<
https://theconversation.com/this-years-nobel-prize-exposes-economics-problem-with-colonialism-241400>
"Daron Acemoglu, Simon Johnson and James Robinson have been awarded the 2024
Nobel memorial prize in economics for their influential work on how
institutions shape economic development. Some would say the decision to award
these scholars the Nobel was long overdue.
The paper that formed the basis of their work is one of the most cited in
economics. Acemoglu and Robinson’s subsequent book,
Why Nations Fail, has
also been hugely influential.
These works have inspired a rich debate on the relationship between societal
institutions and economic development – so in that sense, congratulations are
in order. But they have also been the subject of substantial criticism. In the
aftermath of the award, it is fitting to highlight the blind spots in their
analysis.
The most important piece of criticism concerns the connection between the
quality of a country’s societal institutions and its level of economic
development. Acemoglu, Johnson and Robinson’s work divides institutions into
two categories: “inclusive” and “extractive”.
Inclusive institutions – such as those that enforce property rights, protect
democracy and limit corruption – foster economic development, according to the
laureates. In contrast, extractive institutions, which give rise to a high
concentration of power and limited political freedom, seek to concentrate
resources in the hands of a small elite and thus stifle economic development.
The laureates claim the introduction of inclusive institutions has had a
positive long-term effect on economic prosperity. Indeed, these institutions
are today found primarily in high-income countries in the west.
A huge problem with this analysis, however, is the claim that certain
institutions are a precondition for economic development.
Mushtaq Khan, a professor of economics at Soas, University of London, has
analysed Acemoglu, Johnson and Robinson’s work extensively. He argues that it
mainly shows today’s high-income countries score higher on western-based
institution indexes, and not that economic development was achieved because
states first established inclusive institutions.
In fact, history is rife with examples of countries that grew rapidly without
having these inclusive institutions in place as a precondition for growth. East
Asian states such as Singapore, South Korea and Taiwan are good examples. Most
recently, so too is China.
Yuen Yuen Ang’s award-winning books on China’s development process have laid
out in detail how China was riddled with corruption during its growth process.
In the wake of this year’s Nobel award, Ang went as far as saying that the
laureates’ theory not only fails to explain growth in China, but also growth in
the west. She points out that institutions in the US were smeared with
corruption during the country’s development process."
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
