From Poverty to Prosperity Watch

Daron Acemoglu writes,

People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions -- the rule of law and security and a governing system that offers opportunities to achieve and innovate. That's what determines the haves from the have-nots -- not geography or weather or technology or disease or ethnicity.

I disagree with some of Acemoglu's essay. He makes it sound as though American hostility toward authoritarian regimes and support for democratic revolutions would produce big improvement. Instead, I think more highly of Douglass North's work, particularly with John Wallis and Barry Weingast, on the difficulty of making the transition from the "natural state" to an "open access order."

The economists who are interviewed in From Poverty to Prosperity, including Doug North, Robert Solow, and Bill Easterly, agree with Acemoglu that institutions (what we call the "operating system" of the economy) are major determinants of prosperity. However, these economists share my view that institutional evolution is a complex phenomenon, and that there is no simple way to transplant institutions that work well in one country to another country.

Simon Johnson, who has been a co-author of Acemoglu's, gave us a blurb for the back of the book.

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