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Why economists fail

The new book (and the accompanying blog) by Daron Acemoglu and James Robinson Why Nations Fails is a popular version of their academic papers (several with Simon Johnson, the ex IMF chief economist) on the topic [brief summary here]. The main idea is that institutions and not geography or culture are the key to economic development. That is for the most part true.

They use South and North Korea (and Nogales, México and Arizona) as an example of countries that share the same culture and geography, but have very different institutions, and, as a result, a huge disparity in income per capita. Jared Diamond is correct to point out that, in part, technology is geographically determined. No plants and animals to domesticate, and provide for a large surplus (Diamond uses the old classical notion of surplus), and higher population density (with the diseases and immunities associated to those Germs) and no advantages associated to a more developed division of labor (Diamond is also Smithian in that sense), with the consequent development of technology (Guns and Steel). But the problem is that this won’t help you understand why England and not China industrialized (the opposite extremes of the Eurasian continent).

Read the rest here.

Comments

  1. I promised to refrain from polemics in this sad moment after the sudden death of Randy Wray's wife. However I do not resist to point out that the MMT Weekly newsletter just published a (bad) article by Acemoglu and Robinson (http://paper.li/AusMMT/1297816409) without feeling the necessity of any criticism. Meeks pointed out that according to the Classical economists growth induced the development of modern institutions, not just the other way round. And Diamond points out that it was the emergence of a surplus that gave the possibility to create institutions (a political class, priests, philosopher etc). After the Austrians, (some of) the MMTs are now making new orthodox alliances!

    ReplyDelete
    Replies
    1. Very sad news about Randy's wife. The Acemoglu and Robinson stuff is essentially supply constrained, and very anti-Keynesian. They had a debate with Krugman recently too http://whynationsfail.com/blog/2012/4/18/inequality-and-keynesian-economics.html

      and Mark Thoma's reply here
      http://economistsview.typepad.com/economistsview/2012/04/why-do-acemoglu-and-robinsons-resort-to-hitler.html

      No reply by Krugman on this one.

      Delete
  2. And I should have probably said that Deirdre McCloskey and her stuff on 'bourgeois values' is one of the important and recent contributions to the cultural view of the development of capitalism.

    ReplyDelete
  3. And Diamond points out that it was the emergence of a surplus that gave the possibility to create institutions (a political class, priests, philosopher etc). After the Austrians, (some of) the MMTs are now making new orthodox alliances!
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    ReplyDelete
  4. oh yeah?? Meeks pointed out that according to the Classical economists growth induced the development of modern institutions, not just the other way round. And Diamond points out that it was the emergence of a surplus that gave the possibility to create institutions (a political class, priests, philosopher etc).contoh paragraf induktif

    ReplyDelete
  5. Why Economist Fail?, An outstanding theme in my opinion. why so?. because in the era of globalization and the growing economic crisis amid issues of strangling or anything like it was supposed to be discussed and opened wide width. it can be viewed also on Harga BlackBerry Terbaru

    ReplyDelete
  6. And Diamond points out that it was the emergence of a surplus that gave the possibility to create institutions (a political class, priests, philosopher etc). After the Austrians, (some of) the MMTs are now making new orthodox alliances!

    ReplyDelete

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