'Why Nations Fail' Comes Up Short

'Why Nations Fail' Comes Up Short

Daron Acemoglu and James Robinson have just published Why Nations Fail, a big book on development that will attract a lot of attention. The latest fad in development studies has been to conduct controlled randomized experiments on a host of micro-questions, such as whether co-payments for mosquito bed nets improves their uptake. Whether such studies will ever aggregate upwards into an understanding of development is highly questionable. By contrast, Acemoglu and Robinson have resolutely focused on only the largest of macro questions: how contemporary institutions were shaped by colonial ones, why it was that regions of the world that were the richest in the year 1500 were among the world’s poorest today, or how rich elites were ever persuaded to redistribute their wealth. In Why Nations Fail, Acemoglu and Robinson restate and enlarge upon earlier articles like “The Colonial Origin of Institutions” and “Reversal of Fortune,” but in contrast to their academic work, the new book has no regressions or game theory and is written in accessible English for general readers.

 

Acemoglu and Robinson (henceforth AR; Simon Johnson of the old AJR team dropped out of this volume) have two related insights: that institutions matter for economic growth, and that institutions are what they are because the political actors in any given society have an interest in keeping them that way. These may seem like obvious statements, but many people in the development business haven’t gotten the message. Among development specialists there is what AR term the “ignorance” hypothesis: failure to develop is the result of not knowing either what good policies are (this was the old Washington Consensus) or, now that the focus has shifted to institutions, what good institutions are or how to create them. Many development agencies act as if leaders in developing countries want to do the right thing, if only they knew how, and that development assistance should therefore consist of sending smart people from places like Washington out to teach them, perhaps accompanied by some structural adjustment arm-twisting.

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