Sunday, April 12, 2009

Book Report: The Rise and Decline of Nations

Finally finished this one, eek that took a while. Rise and Decline of Nations was dry as matzoh, but it did leave me with some ideas to chew on...

The basic theme is wonderfully simple: special-interest groups (aka distributional coalitions) are bad. Through influencing government policy and collective action (price fixing, etc) over time they manage to tax each of us, thereby reducing our wealth while increasing theirs (in an extremely inefficient way). 

One key takeaway for me was when Olson explained why consumers (like you and me) don't defend themselves against these groups...

Olson provides 9 implications of having special interest groups operate in a stable society over time (paraphrased more or less here): 

1. No country will obtain an optimal economic outcome through competition between groups since only those with something significant to gain by organizing (distributional coalition) are represented. 

2. Older stable societies have more special interest groups.

3. Small groups can organize easier and have more power in a newly formed societies.

4. Special interest groups on balance reduce economic efficiency and make political life divisive. 

5. Very large groups (encompassing) have some incentive to do what is best for society and are less damaging. 

6. Groups make decisions far more slowly than individuals.

7. Groups slow down society's ability to adjust to changing conditions and technologies, reducing economic growth. 

8. Once successful, a group seeks to limit diversity of incomes and values. They also work to restrict membership (to protect the value of the benefits obtained for each existing member).

9. More groups means more regulation and government involvement.