The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities
Average customer rating: 5 out of 5 stars
  • Why isn't this book more famous?
  • Taking "The Logic" Cross-National
  • On the Virtues of Flexibility
  • Not totally bad book, but its thesis is somewhat simplistic
  • Powerful marginal explanation
The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities
Mancur Olson
Manufacturer: Yale University Press
ProductGroup: Book
Binding: Paperback

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ASIN: 0300030797

Customer Reviews:

5 out of 5 stars Why isn't this book more famous?.......2007-05-18

Olson's book is difficult to classify, since on the one hand, it's not for the general reader, but on the other hand not so forbiddingly dense that it should be classified as scholarly. Lemme put it this way: it's for economically literate people. It makes use of, say, the concepts describing steady-state growth, supply factors, and expeduture-approach identities that one learns about in a college econ class.

If you don't know what I just said, I imagine much of this book will be opaque to you.

But if you can handle such stuff (and don't let me scare you too much: the gist of this book is clear enough even if you can't), man, O man! Olson's thesis is so brilliant it will give you whiplash!

In brief, great empires invariably collapse not because of cultural overstretch, internal discord, or military misfortune, but rather because the very process of building an empire gives rise to myriad vested interests that eventually claw their way so deeply into the neck of the government that they eventually choke it. In other words, empires collapse because they are invariably made sclerotic by special-interest groups.

An idea that is truly, classically brilliant: not obvious, but once developed at length, undeniable and endlessly applicable.

5 out of 5 stars Taking "The Logic" Cross-National.......2007-03-11

Olson seeks to explain why some nations achieve high rates of economic growth while others suffer bouts of stagflation. He contends that the number and strength of "distributional coalitions," coupled with the length of economic and political stability will influence a nation's rate of economic growth. As such, Olson's hypothesis is two fold. First, Olson argues that states with lower levels of "distributional coalitions" often have higher rates of economic growth. Second, states which have experienced prolonged periods of disorder or armed conflict will have lower numbers of interest-group, or collusion organizations.

Olson's explanation builds upon his early work in The Logic of Collective Action, which holds that "...large groups, at least if they are composed of rational individuals, will not act in their group interest" (18). Rather, the rational actor will seek to further his or her self-interest, and will subsequently free-ride when possible. Olson expands the scope of this logic to encompass not only the rationality of the individual, but the rationality of the firm in explaining The Rise and Decline of Nations.

As the power of the firm expands, the firm seeks to maximize its own utility at the expense of a societal common good. In order to simplify a complex argument, we can think of Olson's theory in this way. An organization or firm will not expend its energy to create a benefit to society writ large, as it, and its members, will only receive a fragment of that benefit in relation to the costs incurred. On the other hand, if the same firm seeks to maximize its utility, it will seek to obtain a larger slice of the social "pie." In so doing, it may lower the benefits of society as a whole, but will significantly expand its own gain and that of its members. Meanwhile the firm will only incur a fraction of the costs such action projects on society at large. As such, Olson writes, "The great majority of special-interest organizations redistribute income rather than create it and in the ways that reduce social efficiency and output" (47).

Olson argues that a society with long-term stability - free from war, and economic and political turmoil - tend to accrue more special-interest and collusion groups. This occurs because it takes time and reasonable amount of stability for such interest-groups to organize, solidify, and begin to achieve some collective benefits for their members. Once collective benefits are seen as the result of organization, a host of other interests will begin to coalesce and seek to obtain gains for themselves. What emerges is a highly pluralistic society.

This leads us to the second part of Olson's hypothesis, those nations with high numbers of special-interest or collusion groups have lower levels of economic growth. Olson writes, "Distributional coalitions slow down a society's capacity to adopt new technologies and reallocate resources in response to changing conditions, and they reduce the rate of economic growth" (65). First, distributional coalitions stymie technological adoption when such innovation stands to benefit a rival group. A present day illustration can be found in a labor unions vehement opposition to the implementation of labor saving machinery. Second, distributional coalitions will attempt to block policy initiatives that change the status quo. When policy needs to be developed to increase economic or social advancement, the special-interest groups are likely to feel a certain displacement and will act to prevent such policy. According to Olson, these actions, coupled with others, often lead to policies which promote policies which have the potential to stifle economic growth.

5 out of 5 stars On the Virtues of Flexibility.......2006-12-29

I had always wanted to read this book and am glad that I did !

On the one hand the argument is quite obvious and one is left wondering what is really novel in this work (virtues of competition, market flexibility etc.), but I found the last chapter to be an interesting perspective on the effect of imperfect competition on the impact of changes in nominal demand on employment and inflation.

Olson explains social rigidities ,with all their negative collective effects, as the outcome of rational microeconomic behaviour and integrates these into macroeconomic theory (other mainstream macroeconomic theory attribute price rigidity to error or simply make ad hoc assumptions on wage rigidity).

This is a very valuable and important contribution to macroeconomics and explains why some economies are more resiliant than others. The main message is that governments must either make their economies more flexible or have to rely on macroeconomic conditions not fluctuating too much for acceptable macroeconomic performance.

3 out of 5 stars Not totally bad book, but its thesis is somewhat simplistic.......2006-12-27

This one-idea book by late professor Olson tries to explain why some countries did better than others in terms of economic growth after World War II - namely Germany and Japan, in contrast with Britain. His explanation is that World War II weakened many institutions in those two countries that, by trying to retain their usual privileges, were holding back economic progress. The weakening of those institutions, permitted the economic miracle in both Germany and Japan. In contrast, England's institutions were not as weakened, so they continue to slow England's progress. I suppose that there are grains of truth in Olson's explanation - though if it was true, then the required policy recommendation would be that is good to suffer a devastating war every once in a while. I think Olson omits another possible explanation: the fact that Germany and Japan had both a strong industrial base before the war, a base that was not completely destroyed by it. Britain was in the 1940s suffering a slow economic decline in its industrial base - which really come back from the late 19th century, when Germany overcome Britain as Europe's leading industrial and economic power. And how would Olson had explained that after he wrote the book (in 1982), Britain went through a much higher economic growth than Germany and Japan - without the intervention of a war. So, while the book is interesting to read, I think its thesis is way too simplistic.

4 out of 5 stars Powerful marginal explanation.......2006-06-06

Holding productive and destructive efforts constant, small distributional coalitions have the incentives to form political lobbies and influence policies that tend to be protectionist and anti-technology; since the benefits of these policies are selective incentives concentrated amongst the few coalitions members and the costs are diffused throughout the whole population, the "Logic" dictates that there will be little public resistance to them; as time goes on, these distributional coalitions accumulate in greater and greater numbers, the nation burdened by them will fall into economic decline.

However, if we think beyond the "natural" cost-incentive structure of Olson's "collective action logic", there are then four possible directions:
1. intentionality from the knowledge of this logic results in certain institutional design that prevents the nagative effects of the distributional coalitions;
2. the dynamics of distributional coalitions may be changed by political or economic factors, e.g., globalization may affect the formations of the distributional coalitions so that the power of protectionist coalition is now balanced by a coalition of big importers;
3. If a society has positive economic growth while distributional coalitions in fact have negative impact on it, or if a society has negative economic growth while distributional coalitions in fact have positive impact on it, then we should further look at how a society's institutions favor or disfavor its productive and destructive efforts;
4. Distributional coalitions may be formed by the pure "logic", they can also be formed by institutional incentives; they could be "natural" due to the free-riding logic, but they are more likely to be "institutionally-induced".

The explanation power of distributional coalitions comes from the strength of its "internal logic", we could be easily overwhelmed if "external logic" is neglected. Still, Olson's contribution is his offering of a powerful marginal explanation for the academic world.


Work, Consumerism and the New Poor (Issues in Society)
Average customer rating: 5 out of 5 stars
  • "No such thing as society"
Work, Consumerism and the New Poor (Issues in Society)
Zygmunt Bauman
Manufacturer: Open University Press
ProductGroup: Book
Binding: Paperback

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ASIN: 033521598X

Book Description

From one of today's most eminent thinkers--a piercing examination of poverty in the modern age

If "being poor" once derived its meaning from the condition of being unemployed, today it draws its meaning primarily from the plight of a flawed consumer. This distinction truly makes a difference in the way poverty is experienced and in the chances to redeem its misery.

This absorbing book traces this change, and makes an inventory of its social consequences. It also considers ways of fighting back advancing poverty and mitigating its hardships, and tackles the problems of poverty in its present form.

The new edition features:

Students of sociology, politics, and social policy will find this to be an invaluable text on the changing significance and implications of an enduring social problem.

Customer Reviews:

5 out of 5 stars "No such thing as society".......2006-03-24

Zygmunt Bauman's argument, put very simply, boils down to the fact that in the present consumerist society, the plight of the dispossessed is to be helpless spectators of other people's party, and to be made to experience the humiliating gap between themselves and the successful: the big spenders.

Not so long ago the Protestant "work ethic" was the basis of capitalist societies. It's within the living memory of many older people in the UK.

In the 1950s real unemployment in the UK was below the half million mark, and it was an accepted objective of government to keep it that way. As UK Prime Minister Harold Macmillan famously put it: "You've never had it so good." He was right. Before 1939 unemployment, along with the weather, was regarded as beyond the reach of governments.

The post-war consensus changed all that, and full employment lasted into the early 1970s.

The unemployed were a small minority. The long-term unemployed were an even smaller minority.

Then came Margaret Thatcher, globalisation, and massive unemployment. Previously safe employment in industry was destroyed. The idea of "jobs for life" was finished.

Welcome to the new insecurity. The power of unions to protect employees was broken, and it was `open season' on the welfare state and the public sector.

In parallel, changes from broadly redistributive taxes on income to regressive taxes like VAT - and a growing range of stealth taxes - fuelled the widening gap between rich and poor.

The rich now come from the money markets and banking, and they are joined by a new elite from the media, entertainment and sport.

Globalisation - you could call it `Murdochisation' - injected huge sums into the once-upon-a-time "working man's" sport of soccer, and it did not stop there. Overnight the new mega-rich flaunted their affluence, and became objects of both veneration and envy.

Work appears to be but a small part of the lives of the new elite: conspicuous consumption appears to be all. The "work ethic" suddenly looks dowdy and old fashioned, rather like the sad pit villages left by Thatcher's defeat of the miners, or those Stalinist tower blocks from the sixties. They are archeological remnants from only yesterday.

Bauman describes the tensions at the heart of the consumer paradise:

"Boredom is one complaint the consumer world has no room for and the consumer culture has set out to eradicate it ... To alleviate boredom one needs money - a great deal of money - if one wishes to stave off the spectre of boredom once and for all, to reach the state of happiness."

But, as Bauman perceptively tells us, happiness is not a state of mind, it is a fleeting experience. But globalisation has taken care of that. Planned obsolescence ensures that just as last month's object of desire fails to bring about a state of happiness, this month's upgrade - with life-changing new features - is there waiting to bought online, or at the new cathedral: your local shopping mall.

The new connoisseurs, says Bauman, attain " their right to universal admiration."

And where is this new society at its most successful? You've guessed it: post-Thatcher Britain.

" ... the country widely acclaimed as the most astonishing `economic success' of the western world, has been found also to be the site of poverty most abject among the affluent countries of the globe. ... Nearly a quarter of old people in Britain live in poverty, which is five times more than `economically troubled' Italy and three times more than in `falling behind' Ireland. A fifth of British children live poverty - twice as many as in Taiwan or Italy and six times as many as Finland. ... The wealthiest fifth are among the richest in Europe ... And so the `subjective sense of insufficiency' (of the dispossessed) ... is aggravated by a double pressure of decreasing living standards ... reinforced rather than mitigated by economic growth in it present, deregulated, laissez-faire form."

The problem, now, as Bauman makes clear, is that this society no longer needs a "reserve army of labour" - that has been exported - now, when there is a "downturn" in the economy, politicians call for a `consumer-led' recovery.

In this, the poor can play no part.

"And so, for the first time in recorded history the poor are now purely and simply a worry and a nuisance. ... In a world populated by consumers there is no room for a welfare state ... what used to be a sensible investment now looks like ... an unjustifiable waste of taxpayers' money."

So we reach the point where, as the author rightly points out, " poverty is, first and foremost, perhaps solely, the question of law and order."

We are (in the UK), as he implies, only a few steps away from the Germany of the 1930s. It is a sobering realisation.

The hedonist party effectively stops us from asking more fundamental questions, such as: why does society no longer put itself in question at all? If, as the author suggests, our arrangements are arbitrary, why can we no longer even consider changing them?

History shows that winners release their grip on power only with the greatest reluctance. As would be the case with a solution he offers for consideration: Claus Offe's idea of decoupling income from work.

In what sounds something like Milton Friedman's Negative Income Tax, the idea's main problem is that it would come up against huge opposition from those funding it: the people who might have to cut down on their consumption.

As Margaret Thatcher put it: "There's no such thing as society".
Equilibrium Unemployment Theory - 2nd Edition
Average customer rating: 4 out of 5 stars
  • An important and influential book in labor economics
Equilibrium Unemployment Theory - 2nd Edition
Christopher A. Pissarides
Manufacturer: The MIT Press
ProductGroup: Book
Binding: Hardcover

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ASIN: 0262161877

Book Description

An equilibrium theory of unemployment assumes that firms and workers maximize their payoffs under rational expectations and that wages are determined to exploit the private gains from trade. This book focuses on the modeling of the transitions in and out of unemployment, given the stochastic processes that break up jobs and lead to the formation of new jobs, and on the implications of this approach for macroeconomic equilibrium and for the efficiency of the labor market.

This approach to labor market equilibrium and unemployment has been successful in explaining the determinants of the "natural" rate of unemployment and new data on job and worker flows, in modeling the labor market in equilibrium business cycle and growth models, and in analyzing welfare policy. The second edition contains two new chapters, one on endogenous job destruction and one on search on the job and job-to-job quitting. The rest of the book has been extensively rewritten and, in several cases, simplified.

Customer Reviews:

4 out of 5 stars An important and influential book in labor economics.......2005-07-18

The book is written by one of the pioneers of matching theory approach to unemployment theory. The book starts with very simple matching models and builds its way up by adding something at each chapter. So the book starts by a deterministic model of equilibrium with only labor as input. you see that first capital is added to the model, then dynamics of the model are discussed and balanced paths are derived. Then random elements and shocks are added,then heterogeneity among workers is considered and then search efforts and other elements are being added.

I think the book is very well written and the flow of topics and ideas is smooth and easy to grasp. Verbal discussion and explanations are clear, informative and are always accompanied by the proper formulas and derivations. Note that the book covers only matching models of labor and completely ignores other types of models (like efficiency wage, implicit contracts, ...). Also chapters don't have exercises at the end, which I don't think is a major handicap for the book, as it is more meant for graduate level research.

In general I think this book makes understanding the matching theory easy and anybody who wants to work on labor economics should know about this book.
Unemployment: Macroeconomic Performance and the Labour Market
Average customer rating: Not rated
    Unemployment: Macroeconomic Performance and the Labour Market
    Richard Layard , Stephen Nickell , and Richard Jackman
    Manufacturer: Oxford University Press, USA
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    This broad survey of unemployment will be a major source of reference for both scholars and students. It aims to provide a basis for better policy: showing how the lessons learned from experience and theory can be applied to greatly reduce the waste and misery of high unemployment. The book surveys in a clear, concise manner the main aspects of the unemployment problem. It integrates macroeconomics with a detailed micro-analysis of the labour market. It uses the authors' model to explain the puzzling post-war history of OECD unemployment and shows how unemployment and inflation are affected by systems of wage bargaining and unemployment insurance. For each issue the authors' develop a relevant theory, followed by extensive empirical analysis. The authors are established experts in the field, and this book gives their definitive treatment. Now revised to include an analysis of unemployment changes since 1991, it is clear the authors' original model has stood the test of time making this book a must read for any student studying economics at an advanced level.
    Inflation, Unemployment, and Monetary Policy (Alvin Hansen Symposium Series on Public Policy)
    Average customer rating: 5 out of 5 stars
    • fruitful and timely discussion
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    Robert M. Solow , and John B. Taylor
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    Book Description

    The connection between price inflation and real economic activity has been a focus of macroeconomic research--and debate--for much of the past century. Although this connection is crucial to our understanding of what monetary policy can and cannot accomplish, opinions about its basic properties have swung widely over the years.

    Today, virtually everyone studying monetary policy acknowledges that, contrary to what many modern macroeconomic models suggest, central bank actions often affect both inflation and measures of real economic activity, such as output, unemployment, and incomes. But the nature and magnitude of these effects are not yet understood.

    In this volume, Robert M. Solow and John B. Taylor present their views on the dilemmas facing U.S. monetary policymakers. The discussants are Benjamin M. Friedman, James K. Galbraith, N. Gregory Mankiw, and William Poole. The aim of this lively exchange of views is to make both an intellectual contribution to macroeconmics and a practical contribution to the solution of a public policy question of central importance.

    Customer Reviews:

    5 out of 5 stars fruitful and timely discussion.......2000-02-11

    "Inflation, Unemployment, and Monetary Policy" is one of the most serious problem in the developed countries, especially my country Japan, which is suffering a severe unemployment problem for a long recession. Because of the continuous Government's spending policy. Japanese fiscal situation is deteriorated, so japanese economy's last hope is a monetary poicy. At that time, reading this exciting book and studying excellent opinions of 6 notable economists are truly fruitful. In this book, 6 economists make a poweful and exciting discussion...of course, there is no perfect solution...But, I believe that I can make a firm basis for thinking this severe problem.
    The Natural Rate of Unemployment: Reflections on 25 Years of the Hypothesis
    Average customer rating: Not rated
      The Natural Rate of Unemployment: Reflections on 25 Years of the Hypothesis

      Manufacturer: Cambridge University Press
      ProductGroup: Book
      Binding: Paperback

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      ASIN: 0521483301

      Book Description

      For 25 years, theory about the causes of, and possible solutions to, the problem of unemployment has been dominated by Phelps and Friedman's natural rate of unemployment hypothesis. This postulates that the equilibrium rate of unemployment consistent with steady inflation is determined by structural variables: sustainable reductions in unemployment can be achieved only by measures to change underlying microeconomic structures, such as benefit and pay bargaining systems. Belief in the hypothesis has faltered since the 1980s, the hypothesis being unable to explain the dramatic upward shifts in European unemployment rates. These essays reflect upon the fundamental structures underlying the hypothesis, assess the related evidence, and look forward, suggesting possible modifications. In contrast to the single rate postulated by the natural rate hypothesis, several of the contributors propose that there are ranges of unemployment rates consistent with steady inflation.
      Productivity Growth, Inflation, and Unemployment: The Collected Essays of Robert J. Gordon
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        Productivity Growth, Inflation, and Unemployment: The Collected Essays of Robert J. Gordon
        Robert J. Gordon
        Manufacturer: Cambridge University Press
        ProductGroup: Book
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        Book Description

        Seventeen essays include three previously unpublished works and offer sharply etched views on the principal topics of macroeconomics: growth, inflation, and unemployment. Robert Gordon re-examines their salient points in a new accessible introduction to modern macroeconomics. Each of the four parts into which the essays are grouped also offers a new introduction. The foreword by Nobel Laureate Robert M. Solow comments on the continuing importance of these essays which date from 1968 to the present.
        UNDERSTANDING MODERN MACROECONOMICS: Resources, National Income, Employment and Unemployment, Growth and Wealth, Inflation, Government Policies, Money ... Deficits and Debt, International, and More
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          Peter , M. Gutmann
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          Book Description

          This book explains modern macroeconomics. It does not use equations, graphs, diagrams or footnotes. The book is designed to make modern macroeconomics available to those who never had a university course in economics or who had one years ago, now little remembered. The book is non-technical. Since readers are busy, the book is purposely confined to about a hundred pages. It seeks to combat the lack of literacy in basic macroeconomics that is all too evident among Americans. It covers a series of important subjects: resources; national output; living standards; economic growth; employment and unemployment; money and interest rates; inflation; government; deficits and debt; international; productivity; incentives; expectations; income distribution; asset markets; business fluctuations; creative destruction; planning horizons; international convergence; and more.
          Money and the Natural Rate of Unemployment
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            Money and the Natural Rate of Unemployment
            Finn Ostrup
            Manufacturer: Cambridge University Press
            ProductGroup: Book
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            Book Description

            This book presents a revisionist view of monetary policy and monetary regimes. It presents several new mechanisms, indicating that money affects long-term production. The consequent policy implications are also discussed, including: the uses of monetary policy and monetary regimes in achieving macroeconomic goals; the impact of an independent central bank; the effects of a movement from floating exchange rates to fixed exchange rates in a monetary union. In addition to the theoretical and policy discussions the book also contains a comprehensive survey of the current state of scholarship in this area.

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            The prevailing view among economists and policy makers is that money has no impact on production in a longer term characterised by full price and wage flexibility and rational expectations. This book presents a revisionist view of monetary policy and monetary regimes. It presents several new mechanisms, indicating that money affects long-term production. The consequent policy implications are also discussed, including: the uses of monetary policy and monetary regimes in achieving macroeconomic goals; the impact of an independent central bank; the effects of a movement from floating exchange rates to fixed exchange rates in a monetary union. In addition to the theoretical and policy discussions the book also contains a comprehensive survey of the current state of scholarship in this area. Designed as a textbook for advanced undergraduate and graduate students in macroeconomics, labour economics and finance, this book will also appeal to scholars and policy-makers.
            Rusted Dreams: Hard Times in a Steel Community
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              Rusted Dreams: Hard Times in a Steel Community
              David Bensman , and Roberta Lynch
              Manufacturer: University of California Press
              ProductGroup: Book
              Binding: Paperback

              Economic ConditionsEconomic Conditions | Economics | Business & Investing | Subjects | Books
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              ASIN: 0520063023

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