Nobel nod for failure findings
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How nations thrive - or fail - hinges largely on their political and economic institutions.
This premise underpins the groundbreaking research that has earned Daron Acemoglu, Simon Johnson, and James A Robinson the 2024 Nobel Memorial Prize in Economic Sciences.
The Royal Swedish Academy of Sciences has honoured the three scholars “for studies of how institutions are formed and affect prosperity”, recognising their exploration of why nations with differing institutions experience vastly different economic outcomes.
The laureates’ research confronts a fundamental question: why do some countries achieve sustained economic growth while others stagnate?
Their work demonstrates that inclusive institutions - those that provide broad access to opportunities and uphold fair rules - are key drivers of prosperity.
In contrast, extractive institutions, which concentrate power and benefits among a few, typically hinder long-term development.
“Reducing the vast differences in income between countries is one of our time’s greatest challenges. The laureates have demonstrated the importance of societal institutions for achieving this,” said Jakob Svensson, Chair of the Committee for the Prize.
Central to their findings is how colonial legacies have shaped present-day economic disparities.
Acemoglu, Johnson, and Robinson argue that colonial powers established different types of institutions based on local conditions.
In regions rich in natural resources, colonisers often implemented extractive systems to maximise short-term gains.
In contrast, areas more suitable for European settlement saw the creation of more inclusive institutions, inadvertently setting the stage for long-term development.
This dynamic explains why some former colonies that were once poor have become relatively prosperous, while regions that were initially wealthy have struggled economically.
Their methodological approach has been equally influential, particularly their use of natural experiments drawn from colonial history to assess how institutions impact prosperity.
This quasi-experimental strategy enabled them to quantify the long-term effects of institutional frameworks, establishing new empirical standards in economics.
Their seminal papers from 2001 and 2002 remain central to discussions on how historical institutions shape modern economies.
The laureates’ work also explores why extractive institutions often persist.
According to their analysis, political leaders benefit from maintaining the status quo, while promises of reform are usually distrusted by the public, preventing meaningful change.
In some cases, the threat of revolution forces elites to concede power, leading to democratisation and subsequent economic growth.
However, such transitions are rare and often fraught with conflict.
Beyond academia, their research has influenced global policy approaches to economic growth, including strategies outlined by the World Bank and the United Nations’ Sustainable Development Goals.
By demonstrating the central role of institutions in driving or hindering economic progress, the laureates provide a crucial framework for addressing global inequality.
More scientific background on their achievements is accessible in PDF form, here.