The Nobel Prize committee summarizes their contributions as follows:
Some countries become trapped in a situation with extractive institutions and low economic growth. 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.
However, this inability to make credible promises of positive change can also explain why democratisation sometimes occurs. When there is a threat of revolution, the people in power face a dilemma. They would prefer to remain in power and try to placate the masses by promising economic reforms, but the population are unlikely to believe that they will not return to the old system as soon as the situation settles down. In the end, the only option may be to transfer power and establish democracy.
One book of interest (one I just ordered) is Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Acemoglu and Robinson. Alex Tabarrok of Marginal Revolution called Acemoglu:
…the Wilt Chamberlin of economics, an absolute monster of productivity, who racks up the papers and the citations at nearly unprecedented rates. According to Google Scholar he has 247,440 citations and an H-index of 175, which means 175 papers each with more than 175 citations.
The authors cite the importance of institutions looking at North and South Korea and also cities, like Nogales, than span an international border. The N.Y. Times writes:
As an example, Dr. Acemoglu and Dr. Robinson point to the city of Nogales, which straddles the border between Mexico and Arizona.
Northern Nogales is more affluent than its southern portion, despite a shared culture and location. The driver of differences, the economists argue, is the institutions governing the two halves of the city.
It’s interesting what different media outlines choose to highlight for this award. Some focus on the research. Some focus on the value the researchers placed on democracy. Another article focused the fact the all three laureates are immigrants to the US.
See more coverage on the 2024 Nobel Prize in Economics from other sources: NPR, WSJ, Marginal Revolution, Nobel.
Do you think the prize was deserved or would you have preferred another economist to win the prize? Let me know.
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