Why Nations Fail

Why Nations Fail: The Origins of Power, Prosperity, and Poverty
Why Nations Fail Book Cover
Authors Daron Acemoglu and James Robinson
Country United States, Turkey
Language English
Subject Comparative Politics
Genre Nonfiction
Publisher Crown Business
Publication date
 March 20, 2012
Media type Hardcover, Audiobook, Amazon Kindle
Pages 546
ISBN 0307719219
OCLC 729065001

Why Nations Fail: The Origins of Power, Prosperity, and Poverty is a non-fiction book by Turkish-American economist Daron Acemoglu from the Massachusetts Institute of Technology and British political scientist James A. Robinson from Harvard University. The book applies insights from institutional economics, development economics and economic history to answer why nations develop differently, with some succeeding in the accumulation of power and prosperity, while others fail, via a wide range of historical case studies. The authors also maintain a website (with a blog that has been deactivated since 2014) about the themes of the book.[1]

Content

In 15 chapters, Acemoglu and Robinson try to examine which factors are responsible for the political and economical success or failure of states. They argue that the existing explanations about the emergence of prosperity and poverty, e.g. geography, climate, culture, religion or bad economic policies, are either insufficient or defective in explaining economic performance. They support their thesis by using countries as case studies, which are similar in all the mentioned factors but still developed differently in term of prosperity. The most incisive example is Korea, which was divided into North Korea and South Korea 60 years ago and both countries’ economies have developed completely differently since then. Further examples are the border cities Nogales (Sonora, Mexico) and Nogales (Arizona, USA). By reference to border cities, the authors analyze the impact of the institutional environment on the prosperity of people from the same geographical area and same culture.

The major thesis of Acemoglu and Robinson is that economic prosperity depends above all on the inclusiveness of economic and political institutions and inclusive institutions depends on whether the ruling elites are willing to yield to changes. Only a functioning democratic and pluralistic state which guarantees the rule of law is able to exploit the ideas and talents spread among the whole population of a nation. In extractive systems (autocracies) however, entrepreneurs and citizens have no incentives to invest in and work on innovations, which are necessary to create prosperity, because the ruling elites are afraid of creative destruction, a term created by Austrian economist Joseph Schumpeter, referring to the ongoing process of annihilating old and bad institutions while generating new and good ones. Creative destruction would fabricate new groups which competed for power against ruling elites. Hence, elites would lose their exclusive access to the economic and financial resources of a country. The authors bring in the emergence of democratic pluralism in Great Britain after the Glorious Revolution in 1688 as being decisive for the Industrial Revolution as an example as well as the fall of the Soviet Union.

Theories

The book is based on two major theories: the first theory explains the drivers for democratic and dictator regimes and the second one goes a step further and explains how democratic regimes promote economic growth while dictator regimes prevent it. The following section elaborates on how those two theories are developed academically.

Drivers for Democracy vs. Dictatorship

The theory on democratic transition comes from Acemoglu and Robinson's prior publication in The American Economic Review, a paper called A Theory of Political Transition.[2] This paper studies the reason behind oscillations between non-democracy and democracy based on the history of democratization of Western Europe and Latin America. The paper emphasizes the roles of the threat of revolution and social unrest in leading to democratization and of elites' desires to limit economic redistribution in causing switches to nondemocratic regime.

A number of theoretical assumptions underlie the paper and allow for the authors' simplified model of society. Firstly, Acemoglu and Robinson assume that society is simply divided between a small rich ruling class and a large poor class. Secondly, they assume that regimes must be democratic or nondemocratic. Thirdly, people's preferences in society are defined by a singularly linear dimension, which means that the only issue people care about is monetary redistribution by the ruling class. Fourthly, people care not only about redistribution today but also redistribution in the future. Therefore, democracy comes in a form that guarantees the future redistribution for the people. Fifthly, the economic output of a country fluctuates year by year, which means the cost of revolution varies at different times. Finally and most importantly, each individual in society all tries to maximize his or her utility.

Under those assumptions, a country starts from a nondemocratic society in which a small rich group controls most of the wealth and rules the poor majority. As the ruling class, the rich receive taxation from the economy's output and they decide on the taxation rate. The poor majority can either take what is left for them, the remaining economy's output divided by the population size, or revolutionize against the ruling class with a certain cost.

In a revolution, the poor's ultimate payoff is the benefit of revolution minus the cost of revolution. Under that circumstance, the payoff of the rich ruling class is split between, when the poor revolutionizes, the punishment for the ruling class and when the poor acquiesces, the taxation income. This thus becomes a two-stage sequential game in which the rich first decide on the taxation rate and level of redistribution and then the poor decide later whether they should revolutionize. Because of the potential loss of economic benefits by revolution, the rich wants to propose the taxation rate that would not instigate the poor as much as they can to avoid revolution but not so much that the rich lack have enough benefits. Democratization thus refers to the situation where the rich increase redistribution and franchise to the poor in order to avoid revolution. There are several variables that determine the decision making of both sides:

E - Economy's output of a certain year

C - Cost of revolution

P - Punishment for the ruling class if revolutionaries take over

t- Tax rate imposed by the rich

B - Benefits of revolution

For the poor, the payoff without revolution is given by E*(1-t) and that with revolution is given by B-C; for the rich, the payoff without revolution is given by E*t and that with revolution is given by -P.

These variable affect the game as follows:

Variable Action Poor Payoff

Without Revolution

 Poor Payoff

With Revolution

 Rich Payoff

Without Revolution

 Rich Payoff

With Revolution

 More Likely to Democratize? Why
E Decrease Lower Unchanged Lower Unchanged Yes The cost of revolution for both rich and poor is lower during economic recession so the rich are more willing to give up rights and benefits to the poor to prevent revolutions.
C Decrease Unchanged Higher Unchanged Unchanged Yes With lower cost of revolution (for example, if one is unemployed vs. employed, the cost is much lower when unemployed), the poor tends to resort more to revolution; the rich would thus grant more benefits to the poor to prevent that from happening
P Higher Unchanged Unchanged Unchanged Lower Yes If the punishment for revolution is higher for the rich, the rich would want to avoid it by further sharing benefits and rights with the poor
B Increase Unchanged Higher Unchanged Unchanged Yes If the benefits for revolution are higher, revolution appeals more to the poor and thus the rich again have more incentive to redistribute

Based on the analysis above, it is not hard to conclude that the threat of revolution constantly incentivizes the rich to democratize. The theory also resonates with Clark, Golder and Golder's paper Power and Politics: Insights from an Exist, Voice and Loyalty Game,[3] in which the government decides between predate and not to predate citizens based on the payoff while the citizen has the option to exit (migrate to other countries), remain loyal and voice their concerns at a cost (protest). Similarly, this game also provides insights into how variables like exit payoff, cost of voicing and value of loyalty change state's behavior as to whether or not to predate.

How Democracy vs. Dictatorship Affect Economic Performance

Given that we know the factors leading to democratic vs. dictatorial regimes, what can we make of it? The second part of the story in Why Nations Fail explains why inclusive political institutions give rise to economic growth.

This theory was first presented in another paper by Acemoglu and Robinson, Institutions as the Fundamental Cause for Long-Run Growth.[4] With this theory, Acemoglu and Robinson try to explain the different level of economic development of all countries with one single framework. To put in simple words, the causal effect starts from political institutions and distribution of resources of a country in current period. Political institutions in current period determines the de jure distribution of political power, while the distribution of economic resources determines the de facto distribution of political power. With the effect of both de jure and de facto political power distribution, they affect the economic institutions as in how production is carried out as well as how the political institutions will be shaped in the next period. Economic institutions also determine the distribution of resources for the next period.

For example, in the case of democratization of Europe, especially in England, in current period, political institutions were dominated by the monarch and therefore the by-law determines the supreme power of the monarch. However, because of the increasing trade, de facto political power also went beyond the monarch to the new rising merchant class. Because the merchant class contributed to a significant portion of the economic output as well as the tax income for the monarch, the interaction of the two political powers gave rise to the political institutions that favored merchant class and the economic institutions that protect the interests of merchant class and redistributed more to the merchant class. This cycle gradually empowered the merchant class, powerful enough to take down the system of monarchy system in England and to guarantee the efficient economic institutions.

In another paper with Simon Johnson (economist) at Massachusetts Institute of Technology called The Colonial Origins of Comparative Development: An Empirical Investigation,[5] authors together with Johnson have empirically proved that different institutions result in different levels of economic growth in a natural experiment. By looking at the new institutions built during colonial period in relation to the economic development level today, the paper has found that, in places where it was hard for colonizers to survive (high mortality rate), they tend to set up extractive regimes, which result in poor economic growth nowadays whereas in places where it was easier for colonizers to survive (low mortality rate), they tend to settle down and set up and duplicate institutions from their country of origin - most often from Britain, as we have seen in the colonial success of Australia and United States. Thus, mortality rate among colonial settlers several hundred years ago has determined the economic growth today by choosing different path of institutions.

The theory of interaction between political and economic institutions is further corroborated by findings in The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth[6], a paper by Acemoglu, Johnson and Robinson, which specifically talks about the rise of Europe after 1500 in terms of its economic power. The paper finds that the Atlantic Trade (slavery, commodities and so on) after 1500 increased profits from trade and thus created a merchant class that was in a position to challenge monarchial power. By conducting regression analysis on the interaction variable between institution type and Atlantic trade, the paper also proves an interaction between Atlantic Trade and the political institution: the presence of absolutist monarch power hampers the effect of Atlantic Trade on economic rise.

Acemoglu and Robinson have also publicly admitted that this theory is largely inspired by the work of Douglass North, an American economist, and Barry R. Weingast, an American political scientist. In their paper in 1989, Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England,[7] they conclude that winners from historical events shape institutions to protect their interests. In the case of Glorious Revolution, the winning merchant class established property rights law and limited power of the monarch power, which essentially promoted economic growth. Later on, North, Wallis and Weingast call this law and order open access, in their paper Violence and the Rise of Open-Access Orders[8] in 2009. With open access - inclusiveness, equality and diversity - a society is able to flourish and prosper.

Alternative Theories

While Acemoglu and Robinson attribute economic growth to institutions, there are also other possible explanations that look at other factors including geography, culture and the ignorance of leaders.

Geography

In Jared Diamond's groundbreaking Guns, Germs, and Steel, he lays out the basic arguments for Environmental determinism - that environments and geography determine the political institutions of a certain region. Starting from the same attempt to explain why Eurasian civilizations have outlived other civilizations that used to exist in the world, Diamond looks at the geographical differences among different civilizations and the agricultural practices that have arisen from those differences. For example, because of the latitudinal differences between the Eurasian continent and American/African continents - Eurasian continent has a large longitudinal span while American/African continents are longitudinally narrow - it is easier for habitants on the Eurasian continent to spread the same kind of agricultural products and domesticated animals like wheat, cows and horses. On the other hand, for African and American continents, because of the wide longitudinal differences of different regions, it is hard for the same kind of agricultural products and domesticated animals to spread. Because of this difference, people on Eurasian continent are more likely to develop stronger immune system. However, according to Acemoglu and Robinson, the theory is incapable of explaining the gap between rich and poor countries after 1500. It is also powerless in explaining the difference of economic growth between two places with similar or same geographic conditions, like Nogales, Sonora and Nogales, Arizona, North Korea and South Korea and East Germany and West Germany. Geographical factors do not have as strong explanatory power as institutional factors. Especially in the modern age when advanced technology is widely available, the reason why Equatorial Guinea or Sierra Leone still suffer from diseases like Malaria is not because of the weather, but because of the poor institutions underlying the state.

Culture

Cultural determinism believes culture is the driving force for different levels of economic growth. For example, Max Weber believes that Protestant ethic explains the industrial revolution and economic boom in Western Europe. Different from previous Christian belief, Protestantism attributes the "good life" to one's faith in God and God's reciprocal blessing. Therefore, believers tend to work hard to have a good secular life to be considered as a faithful believer. This belief thus motivates people to work hard and collectively contributes to the economic growth. On the other side, cultures like African, Asian and Incan culture do not promote such values that motivate people to innovate and work hard and thus those civilizations are more lagged behind. However, this theory is incapable of explaining the recent economic miracle in Asia. Although Confucianism is believed to create social hierarchy and nepotism, it is in reality translated into high work ethics in countries and regions that contribute to the economic boom in Hong Kong, Taiwan and Singapore as well as the recent fast economic growth in China. Moreover, it is unable to explain the economic growth difference between two places that share similar or even the same culture, for example, between North Korea and South Korea, where the culture has been much homogenous until the Korean War. Acemoglu and Robinson also believe that culture to some extent is shaped by the political institutions. For example, the culture of working hard in Confucian societies like South Korea and China is shaped by the incentive structure of the state. Therefore, culture is the effect, not the cause.

Ignorance

Theory of ignorance, by Lionel Robbins, focuses on the market failure as causes for lack of economic development. It conceives ruling a country as distributing resources. As resources are scarce, the rule has to allocate those resources wisely to have economic growth. Therefore, lack of economic growth is thus the inability and ignorance to carry out correct and well-studied decisions in allocating economic resources. For example, previous president in Ghana, Kwame Nkrumah focused his policies only on developing the country's industries, which turned out to be disastrous to the economy. His successor, Kofi Abrefa Busia, knowing the mistakes of Nkrumah, still carried out the same style expansionary economic policy, not because he did not know what policy was good or bad - because of ignorance - but because the institutional design in Ghana pushed him to do so. This example demonstrates that ignorance oversimplifies the situations and cannot offer a satisfactory explanation for why nations fail. First, this theory assumes good intentions of the rulers, ignoring the possibility that rulers intentionally carry out bad economic decisions for personal interests. Second, if ignorance of ruler is the cause, then by having a better and less ignorant leader the country will witness greater economic growth. Yet, this isn't the case as we observe in most of the countries.

Compatibility

Though these theories all try to claim a major factor that drives economic development, they are not mutually exclusive. For example, geography does shape the natural resources available to a country. For example, a country given rich resources have the potential to become rich. On the other side, institutions determine how those resources are distributed and create incentives for different groups to be motivated to participate in economic development.

Critical Reviews

Arvind Subramanian

Indian economist Arvind Subramanian points out the potential problem of simultaneous causality in Acemoglu and Robinson's theory in his publication on The American Interest.[9] Why Nations Fail takes political institutions as causes and economic performance as results for granted. However, according to Modernization theory, the causation can also go the other way around - improvement of political institutions can also be a result of economic modernization. The book thus fails to explain why this alternative perspective doesn't work.

Subramanian also points out the limitation of book to explain the recent economic development in China and India. Under an authoritarian regime (poor political institutions), China has achieved rapid economic development while democratic India (good political institutions) has lagged much behind. According to Surbramanian, one can say that China and India are outliers or that it is still too early to decide (that is, China might collapse and India might catch up according to the book's prediction). However, it is still unsatisfying that the theory is unable to explain the situation of 1/3 world population and it is unlikely that China or India will change drastically in the near future according to the prediction.

Acemoglu and Robinson counter[10] that their theory distinguishes between political and economic institutions and that it is not political institutions that contributes to growth directly but economic institutions shaped by the political institutions. In the case of China, even though the political institutions on a higher level are far from inclusive, the incentive to reform Chinese economy does come from political institutions in 1978 from Deng Xiaoping's Opening up policy at the end of the internal political feud during Cultural Revolution. This exactly fits into the theory that the change in political institutions has shaped economic institutions and thus has influenced economic performance. This economic growth is further expected to shape the political institutions in China in the future. One can only say that China is an outlier to the theory when in the future China becomes as wealthy as U.S. or Germany but still remains an authoritarian regime.

Regarding the case of India, the authors deny an equivalence between inclusive political institutions and electoral democracy. Electoral democracy is the de jure system adopted by a country while political institutions refer to the de facto structure and quality of political system of a certain country. For example, India's political system has long been dominated by the Congress Party; the provision of public goods is preyed upon by political Patrimonialism; various members of Lok Sabha - the Indian legislature - face criminal charges. The quality of democracy is very low and thus the political institutions are flawed in India, which explains why economic institutions are equally poor and economic growth is stymied.

David R. Henderson

David R. Henderson wrote a generally positive review in Regulation[11] but criticized the authors for inconsistency when talking about central government's role in promoting development. In some parts of the book, the authors attribute to the failure of the states like Afghanistan, Haiti and Nepal for the lack of central government to impose rule and order. However, at the same time, in other parts of the book, the authors seem to embrace weak government for growth, as in the example of Somalia after losing its central government. In addition, Henderson points out two errors the authors have made in the book is about the United States. First, the authors falsely accuse "monopolists" like Rockefeller of being the extractive power. But the fact is Rockefeller didn't raise the price of oil but lowered the price to gain market share rather than to extract from the economy. Second, the authors are oblivious of the mainstream scholarship on American economic history between American Civil War and civil movements in America. Rather than diverging from the rich North, the South was actually converging. Besides the two errors, Henderson is also not satisfied with the authors' characterization of extractive institutions only as small wealthy elite class extracting from poor majority class like in Africa. The authors ignore the type of extractive institution in America under President Barack Obama: "A government of elitists that, claiming to speak for the large less-wealthy majority, extracts wealth from a small wealthy minority."[11][12]

Francis Fukuyama

In his article in The American Interest, Francis Fukuyama criticized Acemoglu and Robinson's approach and argument for being very similar to a book by North, Wallis and Weingast in 2009, Violence and Social Order.[13] Fukuyama argued that the conception of states being inclusive or extractive oversimplifies the problem. He also pointed out that the approach is too conceptual and fails to unpack the practical meaning of different institutions. The historical approach to prove the argument was also subjected to interpretation. Finally, Fukuyama specifically pointed out that the argument by Acemoglu and Robinson does not apply to the case of modern China, as China has "bad" institutions but still flourishes economically.

In response to Fukuyama's comments, Acemoglu and Robinson once again replied on their blog.[14] Firstly, Acemoglu and Robinson agreed on the similarity to North, Wallis and Weingast's work but explained that they build on and complement each other's work. Secondly, with reference to the criticism of oversimplification, they countered by describing the oversimplification as an approach to decompose complex political institutions. Thirdly, on the degree of conceptuality, Acemoglu and Robinson respond by saying that it is necessary to conceptualize and to avoid focusing too narrowly on a single aspect of institutions. Lastly, on China, they attribute the rapid economic growth in China to the some (but yet limited) level of inclusiveness, as was also seen in the example of the Soviet Union in the 1970s.

Jared Diamond

In Jared Diamond's book review on The New York Review of Books,[15] he points out the narrow focus of the book's theory on only institutions, ignoring other factors like geography. One major issue of the authors' argument is endogeneity - if good political institutions explain economic growth, then what explains good political institutions in the first place when there was no any institution once upon a time. That's why Diamond lands on his own theory of geographical causes for developmental differences. He looks at tropical (central Africa and America) vs. temperate areas (North and South Africa and America) and realizes that the differences of wealth of nations are caused by the weather conditions: for example, in tropical areas, diseases are more likely to develop and agricultural productivity is lower. Second criticism by Diamond is that Acemoglu and Robinson seem to only focus on small events in history like Glorious Revolution in Britain as the critical juncture for political inclusion while ignore the common prosperity in Western European region. Diamond prompts the authors to also realize the importance of other factors like geography in primordially giving birth to the seeds for good political institutions.

In response to Diamond's criticism,[16] the authors reply by saying that the arguments in the book do take geographical factors into account but however, geography does not explain the different level of development. Acemoglu and Robinson simply take geography as an original factor a country is endowed with; how it affects a country's development still depends on institutions. They mention their theory of Reverse of Fortune that poor countries in 1500 like U.S., Australia and Canada have become rich countries nowadays despite poor natural endowments. They refute the theory of Resource curse as they believe natural resources can be curse to some countries like Sierra Leone (diamond) and Venezuela (oil) but can also be blessing to other countries like BotswanaN(diamond) andorway (oil). What matters is the institutions that shape how a certain country uses its endowed natural resources in the historical processes.

Diamond responds again[16] to Acemoglu and Robinson's response, reinforcing his claim of the book's errors. Diamond insists geographical factors dominate why countries are rich and poor today. For example, he mentions that the tropical diseases in Zambia keep male workers sick for a big portion of their life time, thus reducing their labor productivity significantly. He reinforces his point that geography determines local plantations and gives rise to ancient practice of agriculture. Agricultural practice further shapes a sedentary lifestyle as well as social interaction, both of which shape social institutions.

Diamond's review was excerpted by economist Tyler Cowen on Marginal Revolution.[17]

Jeffrey Sachs

According to Jeffrey Sachs,[18] the major problem of Why Nations Fail is that it focuses too narrowly on domestic political institutions and ignores other factors, such as technological progress and geopolitics. For example, geography plays an important role in shaping institutions, and weak governments in West Africa may be seen as a consequence of the unnavigable rivers in the region. Sachs also questions Acemoglu and Robinson's assumption that authoritarian regime cannot not motivate economic growth. Several examples in Asia, including Singapore and South Korea, easily refute Acemoglu and Robinson's arguments that democratic political institutions are the prerequisites for economic growth. Moreover, Acemoglu and Robinson overlooks macroeconomic factors like technological progress (e.g. industrialization and information technology).

In response to Sachs' critique, Acemoglu and Robinson replied on their book blog with twelve specific points. Firstly, on the role of geography, Acemoglu and Robinson agree that geography is crucial in shaping institutions but do not recognize a deterministic role of geography in economic performance. Secondly, on the positive role authoritarian government plays in economic growth, especially in the case of China, the fast economic growth could be part of the catch-up effect. However, it does not mean that authoritarian government is better than democratic government in promoting economic growth. It is still way too early, according to Acemoglu and Robinson, to draw a definite conclusion solely based on the example of China. Lastly, on industrialization, they respond by pointing on the contingency upon institutions for industrialization in order to take effect.

Based on Acemoglu and Robinson's response, Sachs wrote another response on his personal website.[19] Rather than replying to the specificities of their reply, Sachs proposes the structural differences between two groups of scholars and comments on them. According to Sachs, he disagrees with the historical determinism that Acemoglu and Robinson propose, as Sachs believes that the actions taken by colonists two hundred years ago had no power in explaining economic performance today. Sachs insists on retaining complexity (geography, technological progress, etc.) in explaining differences in economic performance, rather than just simplifying to one factor (institutions). As Sachs describes, the evidence suggests that economic development is a multidimensional dynamic process, in which political, institutional, technological, cultural, and geographic factors all play a role. Such a view of history might not be "powerful" in the sense that Acemoglu and Robinson would like, but it has the virtue of being accurate and useful.

Maximilano E. Korstanje

A professional book review by Maximiliano E Korstanje, an economist from Argentina, exerts a radical criticism on Why Nations Fail. Far from being objective, he claims, the argument of this book is based on Ethnocentrism, or Anglocentrism - that believes that other non-Western civilizations will converge to the universal Western ideal of development, democracy and human rights. Acemoglu and Robinson are claimed to fail to recognize that there are many other nations that are free to choose to live in another way; there is no imperative stating that all nations should be democratic to enjoy the “benefits” of modern life and a capitalist economy. Indeed, paradoxically, envisaging democracy as a "universal value" is a betrayal to the self-determination of others, which Korstanje sees as the very cornerstone of democratic ideology. In his view, defining a nation's success as a function of its degree of wealth or per capita income corresponds directly to an "ethnocentric" mechanism within the discipline, aimed at creating a need in non-western societies, namely, the "need" to be "economically developed", "modern" and "democratic." There is no genuine attempt for a critical discussion of the role of international financial corporations as World Bank in issuing an unlimited number of loans to the world. Lastly, Acemoglu and Robinson are not treating the problem of inequality with accuracy and detail. The Gini coefficient list shows how some Latin American countries as Uruguay are more egalitarian than United States. Moreover, inside United States, despite the high level of economic development and the democratic system, black people are often excluded from such benefits, reaffirming the ethnocentric nature of democracy and development.[20][21]

Mitt Romney

Though the Republican Party candidate Mitt Romney in United States presidential election, 2012 never explicitly mentioned the book, his comment "culture makes all the difference"[22] when commenting on what causes the different level of economic development between Israel and Palestine invokes response from the two authors. On an article called "Uncultured" on Foreign Policy,[23] the authors point our Romney's fallacy. First, Romney is confused between culture and institution. What he called "good work ethic" could be culture on the surface but is essentially shaped by institutions with incentive structure. Furthering the arguments in the book, Acemoglu and Robinson refer to Jewish education system and historical contingencies, none of which is cultural. Why Palestine is less developed is simply because inclusive economic institutions were not able to develop there, due to the colonial occupation and regional political machination. Lastly, the authors mention South and North Korea as an example against "culture" as determinant for economic development, as South and North Korea both came from the same homogeneous cultural entity before splitting up and adopting different institutions.

Paul Collier

Development economist Paul Collier from University of Oxford, reviewed the book for The Guardian.[24] The review summarizes two essential elements for growth from the book: first, a centralized state and second, inclusive political and economic institutions. Based on the case of China, a centralized state can draw a country out from poverty but without inclusive institutions, such growth isn't sustainable, as argued by Acemoglu and Robinson. Such process is not natural, but only happens when the elites are willing to cede power to the majority under certain circumstances.

Peter Forbes

Peter Forbes reviewed the book for The Independent: "This book, by two US economists, comes garlanded with praise by its obvious forebears – Jared Diamond, Ian Morris, Niall Ferguson, Charles C. Mann – and succeeds in making great sense of the history of the modern era, from the voyages of discovery to the present day."[25] Besides singing high praises for the book, Forbes makes the linkage between the message of the book and the current day politics in developed countries like United States and United Kingdom. Though the two countries are by far one of the most inclusive economies in the world, various parts of them are by nature extractive - shadow banking system, conglomerate manufacturers and so on. He warns against extractive practice under the cloak of inclusive economy in current developed countries.

Robert J. Barro

Although Robert Barro, an American economist from Harvard University, did not directly respond to the arguments posed by the book, his research on the relationship between democracy and growth directly refutes the argument that inclusive institutions give rise to economic growth. According to Barro's paper Democracy and Growth[26] in 1996, the econometric analysis reveals weak relationship between democracy and growth, by looking at 100 countries from 1960 to 1990. After fixing factors like rule of law, free market, democracy has statistically insignificant influence on economic growth. At the same time, raising standard of living - including health service, education - will substantially raise the probability of political freedom. Barro is essentially arguing the reverse causality compared to Acemoglu and Robinson - economic growth gives rise to better political institutions, especially when a country is poor.

Warren Bass

Warren Bass reviewed the book for the Washington Post, writing: "It's bracing, garrulous, wildly ambitious and ultimately hopeful. It may, in fact, be a bit of a masterpiece."[27] Despite his applause, Bass also points out several imperfections of the book. First of all, the definition of extractive and inclusive institution is vague in a way that cannot be utilized in policymaking. Second, though Acemoglu and Robinson are ambitious in covering cases of all nations across history, this attempt is subjected to scrutiny of regional experts and historians. For example, their accusation of Ottoman Empire as "highly absolutist" might not be correct, given the level of tolerance and diversity inside the Empire compared with its European counterparts.

Willian Easterly

In a mixed review of the book in the Wall Street Journal, William Easterly was generally supportive of the plausibility of the book's thesis but critiqued the book's failure to cite rigorous, statistics-based evidence to support the validity of the historical case studies, but some evidence existed in the scholarly literature.[28] For example, in Congo, it is not robust enough by just saying the reason why Congo is impoverished is that Congo is close to slave trade shipping points. The approach of historical case studies only offers one data point. Moreover, Easterly also points out the danger of ex-post rationalization that the book only attributes different levels of development to institutions in a way a bit too neat. For example, to explain the fall of Venice, it could be the extractive regime during the time or it could also be the shift from Mediterranean trade to Atlantic trade. The historical case studies approach might be biased.

Awards and honors

Related work by others

References

  1. ↑ "Why Nations Fail". Retrieved 2013-09-21.
  2. ↑ Acemoglu, Daron. "A Theory of Political Transitions". The American Economic Review.
  3. ↑ William, Clark. "Power and Politics: Insights from an Exist, Voice and Loyalty Game".
  4. ↑ Acemoglu, Daron. "Institutions as the fundamental cause for long-run growth" (PDF). NATIONAL BUREAU OF ECONOMIC RESEARCH.
  5. ↑ Acemoglu, Johnson and Robinson, Daron, Simon and James (December 2001). "The Colonial Origins of Comparative Development: An Empirical Investigation". The American Economic Review. Retrieved May 5, 2016.
  6. ↑ Acemoglu and Robinson, Daron and James (June 2005). "The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth". The American Economic Review. Retrieved May 5, 2016.
  7. ↑ North and Weingast, Douglass and Barry (December 1989). "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England" (PDF). The Journal of Economic History. Retrieved May 6, 2016.
  8. ↑ North, Wallis and Weingast, Douglass, John and Barry (January 2009). "Violence and the Rise of Open-Access Orders". Journal of Democracy. Retrieved May 6, 2016.
  9. ↑ Subramanian, Arvind (October 30, 2012). "Which Nations Failed". The American Interest. The American Interest. Retrieved May 4, 2016.
  10. ↑ "China, India and All That". November 2, 2012.
  11. 1 2 Henderson, David (Spring 2013). "The Wealth -- and Poverty -- of Nations" (PDF). Regulation (a publication of the Cato Institute). Retrieved 2013-11-21.
  12. ↑ Henderson, David (2013-04-04). "Acemoglu and Robinson on the Wealth of Nations". EconLog. Retrieved 2013-09-21.
  13. ↑ Douglass, North. Violence and Social Order. ISBN 0521761735.
  14. ↑ Acemoglu, Daron (April 30, 2012). "Response to Fukuyama's Review". Why Nations Fail. Retrieved April 17, 2016.
  15. ↑ Diamond, Jared (2012-06-07). "What Makes Countries Rich or Poor?". New York Review of Books. Retrieved 2013-09-21.
  16. 1 2 Acemoglu and Robinson, Daron and James (AUGUST 16, 2012). "Why Nations Fail". The New York Review of Books. The New York Review of Books. Retrieved May 5, 2016. Check date values in: |date= (help)
  17. ↑ Cowen, Tyler (2012-03-18). "Jared Diamond reviews *Why Nations Fail*". Marginal Revolution. Retrieved 2013-09-21.
  18. ↑ Sachs, Jeffrey. "Government, Geography, and Growth".
  19. ↑ Jeffrey, Sachs (December 3, 2012). "Reply to Acemoglu and Robinson’s Response to My Book Review". Jeffrey Sachs. Jeffrey Sachs. Retrieved April 23, 2016.
  20. ↑ Korstanje M (2015) "Review Why Nations Fail: the origins of power, prosperity and poverty." Journal of International and Global Studies Volume 6, Number 2, pp. 97-100
  21. ↑ Korstanje M. (2015) Exploring the contradictions of Why Nations fail?, the dark side of capitalism". CERS Centre for Ethnicity and Racism Studies. University of Leeds UK. Working Paper 29.
  22. ↑ Parker, Ashley (JULY 30, 2012). "Romney Comments on Palestinians Draw Criticism". The Caucus. The New York Times. Retrieved May 6, 2016. Check date values in: |date= (help)
  23. ↑ Acemoglu and Robinson, Daron and James (AUGUST 1, 2012). "Uncultured". Foreign Policy. Retrieved May 6, 2016 – via Foreign Policy. Check date values in: |date= (help)
  24. ↑ Collier, Paul (2012-03-11). "Why Nations Fail by Daron Acemoglu and James Robinson – review". The Guardian. Retrieved 2013-09-21.
  25. ↑ Forbes, Peter (2012-05-26). "Why Nations Fail, By Daron Acemoglu and James A Robinson: A penetrating analysis of social organisation argues that the West's 'inclusive' states show signs of a relapse.". The Independent. Retrieved 2013-09-21.
  26. ↑ Barro, Robert (March 1996). "Democracy and Growth" (PDF). Journal of Economic Growth. Retrieved May 5, 2016.
  27. ↑ Bass, Warren (2012-04-20). "Book review: 'Why Nations Fail,' by Daron Acemoglu and James A. Robinson". Washington Post. Retrieved 2013-09-21.
  28. ↑ Easterly, William (2012-03-24). "The Roots of Hardship: Despite massive amounts of aid, poor countries tend to stay poor. Maybe their institutions are the problem". Wall Street Journal. Retrieved 2013-09-21.
  29. ↑ "Paddy Power & Total Politics Political Book Awards". Total Politics. 7 February 2013. Retrieved August 29, 2014.
  30. ↑ Andrew Hill. "Biographies and economics dominate". Financial Times. Retrieved 15 September 2012.
  31. ↑ Mark Medley (February 4, 2013). "Lionel Gelber Prize longlist revealed". National Post. Retrieved August 29, 2014.
  32. ↑ "Fredrik Logevall Wins CFR's 2013 Arthur Ross Book Award for "Embers of War"". Council on Foreign Relations. December 16, 2013. Retrieved August 29, 2014.
This article is issued from Wikipedia - version of the Saturday, May 07, 2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.