The Nobel Prize goes to Daron Acemoglu, Simon Johnson and James Robinson for their work on institutions, prosperity, and economic growth. Here’s a great piece that summarizes their work: Institutions as a Key to Long-Term Growth.
This paper develops the empirical case and theory that differences in economic institutions are the cause of differences in economic development. We first document the importance of institutional stability by focusing on two “natural experiments” in history, segregation.
of Korea into two parts with very different economic institutions and the colonization of most of the land by European colonies from the fifteenth century. We then develop a basic framework for thinking about why economic institutions differ across countries. Economics
institutions determine the incentives and constraints of economic actors, and shape economic outcomes. As such, they are social decisions, chosen for their consequences. Because different groups and individuals often benefit from different economic institutions, there are often a
the conflict over these public choices, was finally resolved in favor of the parties with greater political power. The distribution of political power in society is also determined by political institutions and the distribution of resources. Political institutions allocate de jure political power, while parties have
a large economy may have greater political power…Economic institutions that promote economic growth appear when political institutions allocate interest groups to the strengthening of broad land rights, when they create effective limits on power holders, and when they are relatively few. rents will be held by those in power.
See this great MRU in Centers video for a quick overview! Here from an interview with Acemoglu, a slightly more specific view. Politics keeps people poor:
Why stick to certain types of institutions?….it wouldn’t make sense, in terms of economic growth, to have a bunch of institutions that restrict private property or build less secure private buildings, where I can enter. your rights. But politicallyit might make a lot of sense.
If I have political power, and I’m afraid you’re going to get rich and challenge me politically, then it makes a lot of sense to me to create a set of institutions that don’t give you secure property rights. If I’m afraid you’ll start new businesses and pull my employees away from me, it makes a lot of sense for me to control you in a way that will completely kill your ability to grow or innovate.
Therefore, if I am really afraid of losing political power to you, that really brings me to institutional politics, where the mind is not so much economic results, but political results. This means that, when considering certain changes, what most politicians and powerful social elites really do not know is whether the change will make more people live better, but whether it will make it easier or harder for them to adhere to it. strength.
Those are the kind of problems that become the first order if you want to understand how these things work.
One interesting aspect of this year’s Nobel is that almost all of AJRs Nobel work is accessible to the public because it came primarily through popular books rather than paper. The Economic Origins of Dictatorship and Democracy, Why Nations Fail, and The Narrow Corridor all by Acemoglu and Robinson and Power and Progress by Acemoglu and Johnson are all very readable books aimed at the general public. The literature is in many ways deeper and more nuanced than an academic work that might initiate broad ideas (such as the famous Settler Mortality paper). Many important papers like Reversal of Fortune are also very readable.
This does not mean that the authors did not make many technical contributions to economics, especially Acemoglu. I think of Daron Acemoglu (GS) as the Wilt Chamberlin of economics, an absolute monster of productivity who collects papers and quotes at almost unprecedented rates. According to Google Scholar he has 247,440 citations and an H-index of 175, which means that 175 papers each have more than 175 citations. Hold on to that. Daron got his PhD in 1992 so that’s over 5 papers a year which would be great in itself – but we’re talking about 5 groundbreaking, highly cited papers a year and more! (Yes, most are written by very good writers). In addition, he is the author of a major book on economic growth. More than any other economist Daron has pushed the boundaries of technical economics and written books of deep scholarship that are still accessible to the public. In his review of Daron’s work for the John Bates Clark Award, Robert Shimer wrote that “he can write faster than I can digest his research.” I believe that is true of every profession. We all get Daron Acemoglu.
Indeed, reading a book like Why Nations Fail and papers like Network Origins of Aggregate Fluctuations (one of my favorite Acemoglu papers) and Uniqueness of Solutions for Nonlinear and Mixed Complementarity Problems it is hard to believe that they were written jointly. a person. Acemoglu is as comfortable talking about history, politics, and political economy as he is about the economics of recession and abstract statistics.
Here’s a previous MR post on Daron Acemoglu including this post on democracy where I found the effect of democracy on growth to be ho-hum. Here’s Maxwell Tabarrok on Acemoglu on AI. Here are Interviews with Tyler and Acemoglu and a separate interview with Simon Johnson.
As noted, one of my favorite papers by Acemoglu (with Carvalho, Ozdaglar, and Tahbaz-Salehi) is The Network Origins of Aggregate Fluctuations. A standard economy shows the integrated economy as if it were one large firm. In fact, the economy is a network. The auto industry needs steel and oil to operate so fluctuations in the steel and oil industry will affect production in the auto industry. For a long time, the nature of the manufacturing network has been neglected. Partly because there are some cases where a network can be modeled as if it were a single firm and partly because it is much easier to do the math that way. Acemoglu et al. show that aggregate dynamics can be induced by sector dynamics and that network organization cannot be ignored. This is the modern way of real business cycles. See also my post on Gabaix and granular dynamics).
In recent work, Acemoglu and Restrepo have created a new way of modeling manufacturing operations that divides work into tasks, some of which are better performed by capital and others by labor. Technological change is not just about increasing the productivity of labor or money (symbolized in standard economics as making one worker today worth twice as much as yesterday) but about changing which jobs can be best done with money and which with labor. As work shifts from labor to money the demand for labor decreases but productivity increases which creates a demand for other types of labor. Additionally, as money replaces labor in other jobs, entirely new jobs may be created where workers have a comparative advantage. Several interesting points come out of this including the idea that what we should fear most is not large robots but medium-sized robots. A giant robot replaces a worker but has a huge productivity advantage that generates wealth and demand for labor elsewhere. The average robot replaces the same job but doesn’t have a huge productivity advantage. In a radical breakdown, Acemoglu and Restrepo suggest that what happened in the 1990s and especially since 2000 is central robots. As a result, there has been a decrease in the number of workers. So, Acemoglu is worse than most economists on automation, at least as it has happened lately. Acemoglu and Restrepo is one of the best recent works that goes beyond tired old arguments to change the way we think about production and use those reforms to integrate those changes into what actually happens in the economy.
Solow thought of technological change as a generalization which is still the first pass way of thinking about technological change. Acemoglu in contrast focuses on value and market size. In particular, the bigger the market the greater the incentive to invest in R&D to help that market (see also my TED talk). Therefore, technological change will tend to accumulate. A sector with product development will grow which makes that sector more profitable with more technological progress (depending on the expansion). This is particularly important for environmental change because it suggests that relatively small interventions today—including funding for clean technology research—can be very beneficial in the future because by directing technological change in the right place you make it easier to change it over time. (from this interview)
But let’s think about the concept of technical change guided by more research. I Underneath what we do in green technology today, little knowledge has been collected in the green field, therefore big it’s the gap between fuel-based technologies and energy, and clean energy, therefore Harder it will be in the future to fill that gap. With immediate, decisive action today, we are already starting to close the gap, and we are succeeding Easier to deal with the problem in the future.
Simon Johnson has also written important books on banking and finance including and that was before the great increase in American debt! James Robinson has written extensively on African development and colonialism and African development in general.
All in all, I can say that this is a popular political science and economics award for the best economic theory that matters. Go buy their books and read them!
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