Become smarter in just 5 minutes
Morning Brew delivers fast, insightful updates about the business world, from Wall Street to Silicon Valley, every day.
Ex-economics majors, prepare for a sense of déjà vu. The authors of the seminal textbook Why Nations Fail were awarded the Nobel Prize in Economics yesterday for their work “better explaining the reasons for persistent inequalities between nations,” according to the Nobel Committee. He was part of a group of three.
Daron Acemoglu, James Robinson, and former International Monetary Fund chief economist Simon Johnson will receive around $100 in prize money for research that found a link between a country’s prosperity and institutions established during European colonial times. Divide the million dollars into piles.
According to award-winning research:
Places developed either ‘inclusive’ or ‘extractive’ regimes based on population density. The former enabled inclusive governance (i.e. democracy), while the latter extracted resources to benefit a small elite group. Countries that developed inclusive institutions experienced long-term prosperity. People with exclusive institutions do not. “Broadly speaking, the work we have done is in favor of democracy,” Acemoglu said.
A modern-day example: the twin city of Nogales on the U.S.-Mexico border, where the northern and southern parts of the cross-border city have the same climate and the same resources, but the U.S. section has much more It’s rich. , according to the researchers.
But they are not without their critics. Some scholars argue that the Nobel Prize winners’ assumptions ignore the influence of culture on prosperity. Others point to the irrefutable counterexample that China continues to experience explosive growth despite its dictatorship. —CC
