Wednesday, March 21, 2012


Russ Roberts talks to Deron Acemoglu about Why Nations Fail (which I have not yet read; I believe it just became available).  The book's authors have recently set up this blog.

Acemoglu acknowledges his intellectual debt to Adam Smith and Douglass North (and many others).  Smith's question re why some nations are rich and some are poor is as profound and challenging as ever.  North (and colleagues) brought the discussion back to institutions (mainly clear and credible property rights) and how they impact incentives.

Acemoglu (in the interview) does not mention "kleptocracies", preferring to cite "extractive regimes" (as in rent extraction, the partner of rent seeking).  They are seemingly the same.

I first read about "virtuous cycles" in the 1995 paper by Surjit Bhalla.  Economic freedoms prompt prosperity and prosperous people demand economic freedom.  Trouble is that the positive feedback does not occur everywhere.  Kleptocrats often grab power and jam up the unfolding of the virtuous cycle.  But do we know when and where this is most likely?  Acemoglu discusses historic-geographic peculiarities that ocassionaly stymied the kleptocrats.  Colonials respected local institutions in Botswana because the place was apparently too poor to dominate.  This historical accident favors Botswana today and it is a stand-out in African economic development.

(All this sent me back to Deepak Lal, who also emphasizes historical circumstances that seemed to have unintended but profoud economic consequences.)

Is it culture?  Much has been written about the North Korea-South Korea-comparison natural experiment.  (Nogales, Arizona, and Nogales, Sonora, are mentioned by Acemoglu as another useful "twins" study of the power of institutions, but this one involves common geography, not common culture.)

It is a cliche that you can never know enough history.  Picking up on Smith, North, Acemoglu, Lal and others, we see that economists can never know enough history.