Nobel Memorial Prize in economics winners 2024

Rather unusually, the Nobel Prize in Economic Sciences was awarded yesterday in equal parts to three professors living in the USA: Daron Acemoglu (MIT), his colleague Simon Johnson (MIT) and James A. Robinson from the University of Chicago. This honorable and prestigious award was given to them for their research into the institutions that help countries become rich and prosperous and how these institutional structures came into being in the first place.

The economics prize committee justified the decision with the groundbreaking research of the three economists, who not only contributed significantly to explaining the wealth gap between different nations, albeit with similar resources. The works of Acemoglu, Johnson and Robinson have also helped to explain the differences between countries and the root causes why nationals fail or succeed. According to the researchers, today's prosperity is partly a legacy of colonial history.

Although from different social and philosophical positions, the three prize winners
analyze the history of essentially European colonization to show how the sometimes deep gap between individual nations came about. In their work, Acemoglu, Johnson and Robinson argue that those countries that began with inclusive institutions during the colonial period managed to become more affluent than those that did not develop such institutions to protect individual rights. Countries that protected personal property rights, permitted individual and economic freedoms and thus enabled extensive and legally protected economic and social participation of the population tended to be more prosperous in the longer term. States with extractive institutions – i.e., institutions that helped the elites maintain control but gave the population little hope of sharing in the prosperity and wealth – only brought short-term gains to those in power.

European nations installed more authoritarian systems to control places that were densely populated at the time of colonization, while sparsely populated areas often had more settlers and established a more inclusive form of government – albeit partially undemocratic.

The prize winners seem therefore not essentially concerned with the question of whether colonialism was good or bad. Rather, their work attempts to explain why
different colonial strategies led to different institutional patterns and why these persisted even during the political and economic turmoil of the era of decolonization.

While, for example the Mayan culture or the vast Aztec Empire were far richer and more densely populated than any part of North America at the time of early European colonization, the United States and Canada had overtaken almost all states of Central and South America in terms of overall economic and individual prosperity already by the end of the 19th century. This reversal of relative prosperity is historically unique and the legacy is still clearly visible today, for example in the small town of Nogales, on the border between Mexico and the US State of Arizona. While the north of Nogales is prosperous despite a common culture and the same location because of the different institutions that govern the two halves of the city, the southern part remained poor and neglected. In their book Why Nations Fail. The Origins of Power, Prosperity and Poverty (2013) Acemoglu and Robinson conclusively show that it is mostly man-made political and economic institutions that underlie economic success (or lack thereof). Korea as a remarkably homogeneous nation, is used as one of their intriguing examples. While North Korea features among the poorest on earth, their relatives in South Korea are among the richest, due to the fact that the south forged a society that created incentives, institutionalized the Rule of Law, rewarded innovation, established free markets and allowed everyone to participate in economic opportunities. Acemoglu and Johnson’s Power and Progress: Our Thousand-Year Struggle over Technology and Prosperity (2023) also became a NYT bestseller.