The Nobel Prize in Economic Sciences for 2024 was awarded to US-based economists Daron Acemoglu, Simon Johnson and James A. Robinson for their work on global wealth inequality and the role of institutions in shaping prosperity.
The work of these three economists has gained recognition across the globe through their popular 2012 book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, which examines the roots of inequality and the reasons behind the success or failure of different countries.
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Daron Acemoglu, Turkish-American economist currently a professor at the Massachusetts Institute of Technology. He has made contributions to political economy and development economics.
Simon Johnson, British-born economist also a professor at MIT, who has worked on economic crises, global financial institutions and the role of government in the economy.
James A. Robinson, a British political scientist and economist currently a professor at the University of Chicago. He is known for his research on the relationship between political institutions and economic outcomes.
The trio was awarded the Nobel Prize in Economics 2024 for their work on how institutions particularly those established during colonial periods.
Their research shows how the political and economic systems introduced by colonial powers have enduring consequences on the wealth of post-colonial societies.
In particular, they have shown that institutions designed to benefit colonizers often resulted in poverty, while inclusive institutions designed to support European settlers often laid the foundation for prosperity.
The laureates’ work is seen as crucial in understanding the reversal of fortune experienced by many countries where once-wealthy societies became impoverished due to the extractive nature of their colonial institutions, while others that were poorer at the time of colonization developed into wealthier nations.
Acemoglu, Johnson and Robinson’s research focuses on how different forms of governance and institutional arrangements during colonization led to vastly different economic outcomes.
In regions where colonizers established institutions designed to extract resources and exploit local populations, economic stagnation has often resulted.
Established in colonies where European settlers intended to stay long-term such institutions encouraged investment, property rights and political stability.
Designed to extract resources from local populations, these systems often involved forced labor, minimal infrastructure development and little focus on public welfare leading to economic struggles.
One of their conclusions is the concept of a reversal of fortune. Areas that were rich at the time of colonization often due to their natural resources, became poorer under colonial rule because of extractive institutions.
Regions that were relatively poor but developed inclusive institutions saw greater economic success.
Their research also provides hope, showing that countries can reverse the negative impact of extractive institutions by adopting democracy, strengthening the rule of law and fostering inclusive economic systems. Such transformations can break the cycle of poverty and spur growth.
One of the publications by Acemoglu and Robinson, “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” has become a seminal text in development economics.
The book examines why some countries succeed economically while others fail, largely through the lens of institutional development.
Their innovative use of historical events as natural experiments allowed the economists to test their hypotheses about the importance of institutions in economic development. This approach provided empirical evidence linking colonial institutions to modern-day economic outcomes.
Acemoglu and Johnson also co-authored the book “Power and Progress,” which explores how technology and institutions interact to influence the distribution of wealth across societies.
The disparity between rich and poor nations is one of the pressing issues in economics. According to the Nobel committee, the richest 20% of countries are now around 30 times wealthier than the poorest 20% with the wealth gap continuing to widen.
Acemoglu, Johnson and Robinson’s research has been instrumental in explaining why this gap persists. Their studies reveal that countries with weak institutions those characterized by poor rule of law, lack of accountability and corruption are unable to generate sustained growth.
Instead, these nations often fall into economic stagnation or regression. In contrast, countries with strong, inclusive institutions are more likely to experience sustained economic development.
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Countries that were wealthy or strategically important at the time of colonization such as regions in Africa and Latin America often had extractive institutions imposed upon them.
These institutions are designed to benefit the colonizers leading to slow or even negative economic growth.
On the other hand, regions where colonizers established more inclusive institutions typically those with European settler populations have seen higher levels of economic development.
Acemoglu and Robinson’s 2012 book, “Why Nations Fail,” has been a source of insight into the reasons behind the vast differences in prosperity between countries.
The book argues that the political and economic systems set in place by different nations are the primary determinants of their success or failure.
Extractive institutions are depicted as systems where a small group of elites controls most resources and power leading to inequality and poor economic performance.
Inclusive institutions empower a base of the population, fostering innovation, entrepreneurship and sustained economic growth.
The book has been praised for making complex economic theories accessible to the general public, while also contributing to policy debates on global development.
Upon receiving the award, Daron Acemoglu expressed his surprise and delight, saying, “You never expect something like this.”
He added that he was honored and that the recognition of their work would bring greater attention to the importance of strong democratic institutions in promoting economic prosperity.
Acemoglu, Johnson and Robinson will share the 11 million Swedish kronor prize equally, with each receiving a third of the total amount.
Claudia Goldin won the award in 2023 for her work on gender disparities in the labor market.
Ben Bernanke, Douglas Diamond and Philip Dybvig won in 2022 for their research into financial crises and the role of banks.
Milton Friedman won in 1976 for his work on monetarism, which posits that controlling the money supply is key to ensuring stable economic growth.
Unlike the other Nobel Prizes, which were established in Alfred Nobel’s will in 1895, the economics prize was introduced in 1968 by the Swedish central bank in honor of its 300th anniversary.
The first recipients of the award were Ragnar Frisch and Jan Tinbergen in 1969 for their work in econometrics.
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