In his first book, The Logic of Collective Action: Public Goods and the Theory of Groups, he theorized that what stimulates people to act in groups is incentive; members of large groups do not act in accordance with a common interest unless motivated by personal gain. While small groups can act on shared objectives, large groups will not work towards shared objectives unless their individual members are sufficiently motivated. In 1982, he expanded the scope of his earlier work in an attempt to explain The Rise and Decline of Nations. He argues that groups such as cotton-farmers, steel-producers, and labor unions have an incentive to form lobby groups and influence policies in their favor. These policies will tend to be protectionist, which will hurt economic growth; but because the benefits of such policies are concentrated, and their costs are diffused throughout the whole population, there will be little public resistance to them. As distributional coalitions accumulate, nations burdened by them will fall into economic decline. His work influenced the formulation of the Calmfors–Driffill hypothesis of collective bargaining. In his final book, Power and Prosperity, Olson distinguished between the economic effects of different types of government, in particular, tyranny, anarchy, and democracy. Olson argued that under anarchy, a "roving bandit" only has the incentive to steal and destroy, whilst a "stationary bandit"—a tyrant—has an incentive to encourage some degree of economic success as he expects to remain in power long enough to benefit from that success. A stationary bandit thereby begins to take on the governmental function of protecting citizens and their property against roving bandits. In the move from roving to stationary bandits, Olson sees the seeds of civilization, paving the way, eventually for democracy, which by giving power to those who align with the wishes of the population, improves incentives for good government. Olson's work on the roving vs. stationary bandits is influential in analysis of the political and economic order structured in warlord states and societies.
Policy work
To help bring his ideas to the attention of policymakers, Olson founded the Center for Institutional Reform in the Informal Sector, funded by USAID. Based at the University of Maryland, the Center sought to supply an intellectual foundation for legal and economic reform projects carried out by USAID in formerly communist states that were attempting to make the transition to market-driven democratic governments governed by the rule of law. It was particularly active in East and Central Europe and the former Soviet Union. The Center also became actively involved in projects in South America, Africa, and Asia, where it became a proponent of judicial independence. It sponsored the first conference on corruption in francophone Africa in the 1990s, when it was a very sensitive subject. The IRIS Center continued to operate after Olson's death, but was eventually folded into other programs at the University of Maryland. To honor Olson's many contributions, the American Political Science Association established the Olson Award for the best PhD dissertation in Political Economy. In 2013 the University of Maryland announced the creation of a new endowed professorship—the Mancur Olson Professor of Economics. Maryland Professor of Economics Peter Murrell was the first Mancur Olson Professor.
