【Headline Comment】 Nobel Economics Prize Awarded to "Statesman" Scholars

Chen Xiaochang

This year's Nobel Economics Prize was awarded to three American economists who research social institutions and national prosperity: Daron Acemoglu, Simon Johnson, and James Robinson. The reason for the award is that they proved the importance of social institutions in determining a country's prosperity, particularly the role of rule of law in economic growth.

The researchers' focus was very targeted, mainly examining the development history of formerly colonized countries. They believe that the same colonial power can implement different social institutions in different colonies, which would greatly impact the country's future prospects.

Here, the difference lies in whether inclusive or extractive institutions are implemented. Inclusive political and economic institutions form a virtuous cycle: they encourage investment and innovation, allow creative destruction to occur, and lead to economic prosperity. Extractive political and economic institutions form a vicious cycle: they suppress investment and innovation, prevent creative destruction from occurring, and stunt economic growth. A combination of extractive political institutions and inclusive economic institutions can generate growth but is unsustainable.

In the book "Why Nations Fail? – Power, Prosperity, and Poverty" co-authored by Acemoglu and Robinson, more case studies are presented. Two important examples are the development differences between Western Europe and North America.

The book mentions that the Black Death shook the feudal system in Western Europe, making technological progress, population mobility, and private property possible, ultimately leading to different development paths for Western Europe. In America, South America had a large amount of gold and silver, as well as more indigenous residents, while Western colonizers established a network of institutions to exploit these resources, which hindered the economic incentives and creativity of most people; in contrast, North America had fewer opportunities for direct exploitation, but land was vast, with fewer indigenous residents, allowing colonization to be achieved through various incentive mechanisms.

However, not all economists agree with this theory.

For example, renowned evolutionary economist and development economist Rainer Rost never hesitates to point out that all explanations for why some countries are rich and others poor due to property rights, democracy, geography, climate, disease, or viruses do not touch on the most fundamental issue – how a country chooses what kind of industrial activities to engage in. Rost believes that property rights and other institutional systems are important, but from a causal perspective, they do not create national wealth; they are only supporting systems for the process of creating national wealth. Private property and other institutional systems are the results of economic activity development, rather than its causes.

It is worth noting that the book "Why Nations Fail?" also frequently mentions China's development. The authors use Ming and Qing dynasties in China as an example to explain how extractive institutions killed innovation, creativity, and overseas trade, leading to backwardness. As for post-reform China, the authors attribute China's economic success to having "escaped extractive institutions and moved towards inclusive economic institutions."

Because the physics prize and chemistry prize were both awarded to scholars who research artificial intelligence this year, researchers studying artificial intelligence are also considered most likely to win the economics prize. However, the Nobel Committee ultimately chose economists who research social prosperity and economic growth. Their theory may not be perfect, but at least it is worth more attention from scholars and justifies the field of economics as a discipline that is "statesman" in nature.

This column article only represents the author's personal opinion.