Analysis of Olson (1993): Dictatorship, Democracy, and Development

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Questioning Conventional Wisdom In primitive tribes and preagricultural history, peaceful agreements between people may indeed last. However, in large populations which have undergone substantial agricultural leaps, individuals will not be inclined to advance collective goods, since the costs of providing the collective good will greatly exceed the benefit of the collective good. Thus, according to Olson, no one has ever observed a large agricultural society formed through “social contract,” or, through consensus by all individuals in society (568). BNQ: Why do democratic governments form? Olson finds that stationary bandits are preferred to roving bandits. The latter would ravage the population from time to time, stealing everything that the people made. On the other hand, if the roving bandit settles and monopolizes the theft of a particular area, protecting tax collectors, then anarchy and the threat of roving bandits are eliminated. Olson calls this the first blessing of the invisible hand—that a bandit would “settle down, wear a crown, and replace anarchy with government” (568). The people mainly prefer stationary bandits because they know to what extent the theft by the stationary bandit will be extracted from them, and, the stationary bandit will always take less than the roving bandit, while the roving bandit steals everything from the people from time to time. The stationary bandit will collect as much taxes as possible. There is, of course, a level of taxation which will decrease revenues for the dictator and the people. It would not be in the interest of the dictator to surpass this point of equilibrium, for it would lead to the detriment of both the dictator and the people. Also, it is in the interest of the dictator to use some of the theft-through-taxes on public goods. Wise public good investments by the dictator may increase the national
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