Nobel economics prize awarded for studies of prosperity gaps between countries
Posted on 10/14/2024
The Nobel Memorial Prize in Economic Sciences was awarded Monday to Daron Acemoglu, Simon Johnson and James A. Robinson, a trio of economists working at U.S. universities, for research on prosperity gaps between countries — specifically how European colonization led to some nations being rich while others are poor.
The laureates’ research found that societies with a poor rule of law, in addition to institutions that exploit the population, do not generate growth or change for the better, according to the Nobel committee.
“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,” Jakob Svensson, chair of the committee for the economics prize, wrote in a statement.
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Acemoglu is an expert in macroeconomics and political economy at the Massachusetts Institute of Technology, while Johnson heads the global economics and management group at MIT’s Sloan School of Management. Robinson is a professor of global conflict studies at the University of Chicago Harris School of Public Policy.
In an interview with The Washington Post shortly after the prize was announced, Johnson said he was “surprised and delighted.”
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Johnson said he, Acemoglu and Robinson came at their research questions from slightly different angles — Johnson spent 10 years working in Eastern Europe after the fall of communism and was “frustrated and puzzled by why some standard economic analysis didn’t get you very far.”
Questions around which countries became rich, and the extent to which institutions played a role, “were not really central to the economics I learned in graduate school,” Johnson said. “We had to do a lot of work to convince people institutions actually mattered in a really big way.”
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The laureates looked at a range of political and economic systems introduced by European colonizers. Those systems didn’t look the same everywhere — sometimes colonizers exploited Indigenous populations and extracted resources for their own benefit. Elsewhere, colonizers formed more inclusive systems that benefited European migrants over the long term.
Their research showed that inclusive institutions were often introduced in countries that were poor when they were colonized, and over time those nations became more prosperous. Meanwhile, other countries experienced low economic growth after they became trapped in situations with institutions that extracted resources.
Generally, inclusive institutions — such as public schools, the rule of law and antitrust policies — create incentives and opportunities for growth, according to Dani Rodrik, a professor of international political economy at the Harvard Kennedy School. Extractive institutions — like slavery and serfdom — concentrate power and resources in the hands of a small few, to the detriment of the broader population.
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Rodrik said the trio’s work brought the study of institutions and economic history “to the very center of economic analysis.” He said that marked a major shift and joked that beforehand, most economists “would think you were going soft in the head” if the topic of inclusive institutions came up.
“They’ve added a very important, fresh perspective on different types of institutions, the value of democracy and inclusive institutions in particular, not for their intrinsic worth, but also because they were good for economic performance,” Rodrik said. “More inclusive institutions are actually good for economic growth.”
The Nobel website put it this way: “The introduction of inclusive institutions would create long-term benefits for everyone, but extractive institutions provide short-term gains for the people in power. As long as the political system guarantees they will remain in control, no one will trust their promises of future economic reforms. According to the laureates, this is why no improvement occurs.”
Last year’s prize was awarded to Harvard University economist Claudia Goldin for her work exploring the role of women in the labor market. In 2022, the award went to former Federal Reserve chair Ben S. Bernanke, Douglas W. Diamond of the University of Chicago and Philip H. Dybvig of Washington University in St. Louis, for their work on banks and financial crises.
The laureates’ research found that societies with a poor rule of law, in addition to institutions that exploit the population, do not generate growth or change for the better, according to the Nobel committee.
“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,” Jakob Svensson, chair of the committee for the economics prize, wrote in a statement.
Advertisement
Acemoglu is an expert in macroeconomics and political economy at the Massachusetts Institute of Technology, while Johnson heads the global economics and management group at MIT’s Sloan School of Management. Robinson is a professor of global conflict studies at the University of Chicago Harris School of Public Policy.
In an interview with The Washington Post shortly after the prize was announced, Johnson said he was “surprised and delighted.”
Skip to end of carousel
Tracking the 2024 Nobel Prizes
The Nobel Prizes shine a spotlight on some of the world’s most prominent thinkers and innovators. We’re tracking the 2024 Nobel Prize winners here.
End of carousel
Johnson said he, Acemoglu and Robinson came at their research questions from slightly different angles — Johnson spent 10 years working in Eastern Europe after the fall of communism and was “frustrated and puzzled by why some standard economic analysis didn’t get you very far.”
Questions around which countries became rich, and the extent to which institutions played a role, “were not really central to the economics I learned in graduate school,” Johnson said. “We had to do a lot of work to convince people institutions actually mattered in a really big way.”
Advertisement
The laureates looked at a range of political and economic systems introduced by European colonizers. Those systems didn’t look the same everywhere — sometimes colonizers exploited Indigenous populations and extracted resources for their own benefit. Elsewhere, colonizers formed more inclusive systems that benefited European migrants over the long term.
Their research showed that inclusive institutions were often introduced in countries that were poor when they were colonized, and over time those nations became more prosperous. Meanwhile, other countries experienced low economic growth after they became trapped in situations with institutions that extracted resources.
Generally, inclusive institutions — such as public schools, the rule of law and antitrust policies — create incentives and opportunities for growth, according to Dani Rodrik, a professor of international political economy at the Harvard Kennedy School. Extractive institutions — like slavery and serfdom — concentrate power and resources in the hands of a small few, to the detriment of the broader population.
Advertisement
Rodrik said the trio’s work brought the study of institutions and economic history “to the very center of economic analysis.” He said that marked a major shift and joked that beforehand, most economists “would think you were going soft in the head” if the topic of inclusive institutions came up.
“They’ve added a very important, fresh perspective on different types of institutions, the value of democracy and inclusive institutions in particular, not for their intrinsic worth, but also because they were good for economic performance,” Rodrik said. “More inclusive institutions are actually good for economic growth.”
The Nobel website put it this way: “The introduction of inclusive institutions would create long-term benefits for everyone, but extractive institutions provide short-term gains for the people in power. As long as the political system guarantees they will remain in control, no one will trust their promises of future economic reforms. According to the laureates, this is why no improvement occurs.”
Last year’s prize was awarded to Harvard University economist Claudia Goldin for her work exploring the role of women in the labor market. In 2022, the award went to former Federal Reserve chair Ben S. Bernanke, Douglas W. Diamond of the University of Chicago and Philip H. Dybvig of Washington University in St. Louis, for their work on banks and financial crises.
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