Why Do Some Countries Decline?

It's not culture or geography that decide a nation's fate, says one economics professor. It's about the institutions they have -- or don't have.

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We often talk about developed and developing countries. But what is the difference between these countries that causes some to live in extreme poverty and others to thrive?

Many people put forth theories to explain these differences that rely on external factors such as geography or cultural traditions, but Daron Acemoglu, Professor of Economics at the Massachusetts Institute of Technology and member of the Canadian Institute for Advanced Research, believes that the answers lies in things we can control. Acemoglu studies the trends behind why some countries decline, and how we can prevent this from happening in other cases. He advocates the institutional view.

Institutions are not necessarily what you may think, a building or a group of people. Rather Acemoglu defines them as “the rules, both formal and informal, under which a society functions”. It is these rules that determine whether a society, a country prospers.

Institutions create incentives and opportunities for people to bring forth new ideas and innovate which, in turn, brings value and create economic progress.

If these institutions are poorly built, we miss out.

“You can have, you know, dozens of Einsteins but none of them are going to become innovators because they’re too busy, you know, picking rice or cleaning shoes or something like that,” says Acemoglu.

A classic example of this is slavery, “the most extreme form of an extractive system that pigeonholed a significant fraction of society into a role in which they had no ability to exercise their creativity, their initiative.” Because of this, we were missing out on the ideas and talent of a large fraction of the population. It’s no accident that once these rules and institutions were changed, our society prospered.

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Daron Acemoğlu graduated in 1986 from the Galatasaray High School in Istanbul, going on to gain his B.A. degree from the University of York, UK and his M.Sc. degree in Econometrics and Mathematical Economics and then his Ph.D. degree in 1992 from the London School of Economics.

He was a lecturer in economics at the LSE from 1992–1993, before becoming a member of the M.I.T. faculty in 1993. He was promoted to full professor in 2000, and was named the Charles P. Kindleberger Professor of Applied Economics in 2004. He is a member of the Economic Growth program of the Canadian Institute of Advanced Research. He is also affiliated with the National Bureau of Economic Research, Center for Economic Performance, International Growth Centre, and Centre for Economic Policy Research. Acemoğlu is the co-editor of Econometrica, Review of Economics and Statistics, and associate editor of the Journal of Economic Growth, and an editorial committee board member of the Annual Review of Economics. He was elected a Fellow of the American Academy of Arts and Sciences in 2006.

Currently the Elizabeth and James Killian Professor of Economics at Massachusetts Institute of Technology in Boston he is among the 10 most cited economists in the world according to IDEAS/RePEc. Winner of the 2005 John Bates Clark Medal. His most cited article is “Colonial origins of comparative development” (2001). His principal interests are political economy, development economics, economic growth, technology, income and wage inequality, human capital and training, and labour economics. His most recent works concentrate on the role of institutions in economic development and political economy.