root causes, acemoglu Flashcards
what is the overview of the article “root causes” by acemoglu?
Daron Acemoglu’s “Root Causes” argues that institutions, not geography, are the primary drivers of economic development. Inclusive institutions, which protect property rights and ensure equal opportunities, foster prosperity, while extractive institutions, often established during colonization, hinder growth. Historical evidence, like the “reversal of fortune,” shows that regions with inclusive institutions became wealthy, while those with extractive ones stagnated. Institutional reform is challenging due to elite resistance but possible under favorable conditions, as shown by Botswana’s success. Institutions are key to addressing global income disparities.
what are the fundamental causes for the stark global disparities in income and living standards?
While proximate causes like weak markets, poor education, and outdated technology explain poverty, the deeper, fundamental causes are debated as geography or institutions.
- Geography Hypothesis: Suggests that climate, ecology, and location shape technology and incentives, making nature a primary factor in poverty.
- Institutions Hypothesis: Argues that human-designed institutions, such as property rights, constraints on elite power, and equal opportunity, are key to fostering investment, innovation, and economic prosperity.
Good institutions protect investments, prevent exploitation, and enable widespread participation in economic activities. In contrast, societies with selective rule of law and unchecked elite power remain economically stagnant and inequitable.
What is geography’s influence?
The section “Geography’s influence” examines the idea that geographic factors, such as climate and proximity to the equator, contribute to poverty, as poorer regions are often tropical and face challenges like disease and extreme weather. While there is a correlation between geography and economic outcomes, this does not prove causation. Historical evidence shows that geography alone cannot explain prosperity, as many tropical regions were wealthy in the past (before colonisation).
Instead, institutions play a more decisive role in economic development. Wealthy countries consistently have strong institutions that protect property rights and limit elite power. To isolate the effects of geography and institutions, researchers use historical examples like colonization to demonstrate that changes in institutions, not geography, drive economic outcomes.
what does this article mean by “reversal of fortune”?
The section “Reversal of fortune” highlights a historical pattern where regions that were wealthy in 1500, such as the Mughal Empire, Aztec, and Inca civilizations, are now among the poorest, while previously less developed areas like North America, New Zealand, and Australia are now prosperous. This phenomenon contradicts the geography hypothesis, as these regions’ climates and geographies have remained constant.
The reversal aligns with theinstitutions hypothesis, as colonial powers introduced different types of institutions. In extractive colonies, designed to exploit resources and labor, elites maintained unchecked power, and property rights were not protected for most people, leading to long-term poverty. In settler colonies with inclusive institutions, property rights were safeguarded, and political power was balanced, fostering investment and economic growth. This evidence underscores that institutions, not geography, are the key drivers of prosperity.
what does this article mean by “no natural gravitation”?
The section “No natural gravitation” argues that societies do not naturally evolve toward good institutions. Institutions shape not only economic outcomes but also the distribution of income and power within a society. Changes to improve institutions are often blocked by powerful groups who benefit from existing systems and resist reforms that threaten their privileges.
Historical examples, such as 19th-century Austria-Hungary and Russia, illustrate how elites opposed industrialisation and technological advancements to maintain their power. Similarly, European colonists implemented extractive institutions in colonies for their own benefit, leaving a legacy that persisted post-independence, as new elites inherited and perpetuated these systems.
While institutional reform is challenging, it is not impossible. Success requires either empowering groups that favor reform or negotiating agreements to compensate potential losers. Recognizing the barriers to institutional change is essential for fostering development and reducing inequality.
