Three American scholars won the Nobel Prize in Economics for their research on the -gap between rich and poor- between countries_1

On October 14, the Nobel Prize in Economic Sciences was awarded to Professor Daron Acemoglu from MIT, Simon Johnson, and James A. Robinson from the University of Chicago. They were recognized for their extensive research into how social institutions form and influence national prosperity.

Their work focuses on the impact of institutional frameworks in formerly colonized nations and how these frameworks steer economic growth. A key takeaway from their research is that democratic governance tends to foster better economic outcomes.

Moreover, the trio’s studies highlight the stark wealth disparities between nations. According to the Nobel Committee, this year’s laureates examined the varying political and economic systems implemented by European colonizers in their colonies and underscored the importance of social institutions in determining a country’s success.

Committee Chair Hans A. Svensson emphasized that reducing the significant income gaps between countries is one of today’s biggest challenges, highlighting the importance of social institutions in this pursuit.

The Nobel press release elucidates that European colonizers altered the social structures within their colonies by introducing differing systems. Some colonies established inclusive political and economic systems that beneficially impacted European immigrants over the long term. Conversely, other regions fell victim to extractive systems, designed to exploit indigenous populations and extract resources for profit.

While inclusive systems can yield long-term benefits for everyone, many nations remain trapped in extractive systems that stifle economic growth. These exploitative structures provide short-term advantages to those in power; as long as the political framework ensures their continued dominance, the public is unlikely to believe in promises of future economic reforms, perpetuating stagnant conditions.

From Athens, Acemoglu expressed his excitement over the award and emphasized the importance of democratic systems. “Countries transitioning from non-democratic regimes to democracies tend to grow significantly faster, often by about eight to nine years, compared to those that remain non-democratic,” he stated. However, he also acknowledged that establishing democracy is inherently challenging.

Johnson shared his thoughts with Reuters, mentioning that existing structures in the U.S. are under increasing pressure, particularly due to former President Trump’s refusal to concede in the 2020 election. “I see this as my biggest concern regarding the industrialized world,” he said, emphasizing that the upcoming U.S. elections will serve as a “heavy stress test” for American democracy.