Economic, Historical, and Legal perspectives on Why Nations Fail

07 June 2012

Why are some nations rich and others poor? This was the question addressed by a colloquium on the recent acclaimed book Why Nations Fail by award-winning economists Daron Acemoglu and James Robinson, held on 6th June at Wolfson College as part of the Law, Justice and Society Research Cluster.

The book was the basis of a panel discussion in which the economic, historical, and legal implications of the authors' central thesis were critiqued, during the course of which the panel and audience identified a number of challenges for policymakers that the book poses.

The discussion was opened with an outline of the authors' central thesis that it is man-made political and economic institutions, rather than geographical or cultural factors, that determine a nation's economic success. Through a series of case studies, nations are identified as either extractive, wherein they remain mired in poverty through the suppression of technological innovation and economic and personal freedom; or inclusive - those that are innovative and prosperous through the activity of competing interests under the rule of law and secure property rights.

The panel supported many of the claims made in the book, such as the importance of strong institutions in driving long-term economic growth, but other areas of analysis were questioned. Not least of these was the challenge to the theory raised by the economic success of the extractive state of China, which was not adequately addressed by the authors' contention that China will have to risk loss of political control or economic stagnation.

Discussion focused on the book's categorization of inclusive and extractive states, which were critiqued for being too broad, and for 'flattening out' the course of history. Questions were also raised about the lack of precision in the concepts and terminology used, and how far the authors' analytical framework amounted to a testable hypothesis.

Whilst stopping short of making clear policy recommendations, the authors' main achievement, as more than one panellist observed, was in demonstrating the complexity of historical and economic development, and identifying the limitations of external policy interventions in failing states.