Daron Acemoglu, Simon Johnson and James Robinson tackled the most important question of all
Publicado en The Economist, el 14 de octubre de 2024
Why are some countries rich and others poor? The question, full of childlike curiosity, is the most important in economics. A person’s living standards are mostly determined not by talent or hard work, but by when and where they were born. Historically, most models of economic growth focused on the accumulation of factors of production, labour, capital and, more recently, technology or ideas. The greater the capital stock per worker and the more productive its use, then the richer a country would be. Yet that still left a gap: why did some countries manage to accumulate more of these factors than others?
This year’s winners of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, usually called the Nobel prize in economics, argue that it depends on the quality of government. In 2001 the three men—Daron Acemoglu and Simon Johnson, both of the Massachusetts Institute of Technology, and James Robinson of the University of Chicago—published what has become one of the most cited papers in economics, “The Colonial Origins of Comparative Development: An Empirical Investigation”. In the paper they developed a schema for institutions, dividing them into “inclusive” (those which attempted to share prosperity) and extractive (those where a small group took from the rest of the population). Inclusive institutions encourage investment in human and physical capital. Extractive ones discourage it.
The economists used an “instrumental variables approach” to address the problem that development might encourage liberalism rather than the other way round. This approach exploited variations in the mortality rate among settlers to identify which European colonies developed inclusive institutions and which developed extractive ones. In colonies with a high rate of settler mortality, owing, say, to Europeans’ lack of adaptation to tropical diseases, colonial powers exploited native labour. That could be in the form of the encomienda system in South America, which enslaved locals, or the rubber plantations of the Belgian Congo. Meanwhile, low death rates in English-speaking offshoots—America, Australia and Canada—meant the colonial powers attracted European settlers by offering them a chance to share in the wealth they produced via private property and free markets.
As such, there was a “reversal of fortune” among colonies. The richest in 1500, as measured by the degree of urbanisation, became the poorest in modern times—a result that held even after excluding the “new Europes” of the North American and Australasian colonies. Messrs Acemoglu, Johnson and Robinson hypothesised that this was because the greater wealth of the once-rich colonies encouraged the development of methods of extraction, while the higher population provided a labour force that could be coerced to work in mines and plantations. A later paper augmented the research with the “quasi-experiment” of North and South Korea, where one half of the peninsula become a rich, liberal democracy and the other half authoritarian and destitute.
Even after decolonisation, indigenous elites were able to take over extractive institutions. As part of a paper asking “Why is Africa poor?”, Messrs Acemoglu and Robinson examined a cocoa boom in Ghana. Under British administration, the colonists delegated rule to local “chiefs”, rather than facilitating the emergence of private property. The infrastructure the British built, such as railways, was intended to serve the perceived needs of the mother country, not domestic growth. British governors turned down requests from cocoa farmers to build roads, so as to bolster the profits of the railways. Ghanaian farmers had to sell their products through a British-controlled cocoa marketing board which kept prices low. After the country’s independence, the marketing board continued to be used as a system for extracting wealth, albeit for indigenous elites.
Few economists will doubt the influence of this year’s prizewinners. Mr Acemoglu, in particular, has long been regarded as a future Nobel laureate for his work on technological growth and labour economics, as well as development. Research on the historical persistence of institutions, using quasi-experimental techniques such as instrumental variables, has grown vastly more popular over the past three decades. But as often happens with empirical economic work, the prizewinners’ methods have been questioned. David Albouy of the University of Illinois has suggested that the estimates of settler mortality were incorrect and selectively cited to flatter the authors’ hypothesis. Edward Glaeser of Harvard University pointed out that there were ways settler mortality could affect growth other than through institutions. Europeans brought over education with them as well, for instance.
Historians, too, have questioned the neat division of extractive and inclusive institutions. South Korea developed under a military dictatorship. England’s Glorious Revolution in 1688, which Messrs Acemoglu and Robinson have identified as the start of the country’s rise, allowed Parliament to dispossess peasants as well as constrain the king. America’s development combined individual rights and democracy for white men with slavery and later disenfranchisement for their black peers. The rise of authoritarian China to middle-income status presents another problem.
For all the debate over methods, the prizewinners’ research undeniably demonstrated the importance of historical specificity, which moved development economics away from abstract growth models. Their work represents a break from theories assuming an inevitable, deterministic path to modernisation based on the historically unusual experiences of western Europe. Although Messrs Acemoglu, Johnson and Robinson may not have been able to provide a complete account of why some countries are rich and others poor, later generations of economists have a firm foundation on which to build.