It’s the Institutions, Stupid….

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Daron Acemoglu of MIT

I had the pleasure on Thursday of attending a presentation at the World Bank by Professor Daron Acemoglu of MIT. He presented the data and analysis from the paper he co-authored with Simon Johnson and James Robinson on “Institutions as the Fundamental Cause of Long-Run Growth.” It’s one of the best papers I’ve read on the topic. We have a pretty good idea of what policies (respect for property rights notable among them) are conducive to growth in living standards, but we don’t have a good understanding of the preconditions or the means of acquiring the institutional foundations of good policies. Acemoglu and his colleagues have generated some eye-opening results from their study of economic history (notably about the relationship of urbanization to wealth and the “reversal of fortune” that took place circa 1500) and have done a brilliant job of highlighting the problems to the solution of which the study of institutions should be directed.