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134 of 141 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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396 of 438 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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16 of 18 people found the following review helpful
3.0 out of 5 stars Why Economists Fail, July 1, 2012
This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
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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22 of 26 people found the following review helpful
3.0 out of 5 stars Too Much Filler Overwhelms Good Idea, April 14, 2012
By 
Michael Lima (Fresno, California USA) - See all my reviews
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This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
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When I first started out in the work force, I (like most new accountants) was placed in the audit unit. After about four months, my supervisor pulled me aside to discuss my performance. He said that I did great work, but that I needed to learn the "art of pageage". Since I was unfamiliar with the term "pageage", I asked him what he meant. He said that my audit work-papers tended to be a bit sparse, and that they needed to have more pages. I became concerned with these comments, so I asked him if I was turning in incomplete or unsubstantiated work. He assured me that my work was complete and well documented. "But," he said, "an audit and its findings are as much about perception as they are about the work that goes into them. A thick set of work papers conveys a sense of thoroughness and the perception that you are an expert on the subject you audited." He went on to explain that I could take a point that I summarized on one spreadsheet and instead split it over several spreadsheets, thus creating several pages for the work-papers. I was still a bit dumbfounded by this concept, so I said it sounded like he was asking me to create paper for the sake of creating paper. He said no, but that I was documenting points "too efficiently" and that "spreading them out" would create an impression of completeness, and hence give credence to the findings/conclusions. Sadly, I never did embrace the idea of "pageage", and therefore didn't last too long in the audit unit. But, the whole episode came back to me as I was reading Why Nations Fail. I was about a quarter of the way through the book when I found this sentence: "In the remaining chapters, we will discuss in greater detail how this institutional theory works and illustrate the wide range of phenomena it can account for." I knew after reading what should have been an introductory chapter sentence a quarter of the way into the book that the authors subscribed to the concept of "pageage".

The hypothesis that Acemoglu and Robinson present is that societies/cultures/nations which have economic and political structures that empower a wide swath of their populations have stronger economies than those whose economic and political structures favor a select few. While the theorem's strength is that it has a common sense appeal, its weakness (from an academic point of view) is that it's almost too easy to understand, thereby requiring little documentation to build an effective case for supporting it. Thus, Acemoglu and Robinson appear to have made the decision to enhance the book's credibility by utilizing "pageage" in the form of numerous examples. While these examples are useful if one plans to go on Jeopardy, the effectiveness of the examples is so inconsistent that they end up burying the thesis instead of supporting it.

There are some good qualities in Why Nations Fail: it contains a sound thesis; it is written in an accessible manner; and it presents a true moderate approach to its conclusions (meaning, that people on both the left and the right will find things they like in the book). But, by inserting a lot of unnecessary examples, Acemoglu and Robinson end up trying to manufacture credibility instead of relying on the inherent strength of their thesis. While "pageage" may have its place in auditing, Why Nations Fail proves that it is not a concept that works in the presentation of an argument that already has merit.
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9 of 9 people found the following review helpful
2.0 out of 5 stars Doesn't Live Up to the Hype, December 13, 2012
This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
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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6 of 6 people found the following review helpful
5.0 out of 5 stars Misunderstood but really the 1st great leap forward, August 8, 2012
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This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
When Diamond wrote Guns, Germs and Steel he made many of us think about the potential existence in a standard model for the social sciences. We thought about this because the gilded 1990s were so strikingly similar to the roaring 1920s. We began to wonder about what the relationships were. Diamond made a case for several factors in his non-hierarchical model (geography, disease, technology etc). Quickly evolutionary economists followed by attempting build on Diamond's premise through examples such as Eric Beinhocker's book the Origin of Wealth. Why Nations Fail threw all of that logic onto the scrap heap of history by showing again and again that there are some critical factors - namely inclusive or extracting political environments in conjunction with Josef Schumpeter's concept of Creative Destruction. Schumpeter was referring to how the development of technology obsoletes prior technologies and more importantly entire industries. That cycle is what creates all of the societal upheavals. It was for this reason why the authors spent so much time showing how that interplay between these two factors were the most important factors for any social model. Having done so - many reviewers have misunderstood why the authors spent the time to demonstrate these dynamics over thousands of years.

The reasons why Daron Acemoglu and James Robinson's book is contribution of monumental significance needs to be understood for very different reasons than the 100 or so reviewers had previously posted to date. I will list them in the hierarchy of significance which the authors overcame from my own experiences.

1) They took an interdisciplinary approach to the question. Doesn't sound like much but 10 years ago when many of us attempted to address the central question of a model - academia refused to even allow the constructions of models of this size but more importantly patently refused any interdisciplinary approach inside of the ivory walls. This book has leveled the number one impediment towards a model realization.

2) The model features variability. It is not fixed in stone. Any society can move from having healthy inclusive political structures to being hijacked by the few wealthy elites financial interests. This is why they went all the back to the Neolithic period to demonstrate this repetitive cycle. In fact in the agricultural era - extractive politics were the norm and this is why the authors were so thorough in making this point through the ages. This hazard exists just as much today as it existed during the Roman Empires Republic and its subsequent fall.

3) They focused on where there exists a tremendous amount of un-mined data, specifically the Industrial Revolution and what triggered it in England of all places. Since Robinson is a native from Great Britain with a doctorate in political science who teamed with Acemoglu (an MIT economist) - we finally had two subject matter experts focus directly on the factors for why industrialization first took root in England and were initially then exported to the West. Huge!

4) The authors discarded the hunter-gatherers and other time frames where there exists little data that can be correlated to answer the question and fused Creative Destruction (technology) with political institutions (social structure) and presented a construct which is not only the first of its kind but also have placed into our view a viable standard model for the social sciences. Can the importance of Why Nations Fail possibly be overstated? Not from where I stand from. I am hopeful we will see more thinking as they refine this earthshaking construct.
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17 of 21 people found the following review helpful
5.0 out of 5 stars A first-rate analysis rooted in history, March 9, 2012
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This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
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Why is it that some nations prosper, while others wallow in poverty? Why, in particular, have Western European democracies, the US, and Canada led the world in economic growth and standard of living? Further, why is it that wealth has emerged and grown in these countries, and not in others? Until the 18th Century, the common answer was God's grace, or theories of racial superiority. Around 300 years ago, a number of European philosophers started asking these questions in a more scientific way. Bernard Mandeville and Adam Smith identified the existence of trade, specialization, markets and property rights in creating more efficient economies. But even that powerful explanation begs the question somewhat. Why is it that free markets and property rights have emerged in wealthier countries, and not in poorer ones? The answer, say the authors is the kind of political systems that have emerged in different nations.

In the 20th Century, a good many competing theories have emerged. Some, like Jared Diamond and Jeffrey Sachs, point to geographical differences, of differences in natural resources. But those explanations are easily discarded. The Netherlands, which has so few natural resources that it has to make land to live on and farm, was the wealthiest nation in Medieval Europe and remains one of the wealthiest in Europe on a per capita basis. Africa may be poor today, but it was once home to many great nations. Today's poverty stricken Mali was once Timbuktu, one of the wealthiest nations in the world. Great Zimbabwe, which ruled from the 11th through 15th Centuries, was so magnificent that European visitors in the 18th Century believed that its ruins must have been built by Europeans.

The real answer, say the authors, has to do with the kinds of political institutions that have developed in different nations, and they illustrate this by beginning with the examples of Nogales, Arizona, and Nogales, Mexico, two cities divided by a fence that are miles apart economically. They share the same climate, the same geology, and to a great extent the same ethnicity, and yet the Northern city is easily five times as wealthy as its Southern companion. What's different is the political institutions that govern daily life is the two cities, and that difference is largely due to how the two nations were settled.

Mexico's modern history begins in the 16th Century when groups of soldiers and adventurers set out to extract what wealth they could from Mexico by seizing the gold and silver found there, and enslaving the local population. In so doing they destroyed the exiting culture and nations, replacing them with a culture of exploitation that remains to this day. Modern day Mexico is still very much a mercantilist society not all that different from 16thC Spain. Property rights exist at the whim of the state, or those who have curried favor with the state. Monopolies are given to the favored, and courts freely exempt the most powerful from laws and contracts that would otherwise restrict them.

Curiously enough, the settlement of the territories that became the United States began in a very similar way, with the first English settlers being soldiers and adventurers looking for gold and silver. But they encountered a very different set of circumstances than did the Spanish- people who were not so easily conquered, and who did not accumulate gold and silver the way the peoples of Mexico and Central America did. Those differences resulted in a change of strategies. The initial settlers were replaced with farmers and tradesmen who were charged not with extracting wealth, but with creating it. Those difference were responsible for the way in which the US and Canada evolved their political systems.

The authors have compiled scores of such examples that serve to support their thesis and disprove many fashionable ones. Do geography or ethnic differences play a role in the creation of wealth? Consider the cases of South Korea, which shares a gene pool and a border with a nation that is orders of magnitude poorer. In fact, until the 1950s, the two nations were identical in just about every way. But following the partition created by the Korean War, South Korea began developing a political system more like that of the various Western democracies while the North pursued a Stalinist model. Following a political liberalization and freeing of markets in 1979, South Korea's economy grew at an unprecedented 7% per year, while that of the North- already a poor nation- continued to shrink, leading to the mass starvation that periodically plague the country to this day. Similar examples can be found in Taiwan, Hong Kong, and Singapore.

What about natural resources? Mexico and many Central and South American nations were rich in gold, silver, and minerals. Africa is rich in diamonds, rare earths, and other strategic materials. Russia is very rich in natural gas and oil, which the current regime has been exploiting to support itself, and to create a system of privilege, but actual economic growth has been declining for years. Or consider the oil-rich nations of Africa and the Mideast. The wealthiest among them have no industry, no economy save that paid for by pumping oil. They have a huge consumer culture, but nothing else. When the oil and gas are gone, there will be nothing left to replace it.

What makes this book stand out from similar books is the mass of solid data and examples from around the world. The authors serious economists who have approached this project with the same seriousness they put into a journal article, and the list of endorsements from the jacket illustrates this- Kenneth Arrow, George Akerloff, and Gary Becker- all Nobelists- give heart praise. Even Jared Diamond, whose geographic theories are thoroughly picked apart in this book, gives it an enthusiastic endorsement. I found it fascinating to read, and compelling in its arguments.
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8 of 9 people found the following review helpful
1.0 out of 5 stars A major disappointment to me: boring, shallow, repetitive, and unpersuasive, March 5, 2014
By 
Darren X (Toronto, Canada) - See all my reviews
As others have pointed out, the authors ascribe most of the world's ills to "extractive institutions", but in spite of having almost 500 pages to work with, they never get around to defining that term. After a while I felt I was reading thirty articles from The Economist back to back. I do not understand the high ratings for this book. (and I'm an economist myself!)

edit: reflecting further on this book only deepens my dismay, and my disappointment in the economics profession. There are many interesting observations in Why Nations Fail, and I think inside this book is a much more interesting, nuanced, and honest book struggling to get out, but the 'geography hypothesis' (ie: "Guns, Germs and Steel" and Landes' "The Wealth and Poverty of Nations"), deserves much better than the lazy and arrogant dismissal it gets here.. Unfortunately, Robinson/Acemoglu are in such a rush to present their self-congratulatory one-size-fits-all model of development ("Western Democracy makes you rich!"), that they commit many sins of logic and omission of fact. (The Jeff Sachs review is very good). Sadly, judging by book jacket, there are many noteworthy economists willing to overlook the obvious weakness of the argument if they like the message. The sloppiness of this book and the fulsome praise it receives within my field, compared to the careful scholarship of the other books I listed, make me feel a little ashamed of my profession.
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29 of 38 people found the following review helpful
1.0 out of 5 stars Interesting but Simplistic, August 2, 2012
By 
Ginny (El Paso, TX) - See all my reviews
This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
This book is interesting, but its major argument is simplistic. Daron Acemoglu and James A. Robinson place the lion's share of the blame for underdevelopment in poor countries around the world on the adoption of bad governmental and economic institutions. The path to progress, they argue, is to have good institutions; the path to failure is to have bad ones. While there is truth in such a proposition, it is nonetheless highly misleading. Let me explain. I doubt than anyone would disagree with the notion that to have healthy populations countries need good health care systems (doctors, clinics, hospitals, pharmaceuticals, etc.), and to have an educated citizenry countries need good educational systems (teachers, schools, universities, research laboratories, etc.). The real issue is how poor countries get the highly desirable health and educational systems. The harsh reality is that such systems or institutions are not easy to acquire. This is not simply a matter of choice, as Acemoglu and Robinson seem to suggest. If it were, then practically every country would have healthy and well-educated populations, and most do not. The reason is that good health and education infrastructures require robust revenues; robust revenues spring from prosperous economies; and prosperous economies ultimately derive from favorable circumstances in the spheres of external relations, the environment, natural resources, population dynamics, and governance. The same holds true for good governmental and economic institutions--to obtain them countries need strong foundational contexts. Acemoglu and Robinson ignore the fact that mal-functioning institutions and sputtering production processes in many poor countries are directly linked to problematic climates, geography, and resource endowments. These authors also discount the enormous problems faced by tropical areas growing food and maintaining healthy populations in the face of deadly diseases that thrive in hot and humid climates.
Acemoglu and Robinson begin their book with a reference to the U.S.-Mexico border, pointing to the differences in living standards in Nogales, Sonora versus Nogales, Arizona. The Mexican side, they say, is poorer than the U.S. side because Mexico's institutions do not work as well as those in the United States. It is a fact that Mexico is less prosperous than its northern neighbor and that it has weaker institutions. But to conclude that those weaker institutions account for Mexico's profound economic problems is a mighty stretch. To back up their claim that Mexico is just another country that has foolishly passed up opportunities to adopt good institutions, Acemoglu and Robinson recount select historical events and what they believe to be mistaken decisions by Mexican leaders. Anyone who knows the history of Mexico well, however, will quickly see that Acemoglu and Robinson rely on cherry-picked and un-contextualized history. These authors cite fragments of the past as their major source of evidence not only for Mexico, but for numerous other countries as well to make their grandiose case that institutions are the major deterministic causes of underdevelopment. It will be up to historians of all the countries cited as examples by Acemoglu and Robinson to check the efficacy of the history presented in Why Nations Fail.
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5 of 5 people found the following review helpful
4.0 out of 5 stars Important themes, with blind spots, August 30, 2012
This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
3.5 stars: Acemoglu and Robinson's central thesis isn't hard to understand: countries with inclusive, equitable political and economic institutions tend to prosper, while those with extractive, exclusive institutions geared towards the interests of a small elite tend to languish. The authors minimize geography and culture as significant factors in the equation, pointing to nations where those realities are similar but political systems vary.

The dynamic exists, the authors maintain, because the interests of an exploitative elite and those of regular citizens are usually in conflict, so the elite must actively block democratic movements, workers rights, unions, property rights, innovation, etc. in order to maintain a hold on power. In more inclusive systems, meanwhile, there is a virtuous circle effect, in which opportunity breeds motivation and meaningful choice, while making it hard for anyone to consolidate too much power over others.

It's a strikingly simple hypothesis -- a little too simple, I think -- but the authors back it up with a wide set of historical cases, ranging from post-Renaissance Europe, to the colonial Americas (noting the different approaches taken by English and Spanish settlers in controlling their territories), to post 17th century Britain, to the United States (monopolies and trusts are discussed), to the Arab world, to the Soviet Union, to modern Africa, to North versus South Korea. Even if you more or less accept the book's ideas, the details are still informative. If you're not familiar with the political differences between imperial Spain and England, they cast quite a bit of light on the separate paths taken by the two former world powers -- and their former colonial possessions. Similarly, you don't appreciate what apartheid meant for South Africa until you've contemplated just how the system was structured to impede blacks from becoming more than cheap sources of labor. As was a problem in the US, too.

The examinations seemed politically balanced. Communist governments taking a drubbing, and the authors argue that China's rapid growth as orchestrated by Bejiing is unlikely to be sustainable unless the Party relinquishes more of its grip. But Acemoglu and Robinson also pay attention to how capitalist monopolies undermine democratic ideals, as do weak or corrupt central governments that lack the power to enforce laws and protect individual rights.

The book has its blind spots, though. I simply don't agree with the authors that geography doesn't matter. Most wealthy countries, it seems to me, have inclusive systems, but were also blessed in resources, either obtained locally, or extracted from some other region. It's easy, for example, to see a country like the Netherlands as owing its prosperity to a liberal democracy that overcame a lack of natural gifts, but that's not the whole story. The Netherlands got started on a path to prosperity because it set up exploitative trading companies during the colonial era and eventually reallocated the wealth into new ventures. Being "inclusive" at home or among upper classes doesn't mean the same was true abroad or among lower classes. I also think that geopolitics is underrepresented as a factor in Why Nations Fail. South Korea and Israel might be successful countries in spite of tough landscapes, but both enjoyed massive military and economic support from the United States, enabling technological economies to flourish. It's not that a country like Zimbabwe has no chance of becoming a technology center, but it would have to find a way to produce skilled workers who can compete in the global economy, without being tempted to emigrate. Creating an educated population has significant start-up costs, even with the best of intentions.

All in all, the ideas that Acemoglu and Robinson promote are important foundational ones, but should be considered with their blind spots taken into account. Readers interested in history for its own sake might enjoy the case studies; if not, the themes are pretty repetitive.
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7 of 8 people found the following review helpful
3.0 out of 5 stars Interesting theory with a few holes, 3 and a half stars, May 22, 2012
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LMS (In the midwest) - See all my reviews
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This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
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One of the big questions in economics is why some nations are rich and some are poor. This is beyond a mere theoretical question because the answers generated effect how we try to provide aid and resources to lift these nations out of poverty. A current model is that nations are poor because their leaders lack enough information to make sound economical decisions for their country. If we just give them resources, they will make better decisions and their nations will begin to prosper. Of course, we've been trying this for decades so if that is the correct answer we should have solved the world's prosperity problems by now. In this book, the author's propose the theory that the type of government a nation has is the primary reason why a nation will either prosper of fail. If the government is extractive (it exists to extract from its people so that a small group can prosper) the nation will fail. If the people have the power and the government exists to serve the will of the people, an inclusive government, the nation is much more likely to prosper. Thus, supplying an extractive government with aid and resources will never result in prosperity because the ruling elite will siphon the money/resources off for their own means and ends.

There is a great deal of truth that seems inherent to this argument. However, the authors try to argue that other factors such as geography or culture matter little when it comes to whether a nation will prosper and fail. The authors argue that, contrary to the thesis of Jared Diamond's Gun's Germs and Steel, it is government, not geography that determines a nation's prosperity. Well, what determines government? Diamond's thesis argued that geography was critical to government and that the geographical constraints of Europe were critical for the type of culture that arose which gave rise to the type of government that followed. If it is only government and not other factors such as geography, why is there such a difference in prosperity between places with the same government but where the geography is vastly different? The Ozarks are rural, mountainous, and lack good soil for crops and the region is very poor. Yet this is in the US so this should be a prosperous region because its people have access to the same government systems as those in St. Louis, a much more prosperous region which is just over a hundred miles away. Clearly, there is a role for geography in determining prosperity.

The authors make interesting arguments but they bend and cherry pick arguments to solely fit their thesis. The problem with the real world is that the answers are never this easy. Nations are poor for a variety of reasons, government being only one (although a major one). This was an interesting read but lacks from nuance. Also, it would have benefited from an editor who could have cut out some of the repetitious sections.
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7 of 8 people found the following review helpful
3.0 out of 5 stars Frustrating, April 11, 2012
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This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
The ideas presented by the authors are important, and need to be taken to heart. However, I found the book to be poorly written, and I had lost patience with it by the half-way point, although I persevered all the way through.

The book reads as if the authors had collated a number of previously published papers, with a light attempt at integration. However, the attempt is very light. The result is lots of repetition, as previous reviewers have noted. More annoying is that the authors give plenty of examples to support their arguments. Even though some of the examples are repeated over and over (e.g. Britaqin's take-off was strongly influenced by the Glorious Revolution of 1688) the authors hardly ever go into any detail (we are not told the details of the Glorious Revolution or why it mattered until a half-hearted attempt near the end of the book). The examples are typically one or two throw-away sentences.

Even worse is the lack of "pin-point" references.Instead of the usual references, the authors furnish a bibliographic essay. Thus, for support of a given argument they might cite a three-hunder-page book. If I am puzzled by something they say, because it runs against what I had previously believed, I have to rummage through a three-hunderd-page book to see what supporting evidence they are using. I'm sure this was meant to be less intimidating for th general reader, but it sure frustrated me.

Finally, while the ideas here are imprtant, they aren't all that new. For example, the idea that political institutions have a big impact on economic growth was very forcefully expressed a decade ago by Hernando de Soto in The Mystery of Capital, a book that I find better executed, although perhaps not as wide-ranging.
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Why Nations Fail: The Origins of Power, Prosperity, and Poverty
Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu (Hardcover - March 20, 2012)
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