Monday, October 14, 2024 - Three economists were awarded the Nobel Prize in economics on Monday, October 14 for their research into how the nature of institutions helps explain why some countries become rich and others remain poor.
Daron Acemoglu, Simon Johnson and James Robinson will share
the prize, which carries a cash award of 11 million Swedish kronor ($1
million).
While announcing the winners, the Nobel Committee praised
the trio for explaining why “societies with a poor rule of law and institutions
that exploit the population do not generate growth or change for the better.”
“When Europeans colonized large parts of the globe, the
institutions in those societies changed,” the committee said, citing the
economists’ work. While in many places this was aimed at exploiting the
indigenous population, in other places it laid the foundations for inclusive
political and economic systems.
“The laureates have shown that one explanation for
differences in countries’ prosperity is the societal institutions that were
introduced during colonization,” the committee added.
Countries that developed “inclusive institutions” which
uphold the rule of law and property rights – have over time become prosperous,
while those that developed “extractive institutions” – which, in the laureates’
words, “squeeze” resources from the wider population to benefit the elites –
have experienced persistently low economic growth.
The Economics Prize is officially known as the Bank of
Sweden Prize in Economic Sciences in Memory of Alfred Nobel. Unlike the prizes
for physics, chemistry, medicine, literature and peace, it was not instituted
by the Swedish industrialist but rather by Sweden’s central bank in 1968.
Last year, the prize went to Claudia Goldin, a professor at
Harvard University, for her research into women in the labour market.
In their 2012 book “Why Nations Fail,” Acemoglu, a
Turkish-American professor at the Massachusetts Institute of Technology (MIT),
and Robinson, a British professor at the University of Chicago, argue that some
nations are wealthier than others because of their political and economic
institutions.
The book opens with a comparison of living standards in two
towns called Nogales – one in Arizona and one south of the border in Mexico’s
Sonora region.
While some economists have argued that differences in
climate, agriculture and culture have huge impacts on a place’s prosperity,
Acemoglu and Robinson argue that those living in Nogales, Arizona, are
healthier and wealthier because of the relative strength of their local
institutions.
In 2023, Acemoglu and Johnson, a British-American professor
at MIT published “Power and Progress,” a study of how technological innovations
over the past 1,000 years, from agricultural advances to artificial
intelligence, have tended to benefit the elites, rather than creating
prosperity for all.
The authors warned that “the current path of AI is neither
good for the economy nor for democracy.”
Asked whether their research simply argues that “democracy
means economic growth,” Acemoglu said “The work we have done favours democracy”
but added that democracy “is not a panacea.”
“Our argument has been that this sort of authoritarian
growth is more unstable and does not generally lead to very rapid and original
innovation,” Acemoglu said in a phone interview during the announcement
ceremony.
In “Why Nations Fail,” he and Robinson argued that China,
because it lacks inclusive institutions, would not be able to sustain its
economic growth. More than a decade since the book’s publication, Acemoglu said
China has posed a “bit of a challenge” to that argument, as Beijing has been
“pouring investment” into the innovative fields of AI and electric vehicles.
“But my perspective is generally that these authoritarian
regimes, for a variety of reasons, are going to have a harder time in achieving
long-term, sustainable innovation outcomes,” he said.
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