Posts

Showing posts from December, 2018

Book review: Why Nations Fail

Image
Acemoglu and Robinson argue against the “ignorance hypothesis” implicit in most development economics - that poor nations remain poor due to bad economic decisions. Rather, they propose, success and failure come down to the quality of political institutions in that country. These institutions need to be: Centralised enough that they can enforce the rule of law, property rights, and a monopoly on violence.  Inclusive, rather than absolutist or extractive.  Inclusive institutions take input from a wide range of the people they govern, and uphold their rights and liberties, without seizing too much of their wealth. A lack of inclusive institutions leads to many problems: When a high percentage of people’s incomes are taken away (e.g. medieval serfs), that reduces their incentive and ability to invest or innovate. Rulers who prosper by extracting wealth from their populace are primarily concerned with remaining in power rather than improving their countries, and so block “creativ