctoral thesis became The Logic of Collective Action (1965). After teaching at Princeton and working in the US Department of Health, Education and Welfare, he taught at the University of Maryland from 1969 until his death, and founded a research centre there that studied institutional reform in developing and post-communist economies.

• The logic of collective action. Contrary to the assumption that groups with common interests will act to further them, Olson argued that rational, self-interested members of large groups will not contribute to a collective good unless coerced or given a separate incentive. Each member's contribution makes little difference, and each benefits from the good whether or not they contribute: the free-rider problem.
• Group size and selective incentives. Small groups can organise more easily, because each member's share of the benefit is larger and contributions can be monitored. Large 'latent' groups organise only when they offer selective incentives — benefits available only to members, such as insurance, information or professional services — or use compulsion, as with closed-shop unions. This explains why concentrated producer interests are often better organised than diffuse consumers or taxpayers.
• Distributional coalitions. The Rise and Decline of Nations (1982) argued that stable societies accumulate cartels, unions, professional associations and lobbies that seek a larger share of output rather than larger output. Because the costs are dispersed, resistance is weak; the accumulated coalitions slow decisions, block innovation and reduce growth. Countries whose coalitions were destroyed by war or upheaval, such as post-war West Germany and Japan, could grow faster.
• Roving and stationary bandits. In 'Dictatorship, Democracy, and Development' (1993) Olson argued that a roving bandit plunders and moves on, while a 'stationary bandit' who monopolises theft in a territory has an encompassing interest in its prosperity and so limits extraction and provides order. Democracy can be more encompassing still, if majorities bear the costs of their own policies, but needs secure property rights and contract enforcement to prosper.

Olson's argument became a foundation of public choice theory and of the study of interest groups, social movements and international cooperation. It explains why diffuse interests, future generations and the global public are systematically under-represented, and it informs designs that lower the costs of participation, provide selective benefits, use compulsion (compulsory voting, membership taxes) or create encompassing organisations whose members internalise the costs of their demands.

His stationary-bandit model is widely used in work on state formation and the political economy of development, and in comparing the incentives of rulers with different time horizons and degrees of encompassment. In the design of commons institutions and digital public goods, Olson's free-rider problem is the starting point against which mechanisms such as matching funds, quadratic funding, assurance contracts and community monitoring are measured.

• Empirical counter-evidence. Elinor Ostrom's Governing the Commons (1990) and later field and laboratory research showed that many groups organise and sustain collective action through norms, reciprocity and self-designed rules without external coercion or purely selective incentives.
• Narrow rationality. Critics argue that his model leaves out ideology, identity, emotion and solidarity, which explain mass movements and voting in large electorates.
• Rise and decline. Econometric tests of the distributional-coalitions thesis have produced mixed results, and encompassing organisations such as the centralised unions and employer associations of the Nordic countries have coexisted with strong growth — a possibility Olson himself acknowledged.
• Bandit analogy. Historians and political scientists note that rulers' time horizons are often short and that predation by secure autocrats is common, so the stationary-bandit logic is at best a tendency.

• The Logic of Collective Action: Public Goods and the Theory of Groups (Harvard University Press, 1965)
• The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (Yale University Press, 1982)
• 'Dictatorship, Democracy, and Development', American Political Science Review 87(3) (1993) — DOI
• Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships (2000, posthumous)
• Overview: 'Mancur Olson', Wikipedia