Gain Power And Prosperity: Outgrowing Communist And Capitalist Dictatorships Translated By Mancur Olson Rendered As Print

do some economies do better than others How does society encourage the kind of market economy that generates continually increasing incomes How do particular styles of government affect economic performance Worldrenowned economist Mancur Olson tackles these questions and others in what will surely be regarded as his magnum opus.
Olson contends that governments can play an essential role in the development of markets, Reliable enforcement of private contracts and protection of individual rights to property depend on governments strong enough not to undermine them.
His exploration of "marketaugmenting governments" will stand as a cuttingedge work on economic growth and provide a useful framework in which to consider the Asian financial crisis and its aftermath.
As Susan Lee noted in Forbes, "his pioneering insights might have won a Nobel Prize for Olson had he lived a bit longer.
" This book made me want to rip my eyes out, A deep and fascinating study of the development of power and of the resons why postCommunist economies failed to live up to their promise.
The internal logic of Olson's theory is deeply compelling, but I am afraid that his view, despite its strong claims to realism is still somewhat Pollyannaish: he assumes selfinterest and perfect rationality on the part of all actors, and while the former is certainly realistic, the latter is undermined by much of modern research which shows humans to be deeply irrational.
On the other hand, unlike many other political and economical theorists, he at least tries to steer away from the fallacy of the access to perfect information.


In the event, later developments in the postSoviet economies the book was writtenyears ago confirmed his theory to a large degree.
By a Nobel prizewinning economist, this text required for my interdisciplinary International Relations major at the College of William and Mary explains the dynamics that lead civilization to arise from anarchy, the forces that cause communism and democracy outperform, and equilibriums to keep in check.


A critical manual for any aspiring dictator or democrat, A bit like Thinking Fast and Slow, but with a lot less rambling and almost zero cross referencing in the main text, this is a book that's meant to summarise a career's findings.
It's written by somebody who both knows a whole lot and wants to tell you everything he knows, And it's written so beautifully, you keep asking yourself "why did I not think of that" To which the answer, of course, is "because it's only so clear once somebody has told you.
"

Mancur Olson, the man who explained in his youth one of the main problems of our otherwise quite solid market economy, the tendency of concentrated interests such as lobbies, oligopolies and unions to prevail over the interest of the silent majority, spent the last couple years of his life writing this primer that sheds light on some of the big questions in politics.
Here's a list of my favorite examples:

, How come most countries on earth used to be run by a dictator / tyrant / king Answer: because it beats the hell out of what was the alternative at the time, namely being raided by itinerant hordes.
Not unlike a mafia don, a "Stationary Bandit" had every interest in seeing his people prosper and every interest in providing them protection from roving bandits.
So that's the system that prevailed everywhere for a long, long time,

. What does it take to get rid of the dictator / tyrant / king once you're fed up with him Answer: first, a big event that upsets the applecart, such as a famine or a plague or a discovery second, a multitude of interests on the ground so no single successor scheme take over where the previous tyrant left off and third, no external threats.
Daron Acemoglu goes a lot deeper in trying to explain this in his book fromyears later, but still, what a beautiful summary!

.
How come oligopolies and concentrated interests can form and thrive when we know that even two people can sometimes not agree to collude Ah, that would be because the prisoner's dilemma never occurs in nature.
Most economic agents who matter can talk and compare notes, And they are not prisoners, Hell, even prisoners can get it done if the game is repeated,

. If one day we achieve perfect information and zero transaction costs, will the diffuse interests of the consumers, the poor or the unemployed finally prevail over concentrated interests Erm, probably not.
And that's because the basic problem will not disappear, The marginal member of these groups will still do best if somebody else does the hard work for him, The incentive to freeride will remain,

Then he moves to the meat of his book, namely the dissection of why the fall of the Soviet Union did not lead to prosperity.
It's still a step by step series of answers to questions, Stuff like

. How come Sergei Bubka broke the world record for pole vaultingtimes, nine of those by just one centimetre Ah, because under Stalinism the able and the unable got paid the same up to the fortieth hour of work, but after that they got something a lot closer to market rate.
So the able, those who could do superior work, would not only a get underpaid for their first forty hours of work, thereby giving the state their labor for super cheap, but also b they would work as much as possible past that fortieth hour, since that's the bit of their labor that got compensated well.
Also, they could be guaranteed to gravitate toward the jobs that required skills, My choice of example, of course, was meant to prove that you could go around the system, Bubka could probably have set the bar fifteen centimeters higher twice, rather than a couple centimeters seventeen times, but that would have landed him two bonus apartments, rather than seventeen.


. What are the main ways to collude against the hyperextractive Stalinist regime Two mainly: first you can work together with the guy right above you and the guy right below you in the chain of production to sell privately excess resources that have been allocated to your endeavor second, you can work together with staterun nearcompetitors to trade with one another excess resources, rather than ask for them from above.


. What's the one biggest difference between Germany post WWII and Russia post Communism In Russia the main source of corruption, the informal markets that dealt in the reallocation of misallocated resources, not only survived the transformation intact, but by definition reached into everywhere.
By dint of having set prices and quantities, indeed by having set them wrong, the system had not only given birth to a parallel, informal market system for the reallocation of resources, but had actually forced every single citizen to deal with this system or alternatively perish.
The people in charge of these informal networks continued to thrive after the transition, except they no longer had anybody to fear whatsoever.
They could carry on their previous trade legitimately, Only they knew how the system worked,

. What's the difference between Russia and China post Stalin/Mao Mao had purged all Communist party insiders during the infamous Cultural Revolution.
When Deng took

over, there was no entrenched bureaucracy of party cadres who could resist him, The market reforms imposed by Deng were only resisted by elements in the very top echelons, but the rank and file knew not to stand in the way.


Finally, Mancur Olson presents us with the big idea of his book, Again, it's a question: How come market system fails in some places How come the logic of the market does not prevail everywhere When we visit third world countries it is quasi impossible not to bump in to a suk or an open market.
If indeed nothing can go wrong in a society that encourages mutually beneficial trading, how come only some countries allow millions of mutually beneficial trades to turn into one big vibrant marketclearing machine

The answer is that there are two types of markets: spontaneous markets and socially contrived markets.


Spontaneous markets are the ones that will appear regardless, The author goes as far as to say that spontaneous markets are irrepressible, Essentials will find their way to people regardless of how bad the government is, regardless of how extractive a despot is, regardless of how poorly the price has been set.
When no capital investment is necessary for the production of a good, for example, it will be traded as many times as necessary, formally or informally, until it reaches whoever needs it most.
Only two conditions need to be met: first, both parties must stand to gain from the trade and second, both parties must be able to somehow enforce contracts, a la limite by threatening to refrain from repeated trades.
So that's how come markets are ubiquitous,

Socially contrived markets, on the other hand, are the markets that need the support of the state to exist.
If it is essential to invest in capital such as plant and equipment or human capital or intellectual property to provide a particular good or service, then it is equally essential that a government exist to guarantee those property rights.
And it is in the provision of the property rights which support socially contrived markets that Mancur Olson identifies the difference between rich countries and poor countries.


Pretty simple once somebody has pointed it out, no

I really really enjoyed this book,
In "Power and Prosperity" everything is laid out in a logical, I dare to say Austrian, way, That's why Olson's work should be read in tandem with Hoppe's "Democracy: The God That Failed", These two authors will complement and challenge one another, thus, making you contemplate the subject more, Olson's chapter about Stalin's economy, and especially his tax policy, was the most remarkable, It's ironic that those who criticized the bourgeois societies took exploitation to a whole new level, So what do you do if you're fascinated by science but are incapable of scientific rigour, you're fascinated by math but you're crap at it and you're fascinated by philosophy but are incapable of thinking logically Easy: become an economist! Fascinating, though difficult, read.
Got me imagining what an "Olsonic" analysis of the current budget/debt crisis might look like, particularly given his critique of special interests and the impossibility of "rational" collective action by small groups.
.