Obituary: Professor Mancur Olson

MANCUR OLSON was one of the most distinguished economists of his generation. His doctoral dissertation revolutionised the way we think about political lobbies and almost every other sort of social interaction. A later book made controversial claims about the relationship between lobbies and growth. His third blockbuster, not yet published, acutely analyses which sorts of society do well and which do badly as they emerge from autocracy.

Mancur Olson was a farm boy from North Dakota, who retained his Scandinavian accent and delightfully plain - indeed comically humble - manners throughout life. He was surely the only world-famous economist who prefaced his curriculum vitae with his social security number.

Olson graduated from North Dakota Agricultural College in 1954, and went as a Rhodes Scholar to University College, Oxford. From there he went to Harvard, where his doctorate was published in 1965 as The Logic of Collective Action. He joined the Economics Department at Princeton, and went from there for two years to be Deputy Assistant Secretary of the US Department of Health, Education and Welfare.

In 1969 he went as Professor of Economics to the sprawling and unfashionable College Park campus of the University of Maryland. He resisted all offers to move to more glamorous institutions and remained at College Park for the rest of his life.

The Logic of Collective Action was an instant hit. Before Olson, political scientists had assumed that the interplay of pressure groups was the essence of democracy. Some got their way, others didn't. Well, that showed that the first had more members than the second, or members who cared more deeply, or both. So it was right and proper that they should get their way. This "pluralism" both described and celebrated lobbying in a democracy.

Olson pointed out the fatal flaw in this complacent argument. Some lobbies (e.g. consumers) are dispersed. Others (e.g. producers) are concentrated. All consumers have a common interest in keeping down the price of cars (or food, or textiles). Domestic producers have a common interest in keeping it up. There are more consumers than producers. So governments never artificially raise car (etc) prices - right? Wrong. They do, all over the developed world.

As an individual consumer, it is rational for me to contribute time or money to the Consumers' Association if and only if my contribution makes the difference between the consumer lobby's success and failure. It is infinitesimally unlikely that it does. Therefore, in the term popularised by Olson, I probably free-ride.

As an individual car-maker, it makes a great deal of sense for me to join the trade association and lobby for protection and tax breaks. These privileges are worth hundreds of millions of dollars to me, many times more than the comparatively trivial cost of lobbying. So I do not free- ride.

This might seem tritely obvious now. But that is only because Mancur Olson made it so. His analysis of lobbying subverts Left and Right. It subverts the Left by arguing that the crucial distinction is between consumers and producers, rather than between capitalists and proletarians. But it subverts the Right by showing that capitalists will have systematically more efficient lobbies than proletarians because there are fewer of them, and therefore that Marx was right about the balance of power between capital and labour.

Olson's second big book, The Rise and Decline of Nations (1982), argued that political stability was bad news for growth. Stable democracies suffered from "institutional sclerosis" as their lobbies enforced inefficient redistribution. The German and Japanese economic miracles occurred, not because they could build afresh on ruined cities, but because they could build afresh on ruined institutions and design more inclusive, and hence more efficient, lobbying systems.

The politics of the 1980s led careless readers to label Olson a slash- and-burn Thatcherite. In fact, his views differed fundamentally from those of the Chicago and Virginia public choice schools with which they were conflated. Virginians believe that all government is bad (except, perhaps, the Pentagon, which is in Virginia). Marylanders think that some governments do some things well.

Olson's last 10 years were devoted to showing this. Conventional economic theory fails to explain why some emergent market societies become rich while others don't - according to conventional views, in a world of mobile capital and labour, they all should have become rich(ish). Furthermore, markets are ubiquitous in the informal economies of the Third World. What do the unsuccessful ones lack? According to Olson's still unpublished Capitalism, Socialism, and Dictatorship, they lack futures markets. And futures markets require government - but not too much government. An efficient government protects property rights and commits itself not to expropriate earnings. Limited governments can make those commitments credible. Absolutist governments cannot.

Olson's recent ideas have not been accepted as universally as those from The Logic of Collective Action, but they have been hugely influential on the World Bank, the International Monetary Fund, and the many and various Western bodies that have tried to set the post-Communist economies to rights. They emanated from this most humble, personally self-effacing, anglophile, delightful, modest economist.

Mancur Lloyd Olson, economist: born Grand Forks, North Dakota 22 January 1932; Lecturer, Princeton University 1960-61, Assistant Professor 1963- 67; Deputy Assistant Secretary, US State Department of Health, Education and Welfare 1967-69; staff, University of Maryland 1969-98, Professor 1970-98, Distinguished Professor of Economics 1979-98; married 1959 Alison Gilbert (two sons, one daughter); died College Park, Maryland 19 February 1998.