It’s the Institutions, Stupid….

Daron Acemoglu.jpg
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.

One Response to “It’s the Institutions, Stupid….”

  1. Jude Blanchette

    I think Acemoglu has approached the question of how we go from understanding what institutions are desirable to actually getting those institutions implemented. During his lecture at the World Bank he discussed de jure power and de facto power as catalysts for change. I haven’t read this paper yet, but the abstract seems to also hint at an answer:

    “These observations raise the question of whether institutions persist at all. If they do not, this is a challenge to the entire research program on the effect of institutions on economic performance. If they do, then we need to develop a coherent framework in which changes in certain dimensions of institutions are consistent with overall institutional persistence. The available evidence strongly suggests that change and persistence go hand-in-hand in many cases, highlighting the need for a framework for thinking about the sources of simultaneous change and persistence institutions.”

    Also see his paper “The Rise of Europe: Atlantic Trade, Institutional Change and Growth” for a discussion of the role increasingly wealthy merchants played in securing property rights between 1500 and 1850.