Tuesday, March 13, 2012

Why do nations fail?

From Planet Money's Adam Davidson,
Over the centuries, proposed answers have varied greatly. Smith declared that the difference between wealth and poverty resulted from the relative freedom of the markets; Thomas Malthus said poverty comes from overpopulation; and John Maynard Keynes claimed it was a byproduct of a lack of technocrats. (Of course, everyone knows that politicians love listening to wonky bureaucrats!) Jeffrey Sachs, one of the world’s most famous economists, asserts that poor soil, lack of navigable rivers and tropical diseases are, in part, to blame. Others point to culture, geography, climate, colonization and military might. The list goes on.   
He doesn't mention what continues to be one of my favorite books on the subject, Guns Germs & Steel.  But the column is on the more recent work (linked to last week), which I have ordered but haven't read yet, by Darren Acemoglu and James Robinson.   Davidson says this book argues
"that the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy...when a nation's institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help."
This seems in tune with the Spirit Level.

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