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254 of 274 people found the following review helpful
5.0 out of 5 stars A Return To Political Economy, January 29, 2012
This review is from: Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Hardcover)
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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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Showing 1-9 of 9 posts in this discussion
Initial post: May 18, 2012 11:48:19 AM PDT
The authors did not even begin to debunk the geographical thesis of development. Far from it, they create a straw man, arguing against a strictly deterministic model of geographical influence. Geography does not determine development, it just influences whether or not it occurs.

A landlocked state, with poor soil, no navigable waterways, in a high conflict neighborhood, with a high incidence of disease, and poor neighbors who have poorly developed infrastructure will obviously face massive barriers to development, however good its institutions. But of course, it is rare to find good institutions under such circumstances. The authors don't even begin to answer why. In fact, they only include a small smattering of the arguments that Jeffrey Sachs and Jared Diamond include in their geographical theories of development. And they make no use of Adam Smith's same arguments.

In reply to an earlier post on May 29, 2012 11:58:36 AM PDT
Carol Kean says:
Uh....I thought the irrelevant information, such as //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//, was the best part of the book. :-)

Posted on Jul 18, 2012 9:57:34 AM PDT
Last edited by the author on Jul 18, 2012 9:59:11 AM PDT
Amtak says:
Ken McCormick offers a very good review of an important book. In regard to his final sentence, much of the aid -- especially that of the U.S. -- was never intended to make poor countries rich. Rather, it was to persuade countries to support U.S. policies or to reward them for having done so (think: Egypt and Israel, for ceasing fire on each other). That's why many of our aid efforts backfired, as when deposed dictators have been found out as beneficiaries of U.S. aid programs (think: Shah Pavlevy of Iran). I spent a decade in USAID, promoting multisector development and sustainability, with only partial success. My most enjoyable moments were spent in the field, where I met hard-working and generous people, although deprived of much formal education, devising ingenious ways to survive and even produce food in landscapes that looked like the moon -- where I could see nothing but rocks, dirt, giraffes and dikdiks. Economists have argued for decades over causes for some nations succeeding and others failing. My experience says that Acemoglu and Robinson have come closer than anyone else to date, and, with all due respect to Theodore Horesh, make much more sense than Jared Diamond whose arguments often strike me as weird.

In reply to an earlier post on Oct 20, 2012 2:14:42 PM PDT
nickel says:
Excellent commentary. Thank you for your contribution. And I agree with you about Jared Diamond's theories, they are somewhat weird.

In reply to an earlier post on Dec 2, 2012 2:44:14 PM PST
You read my mind. Thanks.

Posted on Dec 2, 2012 2:45:16 PM PST
Thanks for putting so much effort into this. It helped me a lot to sort out what should come next on my reading list.

Posted on Sep 20, 2013 11:45:54 AM PDT
Sherwood says:
Reading the endorsements by Bloomberg's Businessweek, the Wall Street Journal, The Economist and the Washington Post ought to stimulate those who merely like to talk about Power, Prosperity and Poverty in this greatest of all nations.

Posted on Oct 12, 2014 8:03:29 PM PDT
How do you explain China then? Not a very inclusive political system, but it is a lot easier for the common person to start his own business there than in the US, a full fledged democratic republic. The American colonists were actually better off being under colonial rule without any representation from an economical standpoint. They had their little tea party when the British actually started to tax them at 1-2%. A lot less than they were taxed as a new republic.

In reply to an earlier post on Oct 12, 2014 8:39:49 PM PDT
Sherwood says:
You lost me, China? Colonial days? Trying to equate the economics of advanced nations to your examples is akin to entering a Ford Model T roadster in the next Eindi 500
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