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How 2024 Nobel Laureates Link Poverty to Colonialism
Three American scientists have won the Nobel Prize in Economics: Simon Johnson, James Robinson, and Daron Acemoglu for their research on the link between the development of public institutions and economic prosperity.
This year's Nobel Prize in Economic Sciences (the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) went to two British-born American scientists, Simon Johnson and James Robinson, and the Turkish-born American economist Darren Acemoglu. The prize money of 11 million Swedish kronor (US$1.06 million) will be divided equally among the three scientists.
Daron Acemoglu is of Armenian origin and was born in Istanbul in 1967. He graduated from the Galatasaray Institute there in 1986. In June 1989, he received his BA from the University of York, England, and from 1990 to 1992, he received his MA and PhD from the London School of Economics. Since 2004, Acemoglu has been the C. Kindleberger Professor of Applied Economics at the Massachusetts Institute of Technology (MIT). Member of the American Academy of Arts and Sciences (2006), Member of the National Academy of Sciences (2014).
According to media reports, in 2011, the Turkish government offered Acemoglu the position of Permanent Representative of the country to the Organisation for Economic Co-operation and Development (OECD), but the professor reportedly declined (he himself did not confirm or deny this information). The Turkish Ministry of Finance congratulated the scientist on receiving the Nobel Prize.
Simon Johnson was born in Sheffield, Yorkshire, in 1963. He received his BA in Economics and Politics from Oxford and his MA in Economics from the University of Manchester. In 1989, he defended his thesis on ‘Inflation, Intermediation and Economic Activity’ at MIT and received his PhD in Economics.
From March 2007 to August 2008, Johnson served as chief economist and director of the IMF's Research Department. He is currently a professor at the Massachusetts Institute of Technology, a senior fellow at the Peterson Institute for the World Economy, and an economic consultant to the Congressional Budget Office.
James Robinson was born in 1960. He studied economics at the London School of Economics (BA), the University of Warwick (MA), and Yale University (PhD). From 1992 to 1995, Robinson taught at the University of Melbourne (Australia), then became an assistant professor at the University of Southern California, and from 1999 to 2004, he worked at the University of California, Berkeley (Associate Professor since 2001). Robinson taught at Harvard from 2004 to 2015, and is currently a professor at the T.H. Harris School of Public Policy.
What is the essence of the winners' work?
Acemoglu, Johnson and Robinson analyze why some countries are wealthier than others. The Nobel Committee says their research helps us understand why societies with weak rule of law and social institutions that exploit their populations fail to bring about economic growth and better change. “Reducing income disparities across countries is one of the greatest challenges of our time. The laureates have demonstrated the importance of public institutions in achieving this goal,” said Jakob Svensson, chairman of the economic sciences committee.
The study concluded that one of the main factors influencing the well-being of a country is the social institutions created during the European colonial period. Acemoglu and Robinson published a study in 2012 entitled Why Nations Fail: The Origins of Power, Prosperity, and Poverty. The study contrasted two types of social institutions, so-called extractive and inclusive. According to the scientists, the former aim to exclude the majority of society from the process of making political decisions and distributing income, while the latter aim to include the widest possible social strata in economic and political life. And while in some colonies the Europeans’ goal was solely to exploit the native population and extract resources, in others they created inclusive political and economic systems for the long-term benefit of European settlers. “Inclusive institutions often developed in countries that were poor during the colonial period, and over time they led to prosperity for the entire population. This is an important reason why once-rich former colonies now become poor, and vice versa,” the Nobel committee explained. According to the scientists, countries with extractive institutions “fall into the trap” of low economic growth. And while the creation of inclusive institutions provides long-term benefits to everyone, exploitative institutions provide short-term benefits only to those in power.
“As long as the political system guarantees their (government officials) control, no one will trust their promises of future economic reforms. According to the laureate, this is why there has been no improvement [in countries with this model of public institutions],” the Nobel committee notes. At the same time, the scientists believe that these effects can be reversed if countries can move away from the inherited system and establish democracy and the rule of law. “In the long run, such a change could also lead to poverty reduction.”
In 2023, Acemoglu and Johnson published Power and Progress, a paper that explored the question of why technological progress does not always lead to improved quality of life and greater freedom.
In an interview with the Washington Post, Johnson said he and his colleagues approached their research from different perspectives. He had worked in Eastern Europe for about a decade after the fall of communism, and he was frustrated that standard economic analysis was not helping him find breakthroughs. The question of which countries became rich and what role social institutions played in this was not at the heart of the economics he studied in graduate school, Johnson said. “We had to do a lot of work to convince people that institutions really matter,” Johnson concluded.
Dani Rodrik, a professor of international political economy at Harvard Kennedy School, told The Post that the work by the three American scholars brought the study of institutions and economic history “to the center of economic analysis.” The study marks a “significant shift,” the economist said, while most economists had previously talked about “dementia” when talking about inclusive systems.
Reuters notes that the awards to the three American scientists have renewed interest in the topic of global inequality, which is as important as climate change, the artificial intelligence revolution and the aging of the world’s population. The organization calls the data from the Royal Swedish Academy of Sciences “remarkable,” showing that the richest 20% of countries are now about 30 times richer than the poorest 20%. “And even though poor countries have gotten richer, the gap remains,” the journalists concluded.