The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities
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The years since World War II have seen rapid shifts in the relative positions of different countries and regions. Leading political economist Mancur Olson offers a new and compelling theory to explain these shifts in fortune and then tests his theory against evidence from many periods of history and many parts of the world.
resources—to the unemployment of labor and other resources—in the 1930's. The value of goods and services in America fell by almost half in the early 1930's. Correcting for the fall in prices, the quantity of production fell by approximately one-third. Unemployment rose to include one-quarter of the labor force. And investment stopped almost completely. It was the most extensive breakdown of the economy in history. Table 7.1. Comparison of 1839-1843 with 1929-1933 (in percent) The difference
some markets in which the demand is small in relation to the scale at which a firm in that market must operate to be efficient, so that the industry can accommodate only a few firms, or even (as in the “natural monopoly” case) only one firm. But these markets are the exception rather than the rule, and (contrary to what economists used to believe) there is also the danger of entry in these markets;* they are also “contestable,” to use an apt term borrowed from William Baumol et al.18 In the
Big Ben/sauerkraut argument unless it identifies an attribute that explains a number of cases or phenomena or is logically derived from a theory that has wide explanatory power. Often explanations based on a unique attribute of a country provide in statistical terms a sample of the size of one; they are equivalent to concluding, from a single toss of a pair of dice that resulted in two ones, that tossing a pair of dice will always result in “snake eyes.” In some other cases where a unique
features are sometimes overlooked because the conventional nomenclature calls attention to the differences between the formation of governments and of customs unions. The Common Market created a large area within which there was something approaching free trade; it allowed relatively unrestricted movement of labor, capital, and firms within this larger area; and it shifted the authority for decisions about tariffs and certain other matters from the capitals of each of the six nations to the
the wind, and of course accurate navigation requires that they be taken into account, yet it is far more important whether the plane is at full throttle or idle, whether it has a jet or a piston engine, and so forth. It is necessary to make this point here, since some readers of early drafts of my argument, perhaps beguiled by the simplicity of the explanation, have treated all other explanations of the same phenomena as wrong, or explicitly have supposed that the argument here said every thing