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183 of 191 people found the following review helpful
5.0 out of 5 stars An Emancipation Proclamation for Economists Interested in Equality
To an economist like me, reading Why Nations Fail, by Daron Acemoglu and James Robinson, is akin to being set free from shackles worn since I began studying. However, first let me say that the book has many and serious shortcomings. Let me talk about these before I get into why this book set me free. Since I am going to strongly criticize aspects of the book, let me make...
Published on May 11, 2012 by Sergei Soares

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407 of 450 people found the following review helpful
3.0 out of 5 stars Erudite, ever so meandering, and ultimately inconclusive...
I find the topic utterly fascinating: why do some nations prosper, and improve the life of their citizens, and others fail, often disastrously so? Daron Acemoglu and James Robinson, both academics, propose a model based on the concepts of "extractive" vs. "inclusive" institutions. They attempt to support their thesis by undertaking a very broad review of economic and...
Published on February 13, 2012 by John P. Jones III


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183 of 191 people found the following review helpful
5.0 out of 5 stars An Emancipation Proclamation for Economists Interested in Equality, May 11, 2012
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This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Kindle Edition)
To an economist like me, reading Why Nations Fail, by Daron Acemoglu and James Robinson, is akin to being set free from shackles worn since I began studying. However, first let me say that the book has many and serious shortcomings. Let me talk about these before I get into why this book set me free. Since I am going to strongly criticize aspects of the book, let me make clear that this is one of the best books on economics I have read in a long time.

Several criticisms have been leveled in other reviews against this book: it is simplistic and perhaps overly ambitious, the history is bad, it explains away competing explanations. They are all true.

The book is undoubtedly simplistic. Basically, the authors state that the institutions of a nation or society can be placed on a one dimensional continuum running from "extractive" to "inclusive" and this explains the history of humanity from the neolithic to the present day. A second leitmotif is that the economic and political institutions complement each other and that economically inclusive but politically extractive institutions cannot last for long (as well as the opposite). Finally, since political and economic institutions reinforce each other, they are quite difficult to change, leading to what the authors call "the iron law of oligarchy." Needless to say, this really oversimplifies the analysis of institutions and history. While Acemoglu and Robinson give many, many historical examples to illustrate their thesis, some are more convincing than others. They use a huge mallet to hammer all the facts into their mold, either ignoring or re-interpreting contrary evidence.

I am no historian, but I do know the history of the region in which I live, Latin America, reasonably well. When Latin American examples were used in the book, they were shallow and even wrong. For example, the authors talk quite a bit about the establishment of indigenous "serfdom", with terrible extractive institutions such as the encomienda and repartimiento, in much of Hispanic America. I agree the story they tell is quite important but they do not get it quite right. Acemoglu and Robinson tell the tale of these institutions as if they were simply set in place by colonizing Spaniards when the truth was much more complex, involving conflicts and constant negotiation between the Spanish colonizers, the Spanish Crown, and the conquered peoples themselves. The colonizers wanted to set up slavery instead of serfdom but were impeded from doing so by the Crown through the Leyes Nuevas. The story is told marvelously well in La Patria del Criollo by Severo Martinez Pelaez. The funny thing is that the correct narrative would fit well into the inclusive-extractive framework with a richness that comes from putting in two groups of elite actors with divergent interests, but Acemoglu and Robinson tell it so simplistically so as to miss out.

Likewise, the authors analyze, in different points of the book, Colombia and Brazil, with exceptional praise for Brazilian institutions while they heap abuse upon the Colombian ones. Brazil at the present time has, evidently, better institutions than a Colombia only (we hope) beginning to emerge from decades of civil war. But these two countries are much more alike than different. If you believe the tale told by Acemoglu and Robinson, they could have been comparing Japan and Burma, and not two nations with similar history, GDP, and institutions. While Colombia has seen many horrors and has a long road to travel, recent progress in reigning in lawlessness and chaos is undeniable. While Brazil has seen amazing institutional progress in the last fez decades, many of its cities suffer with murder rates higher than those of Colombian cities, de facto slave labor can be still found in some areas, and its income and especially property distributions are still among the most unequal in Latin America. Especially jarring is that, in other parts of the book, the authors place great emphasis on when institutions limit executive power, giving as an example the American system's unwillingness to allow FDR to pack the Supreme Court to get his way. The same happened in Colombia when Alvaro Uribe passed legislation allowing him to run for a third term and the Supreme Court shot it down with the broad support of Colombian society, including Uribe's allies.

The same can be said of their analysis of Mexico and Argentina: maybe not wrong, but terribly shallow. I know little of the Glorious Revolution, the Roman Empire, the Meiji Restoration, the history of Botswana, or much else of what the book is based upon. But if the standard is the same as the their Latin American examples, then much of the book based upon is poor history. In defense of the authors, it is difficult to draw the details with finesse when painting with a broad brush and the history of humanity from the neolithic to present day is about as broad as you can get in the social sciences.

A final criticism is that Acemoglu and Robinson do not give competing explanations for the backwardness of nations the credit they deserve. They explain away rather than seek dialogue. They classify competing explanations into the Geography Hypothesis, the Culture Hypothesis, and the Ignorance Hypothesis. One problem is that they ignore other competing explanations that go from scientific knowledge (see Margaret Jacob's Scientific Culture and the Making of the Industrial West) to various Marxist explanations based upon capital accumulation. While Acemoglu and Robinson obviously admire Jared Diamond's Guns, Germs, and Steel - which is very well-argued "geography is destiny" book - they ignore other important proponents of the Geography Hypothesis such as Kenneth Pommeranz. I feel their case would be made stronger if they argued that the two approaches were complementary and not adversarial. A relation between geography, technology, political institutions, and economic institutions would be a much stronger theory than institutions alone.

With regards to the Culture Hypothesis, they are (I believe) correct in criticizing it for being so fluid as to be virtually without content. But here my take is not entirely neutral as I particularly loathe the Culture Hypothesis.

But it is on the Ignorance Hypothesis that Acemoglu and Robinson fire their cannon with relish. Being intelligent economists in contact with the intellectual world of "development" I am sure they are very frustrated at the arrogance of policy advisors from the likes of the World Bank, United Nations, or IMF who believe they have the solution to all the developing world's problems "if only policymakers would listen to them." I am not unsympathetic to their disgust at these people but I think Acemoglu and Robinson throw the baby away with the dirty bath water. History is just too full of examples of disastrous policies (disastrous for those who implemented them, not only for the poor souls who inhabit their countries) for the Ignorance Hypothesis to be dismissed out of hand. The authors blame almost all, if not all, bad policies on the material interests of the elite whose position would be endangered by good policy.

A more subtle, and, in my opinion, much more serious, problem is that knowledge and interests are not independent. It is one thing for the elite to choose bad (bad for the many) policy if that policy can be dressed up in plausible and attractive intellectual robes and quite another if that policy is seen as nothing more than plundering of the many by the few (see Antonio Gramsci on role of the intellectual in allowing policy agendas to go forward or not). The "economic nationalism" that has destroyed so many African, Latin American, and Middle Eastern economies is not just pure extraction of wealth of the many by the few; it also dressed in a coherent economic theory espoused by a host of intelligent sociologists and economists (for a popular, if somewhat limited exposition, see The Open Veins of Latin America by Eduardo Galeano). This is why dismissal of the Ignorance Hypothesis is so dangerous: not only is knowledge power, but economic theories that are on your side are also power.

So the book has quite a few shortcomings. Why did I like it so much?

Because as economists we are taught from course one that you cannot have your cake and eat it too. The trade-off between efficiency and equity has been fed to us since before we were weaned. The result to an economist very interested in equality such as myself are intellectual shackles that hobble and cripple our thinking.

Acemoglu and Robinson show us that in the real world, not some paretian maximum efficiency world, but the real one full of monopolies and other horrendous extractive institutions, there is no such trade-off. Equity is efficiency. Only egalitarian institutions allow for the full creative potential of people to be unleashed and thus only egalitarian institutions allow for boundless, unlimited growth based upon technology and productivity. There may be an equity-efficiency trade-off in Sweden or Norway, but certainly not in Mexico, Brazil, Haiti, Zimbabwe, or Pakistan. Much of this has been around in different guises since Schumpeter (who the authors cite extensively) and, more recently, in the endogenous growth literature, but nowhere has it been as clearly stated as in Why Nations Fail.

Why Nations Fail not only states this as its official position but, in spite of all its shortcomings, argues the point so well so as to be entirely convincing (at least to me). The fact that the authors get much of the history not quite right and that they fight rather than incorporate "competing" explanations does not reduce importance of the book and its central message. The sheer optimism of its viewpoint is as liberating as the Emancipation Proclamation.
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245 of 265 people found the following review helpful
5.0 out of 5 stars A Return To Political Economy, January 29, 2012
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Why are some nations rich and others poor? The question has occupied economists since Adam Smith wrote An Inquiry into the Nature and Causes of the Wealth of Nations. As Nobel laureate Robert Lucas said, once you start thinking about that question, "it is hard to think about anything else." Daron Acemoglu and James Robinson have been thinking hard about it, and Why Nations Fail provides their answer.

Their main thesis is "that while economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has" (page 43). That the right economic institutions are vital has long been recognized; what Acemoglu and Robinson do is emphasize the critical role of politics. They argue that an inclusive political system will allow for an inclusive economic system. Such a system provides incentives for people to acquire skills, work hard, save, invest, and, most importantly, innovate. In contrast, an extractive political system exists for the benefit of a narrow elite, and creates an extractive economic system. The masses cannot influence the political system, and have no incentives to exert themselves creating wealth that will be taken from them by the political elites. Extractive economic systems can achieve growth for a short while, but cannot achieve persistent growth. That is because they cannot generate significant technological change and because there will be infighting over the system's spoils.

The authors provide a wealth of historical examples from all over the world and from ancient to modern times. The numerous examples allow the authors to illustrate their ideas with concrete examples. It also allows them to debunk many of the popular explanations for why some nations are rich and others are poor: geography, culture, and ignorance. After you read this book, you will wonder why you ever thought those ideas made any sense at all.

Overall, this is an excellent, informative, and thought-provoking book. My major complaint is that it could have used a good editor. It is repetitive in places. The authors also sometimes get carried away discussing irrelevant historical details. For example, do we really need to know that Geiseric, king of the Vandals, had his first marriage annulled and sent his ex-wife home, but not before he cut off her ears and nose? Nevertheless, this is a book worth reading by anyone interested in alleviating global poverty. I especially recommend it to the Don Quixotes who think that just a little more aid will make poor countries rich.
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407 of 450 people found the following review helpful
3.0 out of 5 stars Erudite, ever so meandering, and ultimately inconclusive..., February 13, 2012
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I find the topic utterly fascinating: why do some nations prosper, and improve the life of their citizens, and others fail, often disastrously so? Daron Acemoglu and James Robinson, both academics, propose a model based on the concepts of "extractive" vs. "inclusive" institutions. They attempt to support their thesis by undertaking a very broad review of economic and historical developments in a spectrum of 30 or so countries. They commence, like medical researchers do when they hope to minimize the number of variables, by examining "twins." In the author's case the "twins" are the cities of Nogales, immediately adjacent, in Arizona, and in Sonora. One is relatively prosperous, the other not so. It is a good start, and later in the book, the author uses the two Koreas. In both cases, geography and culture are relatively constant, which seems to bolster their view that it is the "institutions" that govern the lives of the respective citizens that are causative.

However the book can be a bit of a maddening slog in order to find some enjoyable nuggets of information and/or wisdom. For sure, if one establishes a situation in which individuals have incentives to produce they will work harder. So, why is this concept not universally embraced, by corporations and countries? I once set up a "profit-sharing" program for workers in my company; it seemed to change attitudes, improved the operating efficiency and reduce waste. After I left, the owner immediately eliminated it, though he would pontificate on the needs for economic incentives for himself! His outlook was rigid: if he was "sharing" the profits with the workers, he was a loser, and the thought that he might have a slightly smaller percentage of a much bigger pie never entered his mind. The authors confirmed my personal experience time and time again, and expressed it in terms of "The Iron Law of Oligarchy." An elite would be deposed by "revolutionary forces," only to see those forces turn into a new elite who acted much the same as the old. Among others, the authors cite Ethiopia as an example, where "the Derg" deposed Haile Selassie in 1974, and within four years Mengistu was using the same throne Selassie did. The authors could also have cited George Orwell's Animal Farm: Centennial Edition. I also found the authors description of how Venice turned into a "museum" to be one of their most concrete examples, in terms of identifying the steps taken by the elites to protect their interests, and eliminate the "profit sharing" with the masses. Likewise, as a counterpoint, there was a good description on how Botswana became the most prosperous country in sub-Sahara Africa.

For sure, I believe the "differential diagnosis" to be essential, and therefore comparisons of one historical situation to another can be most useful. But the authors seem to have taken this concept to the extreme, juxtaposing wildly disparate situations, and providing no "connective tissue." For example, chapter 6 contained 10th-12th Century Venice, the Roman Empire, and Axum, in Ethiopia, without any meaningful comparisons. Over and over again the details of the history of a country were included, generally correctly, but for no apparent reason in terms of supporting their thesis. Thus, we are treated to a catalog of Napoleon's military successes, the number of tons of gunpowder the British sold between 1750 and 1807, and Roosevelt's efforts to pack the Supreme Court. And I dare say that if the redundancies were eliminated by a good editor, a hundred pages would be shaved off the book. For example, three times in 50 pages there is the same list of African countries that had descended into civil war; the Battle of Adowa is mentioned at least twice, and there is the relentless mantra of using "extractive" to mean anything bad that is occurring in a country, and "inclusive" for positive developments. There are also the outright errors of Bill Gates' education (p.43) (Gates dropped out of Harvard in his freshman year), and the circulation of the French "Old Franc" until 1992 (p. 388).

And then there were the sins of omission. Several readily sprung to mind: all of Scandinavia, Singapore, Malaysia, Dubai, and Canada. Examination of these would have provided some useful counterpoints to one of the author's concluding propositions: "You can't engineer prosperity." And where is the rise of "extractive" institutions in the United States over the past 30 years? Totally omitted. Reviewing the extensive bibliography/references was also instructive. There was Kapuscinski's classic account of the fall of Haile Selassie, The Emperor but I was astonished to find missing Gunnar Myrdal's equally classic inquiry into the poverty of nations Asian Drama: An Inquiry into the Poverty of Nations.

It is a rich book, which covers a vast swath of human history. But it lacks the "connective tissue" that supports the author's thesis, and thus remains light-years away from any sort of "unified field theory" of development. 3-stars.
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267 of 322 people found the following review helpful
1.0 out of 5 stars LOOSE ELASTIC, March 20, 2012
By 
Stephen Cooper (South Yorkshire, England) - See all my reviews
I bought this book when I read a favourable review and thought it would be interesting to explore the reasons why some states succeed economically, while others never `take off' and others take flight but stall. I smelt a rat when I started to find that the style of writing is repetitive and circular and when I found some straightforward factual errors.

The authors say that the Spanish Armada was pursued (by the English) `all round the coasts of Britain'. Well no: we stopped pursuing it off the coast of Kent, and it sailed home via the North Sea and the Atlantic because there was no other way back. The Armada was largely destroyed by bad weather, off the West coasts of Scotland and Ireland. Likewise, the authors say - as if there is some significance in this - that at one time England and Hungary were ruled by the same dynasty, the Angevins. Well, it depends what you mean by `Angevin': it was a prolific house; but the Angevin dynasty in Hungary did not come to power until the fourteenth century, by which time we English call our kings `Plantagenets'. They may have been descended from Angevins, but conventionally the Angevins ruled England in the twelfth century; and they were only remotely related to those who ruled in Hungary, Naples, Anjou and Provence.

The detail matters. If you can't get the facts straight, what hope is there for the grand theory?

When you look at the `case studies', the history here is truly crude - almost like Sellars and Yeatman's `1066 and All That', but without the humour. Take English history, which I know something about. The authors place far too much importance on the Black Death of 1381 (feudalism did not come to an end overnight as a result of that event, catastrophic though it was). They accept Geoffrey Elton's account of the `Tudor Revolution in Government', when this was largely discredited by medievalists, almost as soon as it was formulated. They regard Christopher Hill's account of the so-called `English Revolution' of 1640-60 as being the last word, ignoring at least four decades of criticism. They overemphasize the importance of the Glorious Revolution and ignore how English society was between 1688 and 1832 (and beyond), notwithstanding the Industrial Revolution. They constantly confuse `England' with `Britain'.

If the treatment of English history is so brief and sweeping as to be a caricature, it makes me wonder about the history of other countries; and I am very suspicious of the authors' treatment of Japan, Venice and Ancient Rome in particular. With regard to Rome, they take it as read that the Roman Empire declined before it fell; but there is a very respectable view that it simply fell, when invaded by the Barbarians; and the authors detect the seeds of decay as far back as the reign of Augustus. What then of Gibbon's view that mankind's happiest days were passed in the age of the Antonines, in the second century A.D.?

The problem is that the authors purport to be experts on everything and on every age, when in fact they are masters of nothing but a theory; and the theory is so broad and vague as to be almost incapable of proof or disproof. Thus centralisation + inclusive institutions = lasting economic success and prosperity. I think I go along with this to some extent; but the terms are very elastic. What degree of centralisation counts as such? What is meant by `inclusive' or for that matter `extractive'? They may be right about the USSR and China; but I am not sure they have explained why the former failed and why the seemingly inexorable rise of the latter may be an illusion.
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286 of 349 people found the following review helpful
3.0 out of 5 stars A single minded (almost overzealous) presentation of an otherwise very good economic theory of prosperity, February 9, 2012
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`Why Nations Fail' is a book by two eminently qualified economists: Daron Acemoglu, and James Robinson. While they convincingly advance the (not so original) premise that prosperity follows from inclusive political institutions, they make the mistake of pushing it too far to paint a completely black and white picture. Apart from ignoring all other effects on a nation's prosperity, the book is written as if it is a collection of college lectures. As such, it has a tremendous amount of repetition. If you take out the stuff that is unnecessarily repeated, you would reduce the number of pages by half or more.

The biggest glaring omission in the book is the role and the overall importance of education. The book starts with the tale of Nogales: that is `Nogales Arizona' and `Nogales Sonora', in Mexico. I'm sure that you will not be too surprised to learn that Nogales on the North of the border is more prosperous. The differences between the past and the present political institutions of The U.S and of Mexico have a lot to do with the differences in prosperity. But it is not the whole story. Education is another one (and not the only other one either.) There are more opportunities in the U.S. to get better education. More importantly, getting a good education is valued more in the U.S. than in Mexico. The authors may want to believe that this follows from the differences in the political institutions, but it does not. There are countries with "extractive political institutions" where the education is highly valued (like China) and prosperity is increasing by leaps and bounds every decade. To be fair, the authors discuss China but not very carefully.

The authors appear to be absolutely smitten by Britain (more precisely by England.) England certainly deserves a great deal of credit for advancing inclusive political institutions earlier than other nations. But if that was the whole story, you would expect England to be the most prosperous nation in the world in the 21st Century. Even if you exclude the oil rich tin-pot-little-countries, England still lags far behind Norway, Switzerland, Sweden, Denmark, Netherlands, Germany, and yes, even the U.S. The "Glorious Revolution" (1688) in England (which must have been mentioned in a hundred different contexts) should have put England in the driving seat. Well it did, but only for a while. By the time the 20th Century started, Western Europe and the United States had already surpassed England in prosperity, despite the fact that no other country had as much economic support from its "colonies" of which resources it devoured. None of the Western European countries had an equivalent of the "Glorious Revolution", because that is not a key ingredient to prosperity.

I will close by commenting on the example of Egypt. Egypt is a poor country today, and it has always been a poor country for the last two Millennia. The authors blame Egypt's poverty on the iron-fisted rule of the Ottoman Empire with "extractive political institutions". Then in the 19th Century, Egypt had the "good" fortune of being occupied by Britain with the most advanced form of "inclusive political institutions" at that time. That did not change things one iota in Egypt. In fact Egypt became even poorer. If inclusive political institutions were all there was to achieving prosperity, Egypt would be in great shape today. Yet these inclusive institutions never took root in Egypt despite the British presence. (They still don't exist today.) An even more striking example (than Egypt) is India. Until its independence from Britain in 1945, India was extremely poor, even poorer than Egypt, despite being fully controlled by the British for two centuries. Today India (unlike Egypt) has one of fastest growing economies in the world. Coincidently, it so happens that India is ranked #1 in the world in terms of how important its people perceive education. Do you know how many pages the authors devote discussing India (with 20% of the world population)? No, I won't tell you, buy the book and read it if you want to find out.
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41 of 47 people found the following review helpful
5.0 out of 5 stars fascinating big picture history, March 2, 2012
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Every once in a while, a book comes along that I want to recommend to every educated person that I know. "Why Nations Fail" is one of these books. Its authors advance a theory about success and failure of nations throughout history that seemed so obvious once I read it that I almost lost sight of how creative and robust it really is. This is one of those books that has the potential of changing your view of the world forever once you have read it.

Their theory (that institutions, whether "extractive" or "inclusive" are what make long-term economic prosperity and political stability possible within a polity) is not entirely without precedent. A form of this thought arose as far back as the Enlightenment era when, as Jonathan Israel points out in his book "Democratic Enlightenment," European thinkers clashed over whether societies like India or China lacked democratic institutions because of inherent geographic or cultural factors or due to more contingent historical factors that caused them to be poorly served by their ruling classes. More recent efforts in this direction, however, tend to reflect the political split between left and right that may hinder original thinking. (Thus, for example, Dierdre McCloskey's recent editorializing, in an otherwise interesting series of books about the bourgeois mind-set and economic progress, that government should be slashed to the bone.)

"Why Nations Fail" is refreshingly free from knee-jerk political rhetoric. The authors do not buy the ultralibertarian assumption that government's function is simply to "get out of the way" and let the chips fall where they may. Their theory of a successful nation requires a government strong enough to centralize political power and prevent endless factional wrangling or exploitation by local elites. (Speaking of antecedents, this insight was also expressed in a different way by Ramsey MacMullen in his books on the Roman Empire, when he noted that during the late Imperial period the weakness of central authority did not result in a libertarian paradise; instead, local land-owners were free to exploit the powerless, who had no recourse to a greater authority.) The authors even have some praise for the ultimate democratic effect of the French Revolution, that bete noire of conservative thinking since Edmund Burke. On the other hand, they believe that left-wing Communist governments were among the worst because their "extractive" nature, abusing people in favor of a self-defined elite, ultimately resulted in nothing more than failed states.

What the authors are after is an "inclusive" society, where economic benefits and political power are shared among all segments of society. Importantly, this does _not_ necessariy mean "socialism" or even a social welfare state. There is a broad scope here for what "inclusive" means in terms of actual institutions, and a robust and free-wheeling capitalism has also led to societies the authors would call "inclusive." The only thing that is really off-limits is a situation where the government (or a group that the government is unable or unwilling to control) sees its role as extracting wealth and power from the common people. The classic example of this, of course, is slavery or variants thereof. But the authors provide a vast parade of good and bad examples, including the Mayans, Venetians, Romans, Chinese, England under the Stuarts, the Congo, the Spanish, the Dutch, the Soviets, the American Colonies, and the Turkish empire. The book is full of historical anecdotes, in fact, that makes it a fascinating read.
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13 of 13 people found the following review helpful
2.0 out of 5 stars Doesn't Live Up to the Hype, December 13, 2012
Despite the credentials of the authors and the acclaim that this book has received from a who's who of economists, it fails to live up to the hype. Acemoglu and Robinson offer an institutional theory of economic development aimed at general (non-specialist) readers. In their attempt to make their account widely accessible, however, the authors sacrifice too much rigor.

Briefly, the authors' argument is that prosperity or poverty result from differences in economic and political institutions, with "inclusive" institutions producing prosperity and "extractive" institutions impeding development. Under extractive institutions, political leaders resist innovation and the creative destruction that it entails because it will threaten their power and privileged economic position. While growth under extractive institutions is possible, it is not sustainable, because such institutions "do not foster creative destruction and generate at best only a limited amount of technological progress" (150), and because such institutions generate political conflict over control of the state. The authors also try to explain institutional differences by pointing to critical junctures (major events such as the Black Death) that sent areas with slight initial institutional differences down different historical paths. Insofar as it goes, there is nothing too innovative about the core of the argument: institutions like functioning states and markets are conducive to development, while their absence is not.

Acemoglu and Robinson support their argument with brief historical narratives (anecdotes really) - and lots of them. For example, one chapter discusses Uzbekistan, North Korea, Argentina, Colombia, Sierra Leone, Zimbabwe, and Egypt. Not surprisingly, the authors find that their monocausal theory explains economic development or stagnation in every case.

Unfortunately, the book has several crippling shortcomings. First, the authors never clearly define their central concept: institutions. Nor do they provide a comprehensive list of institutions that qualify as inclusive or extractive. Instead, it is left to the reader to conclude that inclusive economic institutions consist largely of property rights, while extractive institutions include slavery, monopoly, and barriers to market entry. Inclusive political institutions include democracy (or some semblance of pluralism), the rule of law, and a functioning state (or a minimal measure of political centralization), while extractive institutions include absolutist regimes. Second, with their main concepts left undefined or defined only vaguely, the authors offer no clear way of measuring how inclusive or extractive a given country's institutions are. Instead, brief narratives on a large number of cases are intended to show that successful countries have "more" inclusive institutions, or "somewhat" inclusive institutions, or "some semblance of" inclusive institutions, etc. Third, the book attempts no rigorous hypothesis testing, and the authors dismiss alternative explanations (chapter 2) because they find them unable to explain all variation across countries. Rather than acknowledging that factors other than institutions also influence economic development, and attempting to weigh the relative influence of institutions vis-à-vis those factors, the authors opt for a strongly monocausal explanation. (On this point, see Jeffrey Sachs's review of the book in Foreign Affairs, September/October 2012).

Besides these substantive shortcomings, there is also the authors' annoying habit of repeating the book's main claim on nearly every page of the book, which quickly becomes tedious. This takes away from what would otherwise be an enjoyable (if unsatisfying) read. Certainly the book contains some material that will be of interest to many readers. But Why Nations Fail doesn't live up to the hype of offering a compelling theory of development.
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18 of 20 people found the following review helpful
3.0 out of 5 stars Why Economists Fail, July 1, 2012
The book Why Nations Fail by Daron Acemoglu and James A. Robinson comes with book-jacket praise from the usual suspects: Steven Levitt of Freakonomics fame, Jared Diamond of Collapse fame, Nobel Prize "laureate" George Akerlof, and Niall Ferguson, champion of imperialism. Thomas Freidman dashed off a quick review in his New York Times column for April 1, 2012. Freidman, the giddy fan of globalization, was ecstatic, although he admitted that he was "reading" the book, but that he had not "read" it. Freidman points out one of the authors' main points: "Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investments in new technologies and skills are more conducive to economic growth than extractive institutions that are structured to extract resources from the many by the few." And this is perhaps their main point, albeit one which they share with most neoliberal development economists. Acemoglu and Robinson are professors at Harvard University; Acemoglu is a winner of the John Bates Clark Medal in the Economics department and Robinson an area specialist in the department of Government (Political Science). The book seems to be aimed at a wider audience than academia, however.

While the authors mine an enormous literature on development to populate their book with dozens of interesting stories of developmental failure and success, at the end of the day, their book devolves into the something similar to most of the neoliberal thinking of which we see so much from the "science" of economics. Diamond, who is quoted on the book jacket as saying "Like me, you may succumb to reading it in one go, and then you may come back to it again and again" is more critical in a review in the New York Review of Books (7 June 2012). There he points out that after presenting a map of Africa that clearly shows the tropical countries of the interior of the continent at the lowest end of the income scale they insist that geographic factors are "Theories That Don't Work" compared to their preferred "institutional" explanation. Diamond's reaction: "While institutions are undoubtedly part of the explanation, they leave much unexplained: some of those richer temperate countries are notorious for their histories of bad institutions (think of Algeria, Argentina, Egypt, and Libya), while some of the tropical countries (e.g., Costa Rica and Tanzania) have had relatively more honest governments. What are the economic disadvantages of a tropical location?" He concludes, "In their narrow focus on inclusive institutions, however, the authors ignore or dismiss other factors. I mentioned earlier the effects of an area's being landlocked or of environmental damage, factors that they don't discuss. Even within the focus on institutions, the concentration specifically on inclusive institutions causes the authors to give inadequate accounts of the ways that natural resources can be a curse." After describing Acemoglu and Robinson's botched job in their explanation of the rise of agriculture "to assert, in the complete absence of evidence, that . . . hunter/gatherers had become sedentary because, for unknown reasons, they happened to develop innovative institutions through a hypothesized political revolution" he concludes that "Acemoglu and Robinson do themselves a disservice by misstating these findings."

The book has a few points to recommend it in this reviewer's mind: 1) Its insistence on uncertainty in the course of human affairs, 2) Its appreciation for the importance of centralized political structure on economic success, 3) Its recognition of the wasted resources that come with gross inequality. But it has glaring blind spots that should cause a critical reader pause.

In the first chapter the authors quote from Fra Bartolome de Las Casas's book, A Short Account of the Destruction of the Indies. Las Casas is presented by the authors as a hero, who defended the rights of the indigenous people enslaved in the New World by the conquistadores. They seem positively unaware, however, of the irony that motivated Jorge Luis Borges to mention Las Casas in the very first chapter of HIS book, A Universal History of Infamy. For Las Casas's answer to the enslavement of the indigenous people of the New World was to import Africans to work in the Antillean gold mines. Thus Borges sees Las Casas not just as the savior of the indigenas of the New World (in which effort he was unsuccessful in any case) but as the father of "W.C. Handy's blues; . . . the mythological dimensions of Abraham Lincoln; the five hundred thousand dead of the Civil War and its three hundred millions spent in military pensions; the entrance of the word "to lynch" into the thirteenth edition of the Spanish Academy . ." etc. This kind of irony is well over the heads of our authors.

They take the "failure" of the Mayan civilization to be the result of their favorite themes of "creation of extractive political institutions" and lack of "creative destruction." They recognize that "the coalescence of these institutions created the basis for an impressive economic expansion" but see its collapse in the ninth century AD to be the result of the overthrow of the political system that had produced this expansion. They recognize that "existing archeological evidence does not allow us to reach a definitive conclusion about why the k'ubul ajaw and elites surrounding him were overthrown" but they take this collapse as evidence nonetheless for their theory that "extractive institutions" are the cause of that collapse. And concerning there diagnosis of "collapse", should a Mayan society that apparently thrived for close to one thousand years be considered a failure? There is no discussion of the possibility that laterite formation in tropical soils had anything to do with this "collapse." The story of the Mayans just becomes another example of their pet theory.

I have mentioned "creative destruction". Although there is only one direct mention of the "great economist Joseph Schumpeter" in the book, there are references a plenty to Schumpeter's most memorable phrase. Creative destruction was explained by Schumpeter's as follows: "The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation - if I may use that biological term - that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating the new one. This process of Creative Destruction is the essential fact about capitalism." (Capitalism, Socialism, and Democracy, page 83.) Schumpeter was convinced that the entrepreneur is the driving force for development in a capitalistic society. Keynes was not so sure, remarking "we are damned if we know" why capitalists invest.

Acemoglu and Robinson seem to take as gospel that creative destruction is necessary for societal advance. Someone like Polanyi would no doubt not agree. Schumpeter's young Harvard colleague Paul Sweezy certainly did not agree when he participated with Schumpeter in their famous debate at the Harvard Graduate Student's Economics Club in the winter of 1946-47 (See "on the laws of capitalism, Insights from the Sweezy-Schumpeter Debate" in Monthly Review, May, 2011.) Sweezy's notes for the debate say that "There is no reason to deny Schumpeter's entrepreneurial type, but its significance is quite differently evaluated. For him the entrepreneur occupies the center of the stage; the accumulation process is derivative. For me the accumulation process is primary; the entrepreneur falls in with it and plays a part in it." Sweezy was, of course, one of the most prominent American Marxist economists of the twentieth century. For him the historical process of evolution of society was crucial, as it was for Marx. And Schumpeter, even as an Austrian economist, had a profound appreciation for this. It is not fair to Acemoglu and Robinson to say that they are oblivious to history; their book is full of historical anecdotes. But this reader gets the sense that for them if a society would just get with the program and encourage capitalists, everything would come out all right.

They rail against the monopolies and resistance to enclosure by the Tudor and Stuart kings in England. This is a typical response of the neoliberal. The problem is not market economies, but those that interfere with the "free" motion of these economies in society. They attribute the rise of the Industrial Revolution in England to an overcoming of the absolutism of the Tudors and Stuarts by the rise of "inclusive institutions" embodied in the Glorious Revolution by the rise of Parliament. But the destruction part of the rise of the entrepreneurial class gets little appreciation.

This book contains almost no reference to socialist critique of the development policies which the authors prefer. This, of course, is typical of the environment of American academic departments of economics and political science, where our authors reside. In spite of their re-telling of many stories about the corruption and distortion imposed upon the people of the South by European imperialism in the nineteenth century, there is no mention of Lenin's Imperialism, Highest Form of Capitalism. No mention of Polanyi. The only significant mention of Marx is in a passage where they say "Lenin and his Communist Party were inspired by Marx, but the practice could not have been more different than the theory. The Bolshevik Revolution of 1917 was a bloody affair, and there was no humane aspect to it." In fact, the Russian Revolution was remarkably bloodless, since the army went wholly over to the Revolution very early in the process. There is no question that much blood was spilled during the Civil War and that enormous suffering was caused by the Stalinist purges and forced collectivization of agriculture in Russia, but that the authors would assume uncritically that this meant that the Revolution itself was "a bloody affair" is a telling indicator of apparent biases that shield them from facts that don't fit their view of reality. In a book that is so filled with facts, this ignorance seems systematic; as if they were searching out only the facts that fit their theory.

The authors make an off-hand reference to current day Iraq (on page 444) with amazing lack of empathy for the impact of the "shock and awe" imposed on that country by the Bush/Cheney/Rumsfeld regime and the UN Sanctions that preceded it. They use Iraq's recent history to argue against the "theory of modernization" that they say "maintains that all societies, as they grow, are headed toward a more modern, developed, and civilized existence, and in particular toward democracy." They mention the "disastrous economic performance under Saddam Hussein's regime" without mentioning the years of pain imposed by continuing NATO-enforced sanctions and bombardment. For a more realistic estimate of that impact the reader is directed to Iraq Under Siege, The Deadly Impact of Sanctions and War, published in 2000, three years before "shock and awe." There the reader will find another reason behind that "disastrous economic performance" of the previous decade. Anthony Arnove in the introduction to Iraq under Siege quotes from a Wall Street Journal article in 1999 citing unnamed US officials saying, "After eight years of enforcing a `no-fly zone' in northern [and sourthern] Iraq, few military targets remain. . . . We are down to the last outhouse." Acemoglu and Robinson say that hopes for "pluralism" were "dashed as chaos and civil war descended upon Iraqi society." This implies that the "chaos and civil war" were the result of some internal dynamic in Iraq without considering that what had descended onto Iraqi society was not just the "extractive institutions" of Saddam Hussein but also the wrath of the American Empire, imposed over a decade of economic sanctions and bombardment since the end of the first Iraq war, "Desert Storm". They fail to mention the possibility that 6,000 sorties and 1,800 bombs launched during the "longest sustained US air operation since the Vietnam War" had anything to do with the dissolution of Iraqi society that followed the second US land invasion by Bush, the younger. Iraq had long since been "bombed back to the stone age" to quote an earlier American general talking about that earlier war. Acemoglu and Robinson make no mention of this.

One of the interesting facts that the authors dredge up from the large anthropological and historical literature upon which they report is the story of Dutch colonialism in the East Indies. They tell the story of the Banda Islands which had established trading relations with English, Portuguese, Indian, and Chinese merchants for mace and nutmeg, which were indigenous to their islands. In 1621 the Dutch governor of Batavia (now Jakarta in Indonesia) Jan Pieterszoon Coen "sailed to Banda with a fleet and proceeded to massacre almost the entire population of the islands, probably about fifteen thousand people." He set up a plantation system in place of the thriving economic activity of the local Banda people and "divided the islands into sixty-eight plantations, awarded to sixty-eight Dutchmen, mostly former and current employees of the Dutch East India Company." They use this to support their major thesis, that "European expansion . . . sowed the seeds of underdevelopment in many diverse corners of the world by imposing, or further strengthening existing, extractive institutions." But their emphasis is on the "extractive institutions" and not on the fact that European imperialism imposed this reality by genocidal force of arms! This is a very strange emphasis to place on these facts.

Diamond's critique in his NYRB article is a good summary of this book. There he points to "the authors' resort to assertion unsupported or contradicted by facts." This book presents what is really a banal conclusion: that authoritarian institutions that impose the will of a small group of elites onto a population is the primary cause of "underdevelopment". This is a re-statement of Aristotle's Politics. The real questions are why these authoritarian institutions succeed in taking over power in so many societies and how societies with apparently "inclusive" institutions like those in current day United States have evolved into such unequal societies. This book leaves us no closer to an answer to these questions.

The real problem that I have with this book is that it uncritically takes for granted the underlying assumptions from the neoclassical economist's tool box. They point out the obvious: "Europeans themselves stamped out the possibility of economic growth in many parts of the world that they conquered; . . . the lands where Industrial Revolution originally did not spread remain relatively poor; . . . . the Industrial Revolution and other new technologies are unlikely to spread to places around the world today where a minimum degree of centralization of the state hasn't been achieved." These conclusions are delivered with a tone of great solemnity, but no one but the most dogmatic libertarians or European chauvinists would seriously disagree. The question is how to change this. Their prescription of more "inclusion" the like of which we have in the United States may satisfy some, but it does not satisfy this reviewer.
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65 of 81 people found the following review helpful
2.0 out of 5 stars Mangy hedgehog thinking, March 26, 2012
The most startling revelation provided by this book is the total disconnect between, on the one hand, the hype (see amazon page) and the credentials of the authors and, on the other, the actual delivered contents. The first author has a chair at MIT and a John Bates Clark medal, the second has a chair at Harvard. But surely, please, not for this sort of thing. They have one idea, which, in so far as it has any substance, is that 'extractive institutions are bad'. They claim to find extractive institutions where bad things are, and not where good things are. They don't actually provide a useful definition of what an extractive institution is, though they have a long list of places where things did not go well, which are supposed to illustrate 'extractive' situations, and places where things did go well as not. This vagueness is sensible, because they apply the label to so many different things that there is no possibility that I could see of a useful operational definition.

Of the many mangy hedgehogs I have encountered in 'one big idea' world history, this is surely the mangiest.

They manage, for instance, to be confident that they can diagnose 'extractive' institutions in Mayan civilization and various neolithic arrangements in the middle east. Their claims about the fine structure of political institutions in 2000BC in what was to become Syria, or where-ever it was, are on the basis of distributions of flint arrow heads and the like. Never do they discuss (or even appear to stop to wonder) what, exactly, a non-extractive institution would look like in situations like this, or how you would distinguish it on the basis of the surviving archeological evidence.

One thing I was interested to read to was their prognosis for China, but this boils down to very little more than 'China has bad institutions, which are bad because in the long term they won't allow the sort of creative destruction that an economy cannot avoid if it is going to continue to grow to rich nation levels of prosperity'. Really?

If you have read people like Mancur Olson, and your ideas about political economy and political sociology are even a little bit more sophisticated than what you can find in nerdy libertarian science fiction (or, come to think of it, than you can learn from full professors at MIT or Harvard), then there is no insight here worth stopping for that I could identify. Not that I actually stopped for all four hundred-odd pages; after a while, I simply got tired ploughing through endless pages of low-content penny-a-word prose and started skimming more and more rapidly (even on its own terms, this is at most a hundred page essay, not a four hundred page book).

For this level of insight I paid 14EUR? Oswald Spengler is at least fun to read.

P.S. [addendum that occurred to me after a recent evening run] This is not a history book. The authors are not historians, and they do not think like historians (they are an economist and a political scientist); they have no interest in the past except to cherry pick examples to relate to the present. This is essentially a disposable policy wonk essay blown up to a book, and all the hype is in policy wonk circles, not historian circles. Its purpose is to reassure a specific class of policy wonks who are desperate to be reassured by what they see as figures of authority (MIT economist, Harvard political scientist), that, in spite of current pessimism, yes, liberal democratic capitalism is the best way to arrange a society, and it will prevail (that there is no Untergang des Abendlandes, if you like). This may be true (I even think so - the first bit, at least), but this book makes no original or substantial case, it's just a (shallow, whiggish) sermon to the converted. Interestingly, the authors even implicitly acknowledge that what they have written is a disposable policy wonk essay, since they chose to issue it in a 'business book' imprint, and not with Cambridge or Princeton University press, which is where they usually publish (or maybe CUP and PUP simply declined the offer).
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75 of 94 people found the following review helpful
1.0 out of 5 stars Relentlessly redundantly redundant. Sloppy on facts. Shallow, dumbed-down., May 30, 2012
Forgive me for saying the following so forcefully, but despite this complaint being pervasive in other reviews here, it didn't register strongly enough with me.

The intended audience I picture for this book is one where detail and sophistication must be sacrificed in favor of repetition, that is: Severe problems with both short-term and long-term memory. Uninterested in the topic, but being forced to listen. Below average intelligence and general knowledge (example: Will not know that Arizona is in the US). If this is not you--and I doubt it is--be prepared to endure a lot to find the sparse content of this long book.

For comparison, this book is far worse than the typical "motivational" business book, a category that is infamous for books that are bloated with unnecessary repetition and that offer shallow and questionable analyses. In this book, it is not uncommon to encounter pages that have 2-3 repetitions of the book's mantra, with yet more instances a few pages on. Sometimes it will go on for multiple pages repeating what had just been said immediately before. And examples are cited repeatedly as if new. If this were a lecture, you could go out, make some phone calls, get a pizza and come back without having missed anything.

----
Most of the examples are of the form that chooses an under-performing economy and _declares_ it to be the result of "extractive" policies. Extractive policies cover a wide range--expropriation, extortion/bribery, excessive taxation,...--but there is rarely even an attempt to explore the details or complexities. Or to quantify. My expectation was that such considerations would have yielded interesting insights. The book treats extractive vs. inclusive policies as a binary choice, rather than a matter of degrees.

The explanation of the examples are grossly over-simplified and too often get significant details wrong. See other reviews here for numerous examples. The book had the feel of "Don't let facts get in the way of the story."

This is a book where shallow analysis is the most you can expect, and you'll rarely get even that. Its critiques of other theories, such as Guns, Germs, and Steel:... by Jared Diamond, involve creating strawmen that can be trivially demolished: The book exaggerates those books' claims that other factors were (highly) influential to the outcomes, portraying those claims as being that those factors were absolutely determinative, which the book can then dismiss with a single counter-example.

One of the key tests of a theory is whether it can explain why seemingly similar situations produce different outcomes. Unfortunately, in multiple places in this book, the "explanation" of different outcomes is simply a _statement_ that the underlying situations must have had (unspecified) differences. For example, it claims that the greater freedom of the peasantry in western Europe after the Black Death flowed from the labor shortages the Plague created, but then acknowledges and waves-off that the similar situation in eastern Europe led to greater repression.

Before committing to this book--I was about to be stuck for hours in a hospital waiting room--I quickly sampled some passages and found them to be exciting. But that turned out to be because they were evocative of my existing knowledge. When I actually read the passages, my intelligence was insulted. It was history dumbed way down, to the level of a big-picture, broad-survey course. Although the authors' professional specialties are Economics and Political Science, that is not reflected in the book: The explanations and analyses are unsophisticated/trivial -- what one might expect from students in introductory courses on these topics.

While there are indeed some interesting passages, it is not worth plowing through all the rest to find them.

Near the end of Chapter 5 (about 150 pages), I gave up on the book. The authors had lost all credibility with me and there was no reason for continuing patience with the book.

-- Douglas B. Moran
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