SIEMENS (AP) — Daron Acemoglu, Simon Johnson, and James A. Robinson won the Nobel Memorial Prize in economics on Monday for their work that shows why countries with weak institutions and bad rule of law don’t have sustainable growth.
The Nobel committee of the Royal Swedish Academy of Sciences said at the ceremony in Stockholm that the three economists “have shown how important social institutions are for a country’s prosperity.”
Robinson does his work at the University of Chicago, while Acemoglu and Johnson work at the Massachusetts Institute of Technology.
“One of the most important problems of our time is reducing the big differences in income between countries.” “The winners have shown how important social institutions are for making this happen,” said Jakob Svensson, Chair of the Prize in Economic Sciences Committee.
He said that their study gave them “a much deeper understanding of the reasons why countries succeed or fail.”
The academy in Athens, Greece, where Acemoglu, 57, is scheduled to talk at a conference, called him and asked how he felt about the award. An award that he said shocked and surprised him.
He said, “You never expect something like this.”
Acemoglu said that the study that won the prize shows how important democratic institutions are.
During a phone call with the Nobel committee and reporters in Stockholm, he said, “I think that the work that we have done in general favors democracy.”
He did say, though, that “democracy is not a cure-all.” Bringing freedom to a place is hard. When you hold polls, there is sometimes disagreement.
Acemoglu was asked how economic growth in places like China fits into the theories. He said, “My general view is that these authoritarian regimes are going to have a harder time… in achieving… long-term sustainable innovation outcomes.”
Acemoglu and Robinson’s best-selling book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty” (2012) said that problems caused by people were what kept countries poor.
For example, the judges looked at the city of Nogales, which is on the border between the United States and Mexico.
Life on both sides of the border is very different, even though they share the same geography, temperature, many ancestors, and culture. To the north, in Nogales, Arizona, people are pretty well off and live long lives; most of the kids there finish high school. People who live in Nogales, Sonora, Mexico, to the south are “in general considerably poorer.” Because of organized crime, it is risky to start and run a business. “It is hard to get rid of corrupt politicians,” the Nobel committee wrote.
They found that the U.S. system protects property rights and gives people a say in their government, which is what makes it different.
Acemoglu said on Monday that he was worried that people were losing faith in democratic systems in the US and Europe. He said, “Democracies especially don’t work well when people think they don’t deliver.” “Democratic countries are having a hard time right now.” In a way, it is very important that they take back the high ground of better government.
They also looked at the changes that European powers like Britain and Spain made to institutions when they conquered a lot of the world starting in the 1600s. They went to different places with different rules, which later experts could use as a “natural experiment” to study.
A lack of people in a colony made it easier for foreigners to take over, so more people moved there. In those places, colonial governments tended to set up more open economic systems that “encouraged settlers to work hard and invest in their new home.” “This led to calls for political rights that gave them a piece of the profits,” the Nobel committee says.
In places with a lot of people and not many settlers, colonial governments limited political rights and set up institutions that were meant to “benefit a local elite at the expense of the wider population.” This means that, ironically, the parts of the conquered world that were relatively the wealthiest about 500 years ago are now the ones that are relatively the poorest. In the 18th century, India’s industrial output was higher than that of the American states, for example.
The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel is the full name of the economics award. It was created by the central bank in 1968 as a tribute to Alfred Nobel, the Swedish businessman and chemist who lived in the 1800s and created dynamite and the five Nobel Prizes.
Many people who believe in the original Nobel Prizes say that the economics prize is not really a Nobel Prize. However, it is always given out with the other prizes on December 10, which is the date of Nobel’s death in 1896.
Last week, the Nobel Prizes in medicine, physics, chemistry, literature, and peace were given out.
