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Tuesday, October 31, 2006

 

Assessing the Damages

There is an editorial in the New York Times today discussing the issue of punitive damages. The Supreme Court is currently hearing a case involving this issue between Phillup Morris and the damages to be awarded to the widow of a smoker. Phillup Morris brought the case to the Supreme Court because they believe the award is excessive including "more than $821,000 in actual damages and $79.5 million in punitive damages." These damages were awarded as a result of 'negligence' on the part of the cigarette company. Additionally, according to the Oregon Supreme Court, the company's "deceit thus would, naturally and inevitably, lead to significant injury or death."
Even if Phillup Morris is still found to be accountable for the husband's death, the question of how much should be paid is still debatable. The Supreme Court has already found that due process is violated if punitive damages are too high. The author of this article believes the damages awarded are not too high and calls into question the limitations previously placed on the amount of punitive damages by the Supreme Court. A few years ago, the court said that punitive damages should be in a '"single digit ratio to actual damages." For example if the damages were found to be around $500,000 the punitive damages should not exceed $5 million. The author contends that "Constitutional principles can seldom be boiled down to a formula and it is difficult to see why the court should rein in juries so tightly."
The author is failing to consider economic analysis in his answer. Economics contends the purpose of punitive damages in the end is efficiency- this is the primary goal and in order to achieve this one should be charged an amount equal to the damage done. If the amount is too high, efficiency will not be attained. In addition, using legal rules to redistribute wealth usually causes inefficiency. Courts should take into account estimated human capital such as future income, pecuniary damages and sometimes hedonic damages which is where most of the grey area lies because it involves putting a price on life. Putting a price on life is a task many are not willing to take because it involves a large amount of equity and subjective judgements because what one's life is worth to someone may not necessarily be the case to another. One would also need to calculate the compound interest and the rate one should use is also subject to debate because one cannot accurately predict what the future interest rate is going to be. There are many subjective judgements involved in calculating damages using economics but there are definite formulas and amounts exceeding what could reasonably be used in the formulas would not promote efficiency.
Punitive damages are a necessary part of both our economic and legal system. Punitive Damages exist in an effort to ensure individuals and companies are conducting themselves in a way that will cause little harm to others. Or economically speaking they would at least be willing to adequately compensate for such harm making the other party 'whole' again or internalizing the externality.

 

Generating Economic Freedom

This article focuses on the recent election in Congo between Bemba and Kabila. The problem I find with this article is in what the two candidates are attempting to do which is that of creating economic prosperity. This article states that platform for the two candidates’ calls for basics such as electricity clean water, an end to corruption, and a greater share for the populace in the country's abundant mineral wealth. The belief that providing these essential elements to a society ridden with a corrupt government, economic controls and the diversion of public resources for personal gain will only spur medium growth probably not sustainable for a entire country.

Achieving higher per capital economic growth is possible even in low income countries. Research indicates that the best way for countries to increase economic growth is to adopt policies that promote economic freedom and the rule of law, both which are measured within the index of Economic Freedom. Countries that maintain polices that promote economic freedom such as monetary policy, provide an environment that generates trade and encourages entrepreneurial activity, which produces economic growth. Higher GDP growth rates are associated with improvements in a country's economic freedom. The more a country improves its economic freedom, the higher the average economic growth it experienced. Countries that consistently march toward improved economic freedom enjoy the most progress towards prosperity.

Why would economic freedom contribute to economic growth? With high taxation, corruption and trade barriers the country experiences a lag in economic growth. The more involved the government is in the economy the lower the chance that individuals, investors, and businesses will be able to gain because the costs of the private economic activity become higher. This tends to encourage specialized individuals to leave the country for better opportunities that do not contribute to GDP.

Providing assistance to a poor nation will not spur economic growth. Policies and institution is what should matter. Developing countries must create their own internal reforms by executing policies that encourage economic freedom. Unfortunately in many cases foreign assistance has dame development more difficult by encouraging corruption, and the continuance of bad policies.

 

Trade Disputes

In Washington the has been a proposal put fourth that there needs to be a change to China and the two major trade disputes. The trade disputes have to do with the intellectual property protection and Washington's view that the China's currency is undervalued. The annual report by the U.S. - China Economic and Security Review Commission is dealing with the problem with Beijing's artifically low currency is making China's goods cheap in the U.S. The currency manipulation is being defined economicly as as illegal export subsidy which will allow for harsh penalties agaist those offending country's export goods. The U.S. Congress is going to push at the World Trade Organization for what is said was a failure to enforce intellectual property rights. For example in the U.S. there has been many cases in which China has taken up the act of pirating movies and other goods in their country and selling them back here for a cheap price. China has implemented a policy to crack down on those who are pirating goods to other countries. The results from these pirating activities are making a decrease in the number of jobs in theU.S. In the upcoming elections on November 7th there will be a big influence on the U.S. trade policy, in which the top critics of Beijing's economic practices have come from both parties; but the Republicans have been more inclined to support Bush's free trade initatives than the Democrats. Lawmakers have made it clear that in the next year they will have to change there current policies.

 

How did HOAs get so powerful?

My mom recently received a letter from our Home Owners Association (HOA). It was a copy of a letter sent to our next door neighbors informing them that their two donkeys, which they have had for seven years, are not allowed by the HOA except by a special variance. However, our neighbors were also informed that applying for a variance would essentially be a waste of time because six of the eight board members were already disinclined to grant their request. So, basically my neighbors were told they had thirty days to get rid of their donkeys.

The donkeys are really cute. They look like the donkey from Shrek. Our neighbors rescued them seven years ago from an abusive home and they are afraid that the trauma of uprooting them will make it so they have to be put down. Our neighbors are going to fight the HOA and my mom and I have agreed to help in any way we can. But the whole situation got me thinking about Olson and what he would say about HOAs.I wondered how the HOA could become so powerful. I naively thought that HOAs were only concerned about the color of your house and if you left your trash cans out on the curb too long. How could my HOA tell our neighbors that they can’t have their donkeys when the area is zoned for horses? The HOA even said in their letter that just because donkeys were a member of the horse family it did not mean they were allowed just as wolves would not be allowed just because they are a member of the dog family.

The fact that the HOA has done nothing for seven years means something has changed. So, considering Olson I looked for a “bootlegger” and a “Baptist”. It turns out that our neighbors have had a feud going with our neighbors across the street. And it just so happens that our neighbor across the street is on the HOA board. And suddenly everything made sense. Our neighbor across the street was the “bootlegger” using the “Baptists” of the HOA to promote his own agenda. The “Baptists” in the HOA are concerned with falling property values. By their rationale if they let our neighbors keep their donkeys then what will stop other people from wanting to keep pigs, goats, etc. – animals that would detract from the enjoyment of the neighborhood and ultimately decrease property values?

However, none of this was an issue before the bootlegger was able to get the Baptists on his side. The members of the HOA are not a very large group but they are very latent. I doubt many of them even read the association bylaws let alone attend meetings and vote for the association officials. Since they are not very active in the association they are rationally ignorant about what the association is up to. This is slightly different from what Olson describes as a rationally ignorant voter because a member of the association could, if they so desired, influence the outcome of a vote (especially since so few members actually vote). However, because the cost of informed action to an individual member is likely more than the benefit they will receive, they are rationally ignorant.

For example, lawyers had to be hired to draft the letter to my neighbors. I’m sure many members of the HOA (including my mom) would rather see that money go to improving the park or some other productive venture. However, by not taking an active role in the HOA the neighbors are basically writing a blank check to those who do take an active role, like my neighbor the bootlegger. Having read Olson this is what I expect to happen. But, I still feel sorry for my neighbors and their two little donkeys. The abuse of power is just wrong whether it is by a bootlegger in an HOA or a roving bandit in destitute country.

Monday, October 30, 2006

 

Policy Economics

Policy Economics
I read an article titled "Proposed Border Fence Could Face Environmental Obstacles in Texas." U.S. Congress approved a homeland security bill that would palce a fence along about 700 miles of the U.S. border with Mexico. The purpose of the fence is to control the flow of illegal immigration across theh U.S. Mexico border. The problem is that the plan could destroy habitats and cut off access to water for numerous animals, including the endangered ocelot and jarguarundi, ancestors to the bobcat. To assess this problem you have to compare the costs and benefits of a fence towards the immigration problem and toward the endangered species. The costs of the fence would be funds for construction, disturbance of economic traffic between border towns of the U.S. and Mexico and possible extinction of certain species. The benefits of a fence would be less illegal activity allowing the most vulnerable sectors of our poputlation better chances of succes. A fence could benefit by keeping public funds to those who pay taxes, thus giving future Amercias educatoin, health care, and retirement security. Addtionally the stress of overpopulation, straining natural resources like wter, energy and forestland, would not be present. The costs of putting up a fence for certain species could mean extinction. Gene pools could be altered because of lack of contact with the same species and the food chain could be altered. Benefits towards building a fence are hard to come by unless an interest group implements some type of policy that provides money to reallocate as much of a species to a designated plot of land, not much can benefit from the fence species wise. I think that building a fence will benefit society better than leaving an open boarder. Will the contiuation of the Ocelot species continue life for me? Can i live without the Ocelot? I believe i can and i believe that the problem with illegal immigration is far more important than that of the endangered species along the Mexican/Amercian border. But if people recieve some benefit or incentive from these animals then they should be active in making a policy decision that would allow for both to occur.

 

Policy Economics

Policy Economics
I read an article titled "Proposed Border Fence Could Face Environmental Obstacles in Texas." U.S. Congress approved a homeland security bill that would palce a fence along about 700 miles of the U.S. border with Mexico. The purpose of the fence is to control the flow of illegal immigration across theh U.S. Mexico border. The problem is that the plan could destroy habitats and cut off access to water for numerous animals, including the endangered ocelot and jarguarundi, ancestors to the bobcat.

To assess this problem you have to compare the costs and benefits of a fence towards the immigration problem and toward the endangered species. The costs of the fence would be funds for construction, disturbance of economic traffic between border towns of the U.S. and Mexico and possible extinction of certain species. The benefits of a fence would be less illegal activity allowing the most vulnerable sectors of our poputlation better chances of succes. A fence could benefit by keeping public funds to those who pay taxes, thus giving future Amercias educatoin, health care, and retirement security. Addtionally the stress of overpopulation, straining natural resources like wter, energy and forestland, would not be present. The costs of putting up a fence for certain species could mean extinction. Gene pools could be altered because of lack of contact with the same species and the food chain could be altered. Benefits towards building a fence are hard to come by unless an interest group implements some type of policy that provides money to reallocate as much of a species to a designated plot of land, not much can benefit from the fence species wise.

I think that building a fence will benefit society better than leaving an open boarder. Will the contiuation of the Ocelot species continue life for me? Can i live without the Ocelot? I believe i can and i believe that the problem with illegal immigration is far more important than that of the endangered species along the Mexican/Amercian border. But if people recieve some benefit or incentive from these animals then they should be active in making a policy decision that would allow for both to occur.

Saturday, October 28, 2006

 

Global Corruption

Olson discusses corruption as a hallmark of governments that do not provide the necessary conditions for economic prosperity. I think Transparency International, which calls itself the Global Coalition Against Corruption, tracks the extent of corrupt governments worldwide.

 

World GDP Statistics













ANGUS MADDISON seems to be the go-to economist when it comes to world GDP numbers. You may be interested in checking out his homepage which includes a link to an Excel spreadsheet that provides population and GDP figures for the period 1-2003 AD.

I've used his spreadsheet to create several charts of per capita GDP data you might find interesting. You can click on a chart to get a larger version.

Saturday, October 21, 2006

 

The Logic

ILYA SOMIN APPLIES the logic of collective action:
"When will we know that liberal dominance on campus has truly ended? When conservative and libertarian students engage in as much free-riding and factional in-fighting as liberal ones do today:)!"
Read the whole thing.

Would you agree?

Tuesday, October 17, 2006

 

Kleptocracy

In our Power & Prosperity reading for this week I ran across the word kleptocracy, which I had to look up in a dictionary. Then, by some wierd fluke, I googled the word and discovered that President Bush has a kleptocracy policy
Today, The President Unveiled His National Strategy To Internationalize Efforts Against Kleptocracy, Pledging To Confront High-Level, Large-Scale Corruption By Public Officials And Target The Proceeds Of Their Corrupt Acts. This Strategy Is A New Component Of His Plan To Fight Corruption Around The World. Public corruption erodes democracy, rule of law, and economic well-being by undermining public financial management and accountability, discouraging foreign investment, and stifling economic growth and sustainable development.

Thursday, October 12, 2006

 

Today's Wars

You might be interested in a review of conflicts in the world today:
In all these countries, civil war is the main cause of conflict. The usual trigger is a dispute over scarce resources, or territory that has changed hands in the past. There are no traditional "invasion" type wars going on at the moment. However, some of the conflicts involve the use of irregular troops to "invade" a neighbor and try to conquer disputed territory. This is the case in Kashmir, where Pakistani irregulars have been invading this disputed territory, trying to take it from India. Another example is Darfur, where Arabic Sudanese tribes chase black African tribes out of disputed territory. A major threat of war these days comes from China, which threatens to take Taiwan by force, and uses nationalism and military threats to try and control neighbors.

Many current conflicts arise from the ease with which one can establish a private army. Calling the leaders of these forces warlords is pretty accurate, as these guys live off war. Stealing, or extorting, what they need, these groups have flourished on the availability of cheap Cold War surplus weapons from Eastern European and Russian arsenals. Africa is awash in warlords, with armed groups controlling turf all over the continent. The violence in and around Israel is largely because of warlord organizations like Hamas and Hizbollah, which are funded by Moslems seeking to destroy Israel.
Read the whole piece. Note the reference to warlords. You may want to consider this when we take up Power and Prosperity and discuss the idea of roving bandits.

 

Georgia

MIKHEIL SAAKASHVILI WRITES:
"The past week was a trying one for Georgia. Air, rail, sea, land and postal links were severed unilaterally by our largest neighbor, the Russian Federation. Immediately thereafter, Georgians living in Russia were subjected to a form of ethnic targeting not seen in Europe since the Balkans in the 1990s--and the harassment is tinged with even more sinister historical overtones. Hundreds are being deported; business owners are being harassed; schoolchildren are being forcibly registered with local police; women are being gratuitously tested for sexually transmitted diseases; and children are being torn from families.

It is easy, amid these bleak headlines, to lose sight of an even more important story: In just three short years, my country has been transformed from a gangster-run economic and political basket case into a budding democracy with one of the world's fastest-growing economies. The World Bank recently lauded Georgia as the No. 1 reformer in the world and the least corrupt transitional democracy. Just last month NATO admitted Georgia into a new stage of membership talks, recognizing our political, economic and military progress. And just last week we completed an action plan with the European Union that charts our irrevocable course toward a fully Western future.

It is this remarkable metamorphosis--capped last week by fully fledged, free and fair local elections, hailed by the Organization for Security and Cooperation in Europe (OSCE) for their "professional and inclusive manner"--that gives us strength in this moment of crisis. All of our gains have been hard-fought. Our citizens have long suffered privations, and only now are tasting the sweetness of liberty: the opportunity to vote, to lead fruitful lives, to speak their voice, and to chart a future for their children untrammeled by poverty, mafias or discrimination."

Saturday, October 07, 2006

 

The J-curve and The Rise and Decline of Nations

The link goes to a book review of The J Curve: A New Way to Understand
Why Nations Rise and Fall
, by Ian Bremmer. In the book, Bremmer plots authoritarian states on the left side of the J, and democratic states on the right. He argues that very authoritarian states on the top of the left side of the J must, in order to liberalize, descend through increasing instability at the bottom of the curve and then ascend on the right. As they ascend the right side of the J, the states will see less instability. The process can also happen in the reverse direction, and states can become mired in the middle of the curve.
This strikes me as an interesting idea, particularly given the discussion we had in class of Olson's Rise and Decline. In Olson's theory, the more stability in a state, the more organizations have evolved which rely upon and promote that stability. He even uses the word sclerotic to describe the state of Great Britain in the early '80s. I suspect Bremmer would put Great Britain all the way at the top-right side of the J. Conversely pre-war Japan and Germany would have been placed near the top of the left side -- their defeat dropped them to the bottom of the curve, and then they clawed their way up the right.
The period of highest growth for Japan, Germany and the UK were probably as they completed the 'turn' onto the vertical part of the curve. South Korea and India seem to be making or to have just completed this turn as well. I suspect Iraq is at the bottom of the J, with the potential to go either way. And China, as the reviewer, Tim Worstall, points out, seems to straddle the curve; politically on the authoritarian side, and economically on the free side.

Friday, October 06, 2006

 

Scientists and Engineers for America

"Today a group of scientists and concerned citizens launch a new organization, Scientists and Engineers for America, dedicated to electing public officials who respect evidence and understand the importance of using scientific and engineering advice in making public policy.

The principal role of the science and technology community is to advance human understanding. But there are times when this is not enough. Scientists and engineers have a right, indeed an obligation, to enter the political debate when the nation’s leaders systematically ignore scientific evidence and analysis, put ideological interests ahead of scientific truths, suppress valid scientific evidence and harass and threaten scientists for speaking honestly about their research."
Hmmm. Very interesting, eh? What do you think? What is the probability that a group of people, even a group of scientists, will speak honestly about science, or anything else, after forming a political interest group?

I think I detect "bootleggers" here. Who are the "baptists" that are going to join in their cause?

Wednesday, October 04, 2006

 

Forests and owls

Policy Economics
I found an article entitled "Why Endangered Species Protection vs. Economic Development doesn't Have to Be a Win-Lose Scenario." The article focuses on the effect of the federal endangered species act had on logging mills of the Pacific Northwest during the mid 90's. The problem facing these loggin mills came about through the spotted owl which was listed as one of many endangered species. The spotted owl needed old growth forests for their habitat, yet the loggers maintained their lives with the favored old growth timber which yielded more profit because of the size. Substantial restrictons on old growth logging eventually resulted in 15,000 forest-related jobs lost. These jobs that were lost, according to the results of the Clinton Administration efforts were replaced with jobs in businesses in other sectors such as technology, and other skill-laden opportunities in diverse fields. The unemployment rate was low and owls and old growth were being protected. A perfect comprise right? To keep the old growth trees standing would be efficient and not only by preserving the spotted owl. Lets say the loggers are allowed to keep cutting the old growth timber. The problem arises when you run out of that type of timber. Once the logger exhaust the timber he can't think that planting more trees will yield the same type of profits recieved before because the time to create old timber will exceed the life present logger if planted now. He would not be able to see the maximum net benefit. The problem arises with if whether or not each logger that lost his job was rewarded with a new one that provide equal economic benefit. The article states that 20,000 jobs were gained but by who? If one logger benefitted while one did not this creates a market failure and an inefficient means to providing protection for the spotted owl. Job placement must be obtained in order for this type of policy to work efficiently.

 

Property rights, Collective action, and Agriculture

InstitutionsOrganization of collective action and systems of property rights shape how people use natural resources, and these patterns of use in turn affect the outcomes of peoples agricultural production systems. For example, tenants are often not allowed to plant trees or lack incentives to do terracing. Moving from on-farm technologies to those that operate at larger spatial sales implies a greater need for collective action to make the technology work. Property rights and collective action also affect natural resource management. Collective action and networks among community members can facilitate access to information and even allow farmers to participate in technology development. Ownership of assets can serve as collateral for obtaining credit. Rights over common property resources frequently act as a crutch against risk. Collective action enables risk sharing and inspires mechanisms for collective self help. Property rights and collective action are also interdependent. Take for instance property regimes, where holding rights in common reinforces collective action among members, eventually the collective action is needed to manage the resource.

Monday, October 02, 2006

 

Indian Gaming

Recently proposals have been made by Senators to update the 1988 Indian Gaming Regulatory Act put in place by Congress. The Indian gaming industry has experienced excellent growth since the law was enacted. In 2005 the industry raked in almost $23 billion dollars. This growth has led other tribes to attempt to try and find land that is rightfully supposed to be theirs and establish their own gaming enterprises. The proposed amendment is supposed to halt off-reservation casinos as well as tighten the reigns that government has over the industry. If the amendment were to be approved the National Indian Gaming Commission would have the ability to then regulate the industry. Some tribes are concerned that the stiffer regulations on their accounting and other internal control standards would significantly increase their operating costs. If this were to happen they would be potentially forced to let go of some of their workers. Arrangements have been made by Rep. Pombo in order to specifically allow the Ewiiapaayp-Viejas Project. It is said that most of the Indian Country already approves of the current regulations in use.

Something about this proposed amendment seems fishy. If most of the Indian Country approves of the current regulations one wonders why it is that they would want to have more regulations enforced. It seems possible to this author that there could be at least two possible groups that may want this change to occur. The first could be gaming enterprise owners that operate off of reservations that are subject to the taxes and government intervention that the tribal gaming enterprises are not. The second could be tribes with representation that possibly want to just make it more difficult for other tribes to enter the industry, possibly taking a portion of their market share. One would guess that there are probably some funds that were transferred to Rep. Pombo to keep the Ewiiapaayp-Viejas from being voided by this amendment change. It will be interesting to see if this proposed changes between now and the time something actually happens in Congress. One can rest assured there will be ever more lobbying done in the near future by the tribal gaming groups.


 

The perfect compromise

I found an article entitled "Why Endangered Species Protection vs. Economic Development doesn't Have to Be a Win-Lose Scenario." The article focuses on the effect of the federal endangered species act had on logging mills of the Pacific Northwest during the mid 90's. The problem facing these loggin mills came about through the spotted owl which was listed as one of many endangered species. The spotted owl needed old growth forests for their habitat, yet the loggers maintained their lives with the favored old growth timber which yielded more profit because of the size. Substantial restrictons on old growth logging eventually resulted in 15,000 forest-related jobs lost. These jobs that were lost, according to the results of the Clinton Administration efforts were replaced with jobs in businesses in other sectors such as technology, and other skill-laden opportunities in diverse fields. The unemployment rate was low and owls and old growth were being protected. A perfect comprise right?

To keep the old growth trees standing would be efficient and not only by preserving the spotted owl. Lets say the loggers are allowed to keep cutting the old growth timber. The problem arises when you run out of that type of timber. Once the logger exhaust the timber he can't think that planting more trees will yield the same type of profits recieved before because the time to create old timber will exceed the life present logger if planted now. He would not be able to see the maximum net benefit.

The problem arises with if whether or not each logger that lost his job was rewarded with a new one that provide equal economic benefit. The article states that 20,000 jobs were gained but by who? If one logger benefitted while one did not this creates a market failure and an inefficient means to providing protection for the spotted owl. Job placement must be obtained in order for this type of policy to work efficiently.

Sunday, October 01, 2006

 

Brazilian Rainforest

I read, “How Green was my Valley” in the April, 2006 edition of The Economist. It was about how the Amazon Rain forest is diminishing by about 8,000 square miles every year. The large population of poor in Brazil cut the forests down for logging and farming. This is done both legally and illegally. The government has tried to protect the rainforest, and has recently created national reserves (off limit to logging). They have also become stricter in public lands where logging is legal, but is their a role for the government to play?
The government only has a role to play if the rainforest is a public good that will otherwise not be provided, or if there is an externality. I’m sure there are some goods that are provided because of the forest, and I am sure the rainforest will diminish a lot faster without the government’s intervention, but I am not positively sure if there is an externality. There may be a positive externality that comes from rain forest protection. Many people benefit, or live their lives within the rainforest. Many of these people also benefit from cutting down the rainforest because they can make a living from it, so I don’t believe this is a positive externality. But, their may be a positive externality that results from the value of preservation, especially in preserving something like the Amazon. If there is not enough rainforest protection, which would be the case if there is a positive externality, than the government would be reasonable in protecting the forest.

 

Collective Action and the Rise of Transnational Institutions

The theories presented by Mancur Olson in his book The Logic of Collective Action are based on the rational choices that individuals make as they participate in collective action. His logic is applicable to all types of groups and organizations. Furthermore, in the Rise and Decline of Nations, the author utilizes the model developed in the 'Logic' book and proposes a model that aims to explain the process by which nation states rise and fall as a function of how groups interact within their social, economic, and political systems. The current international political system is experiencing a deep transformation defined by the emergence of many transnational institutions and their growing importance as players in the global stage. Olson's logic could be used to explain this new phenomena.
In the Logic of Collective Action, and later in chapter 2 of The Rise and Decline of Nations, The author writes about the difficulties that arise when individuals organize and attempt to pursue conjunct or collective action. As he states, "[a]nother problem in organizing and mantaining socially heterogeneous groups is that they are less likely to agree on the exact nature of whatever collective good is at issue or on how much of it is worth buying" (Rise 24). This fundamental issue is at the core of the difficulties of true collective action and the theory proposed by Olson. The nation-state system of politics that has dominated the international scene since the Treaty of Westphalia (1648) was initially characterized by the interaction of mostly homogeneous units (nations) but the domestic politics of nation's themselves have experienced an evolution toward more pluralist units. This falls in line with Olsons work in the Rise and Decline of Nations. As the second implication of chapter 3 indicates, "[s]table societies [...] tend to accumulate more collusions and organizations for collective action over time" (Rise 41). This finding explains the process by which nation states become more pluralist over time.
Governments around the globe, once they have undergone the process previously described, become less efficient and less adept to manage the requirements of their citizens. This happens as a result of what Olson describes in his ninth implication on chapter 3, "the accumulation of distributional coalitions increases the complexity of regulation, the role of government, and the complexity of understandings, and changes the direction of social evolution" (Rise 73). In this quote, the 'distributional coalitions' refer to different interest groups that aim to (re)distribute collective resources in a manner that most fits their best (individual)interests. In the example I am using, those coalitions would be the interest groups within nations that want 'a larger' piece of the national 'pie.'
Modern transnational institutions are gaining importance as vehicles for individuals to attain their larger shares of societal wealth, assuming a role previously reserved for nation-states. Gradually, citizen's around the World are relying more on transnational, non-governmental, organizations instead of their own national governments. Richard Mansbach, a political scientist and proffessor at Iowa State University, explains this phenomena as partly related to the "erosion of state capacity"(Global Politics in a Changing World 184). Increasing ineffieciency at governmental levels, in addition to advances in technology that have made transnational resources more accesible, have changed people's perception of community and changed forever the alternatives available for their natural 'self-serving' quest. Author Jessica Mathews writes in her article Power Shift, " nation-states may no longer be the natural problem-solving unit"(Global 184). The effectiveness of transnational organizations is often derived from the fact that they act in a very autocratic manner. P.J. Simmons, in Learning to Live with NGO's, explains: "NGOs operate outside formal frameworks, moving independently to meet their goals" (Global 198). However, as organizations, they come to be under the same process that Olson describes in the Logic of Collective Action, just as the traditional nation-states did. They are subject to the same evolution and the same arising complications. Mathews points out, "[d]edicated to promoting more openness and participation in decision making, they [NGOs]can instead lapse into old-fashioned interest group politics that produces gridlock on a global scale"(Global 197).
As the logic of Olson explains, the 'decline' of the new global system of transnational organizations is inevitable as the workings of collective action continue to shape the evolution of individuals and the social,economic and political systems in which they operate. The same technological adavances that ended "governments' monopoly on information" and changed "people's perception of community," will likely continue to be the shaping force of change for global political systems. Especifically, ever increasing access to the World Wide Web (or internet) has dramatically changed the 'costs and benefits' of attaining and transmitting information, as well as of contacting and organizing with people beyond traditional social circles.
In the Rise and Decline of Nations, Olson provides the following quote: "The limited knowledge of public affairs is in turn necessary to explain the effectiveness of lobbying. If all citizens had obtained and digested all pertinent information, they could not then be swayed by advertising or other persuasion" (Rise 26). As individuals gain greater access to information they will naturally become less reliable on their usual channels of collective action.
If Olson's logic is followed, as this entire essay attempts to do, the eventual decline and/or transformation of the new transnational system of NGOs is inevitable. It is interesting to speculate about how this transformation would occur and what the new emerging system would be like. Is the erosion of the nation-state paradigm transitory? Will a new type of collective organization arise? My understanding of Olson's work may not be sufficient to elaborate a guided 'guestimation' of how the evolutionary process of collective action and global politics will turn out; for now, this posting served as an interesting exercise for the application of the first few assigned chapters of the Rise and Decline of Nations.

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