New York Times Bestseller Why Nations Fail Short Summary

Table of Content

Background information on the authors Daron Acemoglu A professor of Applied Economics at M. I. T. , Daron Acemoglu is among the “20 most cited economists in the world. ” (Daron). Acemoglu is describe as hot as an economists gets. He has received the prestigious John Bates Clark Medal. Acemoglu is the co-author, with Harvard’s James Robinson, of the New York Times bestseller Why Nations Fail, which, like Jared Diamond’s Guns, Germs, and Steel, is a major work of historical, political and cultural heft that comes along once every few years. Born in Turkey and educated in England, Acemoglu has written for mainstream magazines such as Esquire and co-edits academic publications, such as The Journal of Economic Growth” (Daron). Acemoglu’s expertise stretches across a full spectrum of macroeconomics, with a focus on the role of institutions in economic development: how will institutions react to the demographic shifts to the 21st century? How will the rise of new superpowers change the global economy? James A. Robinson

James Robinson is David Florence Professor of Government at Harvard University and a faculty associate at the Institute for Quantitative Social Science and the Weatherhead Center for International Affairs. He studied economics at the London School of Economics, the University of Warwick and Yale University. He previously taught in the Department of Economics at the University of Melbourne, the University of Southern California and before moving to Harvard was a Professor in the Departments of Economics and Political Science at the University of California at Berkeley.

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His main research interests are in comparative economic and political development with a focus on the long-run with a particular interest in Latin America and Sub-Saharan Africa. He is currently conducting research in the Democratic Republic of the Congo, Sierra Leone, Haiti and in Colombia where he has taught for many years during the summer at the University of the Andes in Bogota. Theme The prosperity of a nation depends on a level playing field. If there are extractive institutions designed by only a few elite people who extract resources from the majority, the society will not grow.

This does not encourage investment or innovation. In order for a nation to flourish, people need these things to utilize their talents. Without a level playing field and institution that provide investment and innovation, a nation will fail. Chapter 1 Summary- So Close and Yet So Different. Chapter 1 explains why certain nations prosper over others. “The United States today is also far richer than . . . [third world countries] . . . because of the way its institutions, both economic and political, shape the incentives of businesses, individuals and politicians. (Acemoglu and Robinson 42). The authors are saying that citizens need incentives to help build a nation. Without a nation’s institutions, citizen’s incentive to work hard and use their talents to build their nation will decrease. Chapter one compares America’s economic institutions to other nations such as Mexico. Particularly Nogaleses, Arizona to Nagoleses, Sonora. In America, most citizens have a high school degree, while in Mexico they do not. Many teenagers in Mexico do not even attend school. Why is this? …the very border that defines the two halves” ( Acemoglu and Robinson 9). This chapter gives the reader an answer to why two groups of people who are so close in geography are not on the same scale in salary. People in Mexico and other third world countries lack incentive due to the different economic institutions. Chapter 2 Summary- Theories That Don’t Work Three theories of development are offered, described, and rejected in this chapter as valid explanations for world income/wealth inequality. The first theory is the Geography hypothesis.

This hypothesis claims that the great divide between rich and poor countries is created by geographical differences. The authors explain that even though temperate climates have a relative advantage over tropical and semi tropical areas, “ World equality, however, cannot be explained by climate or diseases, or any version of the geography hypothesis. ” ( Acemoglu and Robinson 49). It is not true that the tropics have always been poorer than temperate latitudes; therefore, the geography hypothesis does not work. onsiders culture as a set of social norms and conventions and as such would seem to be a part of institutional analysis of change. Culture as manifest in religion and nationalism are rejected as useful explanations for change. The second theory is the Culture hypothesis. This tries to explain inequality of income based on beliefs, values, and ethics. The authors explain that this theory does not work. The last theory is the ignorance hypothesis. This states that world inequality exist because we or our rulers do not know how to make poor countires rich.

This theory is considered and presented as the most dangerous of explanations. If only the “right” leader or elites can control society, then the ignorance of proper development policy can be overcome. Chapter 3 Summary- The Making of Prosperity and Poverty Acemoglu and Robinson use the Korean peninsula in their argument advancing political and economic institutions as the reason for economic change or lack of change. They compare extractive and inclusive economic institutions. To be inclusive, economic institutions must feature secure private property, an unbiased system of law, and a provision of public services that provides a level playing field in which people can exchange and contract; it must permit the entry of new businesses and allow people to choose their careers” (Acemoglu and Robinson 74-5). This is explained to present the idea that, in order for a society to grow and develop, the citizens need some sort of public service. They use the state police as an example of a public service to keep law and order.

Without this public service, people could just steal the things one works for, thus creating a loss of incentive. Chapter 4 Summary- Small Differences and Critical Juntures: The Weight of History The argument in this chapter seems to be that, however small the distinctions may be between societies, there are “critical junctures” in history that can change development. This chapter argues for the importance of path dependence through an examinination of history. They use the black plague as an example and describe it as changing the institutions of society.

The authors introduce the idea of institutional drift(108-9) as mechanism that leads to differences in institutional evolution and thus outcome. I am anxious to hear how my colleagues react to the analysis and argument for this mechanism. The authors introduce the idea of institutional drift as mechanism that leads to differences in institutional evolution and thus outcome. “The richly divergent patterns of economic development around the world hinge on the interplay of critical junctures and institutional drift.

Existing political and economic institutions – sometimes shaped by a long process of institutional drift and sometimes resulting from divergent responses to prior critical junctures-create the anvil upon which future change will be forged”( Acemoglu and Robinson 109-110). Chapter 5 Summary- “I’ve Seen the Future, and it Works”: Growth Under Extractive Institutions This chapter echoes Schumpeter’s Creative Destruction and makes a valuable distinction between growth under extractive institutions vs. growth under inclusive institutions.

The discussion of growth under extractive institutions is very helpful for understanding the hurdles faced when a society is facing a transition. There are a number of players in extractive societies that do in fact earn rents and, in the short run, provide some level of growth to the entire society. “Extractive institutions are so common in history because they have a powerful logic: they can generate some limited prosperity while at the same time distributing it into the hands of a small elite. For this growth to happen, there must be political centralization”(Acemoglu and Robinson 149). Chapter 6 Summary- Drifting Apart

This key chapter analyzes the nature of institutional drift, critical junctures and the evolution toward or away from inclusive institutions. The three things this chapter explains are : Most societies have historically been and continue to be extractive in nature, Inclusiveness is fragile and easily can be reversed, “Small institutional differences and critical junctures are ephemera” (Acemogulo and Robinson 157). The use of example in this chapter (Venice, Rome and England) illustrates these three points and, I found provocative the use of Virtues and Vices as an organizing paradigm when examining the evolution of Rome.

The role of the “moral sense” and the dimly understood manner in which this sense develops seems to be a key variable in the movement toward inclusiveness. Chapter 7 Summary- The Turning Point “Conflict over institutions and the distribution of resources has been pervasive throughout history” (Acemoglu and Robinson 184). This Chapter looks at England, the Glorious Revolution and the Industrial Revolution as an illustration of a “turning point” from extractive to inclusive institutions.

The authors are connecting political change and technological change in an interesting manner. Chapter 8 Summary- Not On Our Turf: Barriers to Development This chapter concludes, in a section titled, Enduring Backwardness, with a further description of the role that extractive institutions play in incentivizing elites to reject technology and the process towards modernization and industrialization. A continuing pattern of political institutions from absolutism to failed states (Somalia, Afganistan, etc) can lead to firmly entrenched extractive institutions.

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