A Not-so-dismal Science: A Broader View of Economies and Societies

by Mancur Olson (Editor), Satu Kähkönen (Editor)

Many of economics' greatest successes have been outside the traditional boundaries of the discipline. Economic ideas have been the intellectual focus in the study of law, while in the study of politics, economists and political scientists using economics-type methods are uniquely influential. In sociology and history, economics has had a smaller but growing influence through "rational choice sociology" and "cliometrics."

This book shows that, in calling economics the "dismal science," Thomas Carlyle was profoundly wrong. Economic ideas have illuminated behaviour in all of the social sciences in addition to the economists' traditional domain. The broadening of economics and the use of economists' methods by social scientists in other fields is leading to a unified and positive view of economies and societies.

Genres: Economics

288 pages, Hardcover

First published January 1, 2000

About the author

American economist and social scientist who, at the time of his death, worked at the University of Maryland, College Park. Among other areas, he made contributions to institutional economics on the role of private property, taxation, public goods, collective action and contract rights in economic development. Olson focused on the logical basis of interest group membership and participation. The reigning political theories of his day granted groups an almost primordial status. Some appealed to a natural human instinct for herding, others ascribed the formation of groups that are rooted in kinship to the process of modernization. Olson offered a radically different account of the logical basis of organized collective action.
In his first book, The Logic of Collective Action: Public Goods and the Theory of Groups (1965), he theorized that “only a separate and ‘selective’ incentive will stimulate a rational individual in a latent group to act in a group-oriented way”; that is, members of a large group will not act in the group's common interest unless motivated by personal gains (economic, social, etc.). He specifically distinguishes between large and small groups, the latter of which can act simply on a shared objective. Large groups, however, will not form or work towards a shared objective unless 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. The idea is that small distributional coalitions tend to form over time in countries. Groups like cotton-farmers, steel-producers, and labor unions will have the incentives to form lobby groups and influence policies in their favor. These policies will tend to be protectionist and anti-technology, and will therefore hurt economic growth; but since the benefits of these policies are selective incentives concentrated amongst the few coalitions members, while the costs are diffused throughout the whole population, the "Logic" dictates that there will be little public resistance to them. Hence as time goes on, and these distributional coalitions accumulate in greater and greater numbers, the nation burdened by them will fall into economic decline. Olson's idea is cited as an influence behind the Calmfors-Driffill hypothesis of collective bargaining.
In his final book, Power and Prosperity, Olson distinguished between the economic effects of different types of government, in particular, tyranny, anarchy and democracy. Olson argued that a "roving bandit" (under anarchy) has an incentive only to steal and destroy, whilst a "stationary bandit" (a tyrant) has an incentive to encourage a degree of economic success, since he will expect to be in power long enough to take a share of it. The stationary bandit thereby takes on the primordial function of government - protection of his citizens and property against roving bandits. Olson saw in the move from roving bandits to stationary bandits the seeds of civilization, paving the way for democracy, which improves incentives for good government by more closely aligning it with the wishes of the population.

Reviews

[Riku Sayuj · Rating 3 out of 5]

The Octopus

Like Physics, when a science realizes it could underpin all other sciences, it becomes an Octopus. The primary focus of this collection presented by Olson is to be an apologetic for this ‘ economic imperialism ’: of Economics branching out like an Octopus into almost every sphere of human endeavor. One has to admit that as Economics assumes more and more the role of examining how human beings interact with each other for the attainment of any benefit (in so far as the theory works that any benefit is ultimately economic in a sense, in the broadest meaning of the term), this is almost inevitable. Economics is dominating most policy debates around the world now. Everything has an economic tinge, the green-colored glasses of Oz is now all-pervading. History is written with economic understanding, even science is done from an economic perspective and education is more and more directed by economics.

Most of the essays are meant to illustrate this widening ambit of economics and its integration with the social sciences and beyond. This subset of the essays are not particularly informative as they are exploratory and not argumentative in nature and only attempts to show the growing linkages, not the outcomes of those linkages.

But in the process, Olson being Olson, enough of the essays also try to take on the question of the ‘origin of the world’. And to my chagrin, I have been convinced that I bought the arguments presented by Clark too easily. Olson and co dismantle any productivity based theory by asking a simple question: If the issue was with the people, how is it that they can increase as much as fourfold in productivity on the mere crossing of a border (mexican immigrants to the US etc). Olson has a few counter theories of his own that champion Institutionalism as the answer for most of the economic debates and they seem convincing for now. But the fun thing is that there are as many opinions as there are economists and of course the answers are never to be found in any one camp.

Economics probably has as much to contribute to the various sciences as Olson claims and as he quips glibly, even if economic advice increased the GDP by just 1 percent, that would pay our salaries several times over.