The Nobel Memorial Prize in Economics was awarded on Monday to economists Daron Acemoglu, Simon Johnson, and James A. Robinson for their groundbreaking research that elucidates why nations with weak rule of law and exploitative institutions struggle to achieve sustainable economic growth. The Royal Swedish Academy of Sciences recognized their work, stating that the trio has significantly highlighted the critical role societal institutions play in a country’s prosperity. Acemoglu and Johnson are affiliated with the Massachusetts Institute of Technology, while Robinson conducts his research at the University of Chicago. Jakob Svensson, the Chair of the Committee for the Prize in Economic Sciences, emphasized the relevance of their findings in addressing the stark income disparities that exist between countries today. “The laureates have demonstrated the importance of societal institutions for achieving this,” Svensson remarked, noting that their research has provided profound insights into the fundamental reasons behind the success or failure of nations.

Acemoglu, who was reached in Athens, Greece, expressed his shock and surprise upon receiving the news of the prestigious award. “You never expect something like this,” he said. He emphasized that their research highlights the value of democratic institutions, advocating that their work fundamentally supports the principles of democracy. However, he also acknowledged the complexities involved, stating, “Democracy is not a panacea. Introducing democracy is very hard. When you introduce elections, that sometimes creates conflict.” This nuanced view underscores the challenges of transitioning to democratic governance, especially in regions where institutions are underdeveloped or compromised. When discussing economic growth in authoritarian regimes like China, Acemoglu pointed out that such systems typically struggle to foster sustainable innovation and growth in the long term, reinforcing their findings about the detrimental effects of poor institutional frameworks.

The economists’ influential book, “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” published in 2012, posits that manmade obstacles are primarily responsible for the poverty seen in many countries. Their research includes a striking comparison of the two Nogales cities—one in Arizona, USA, and the other in Sonora, Mexico. Despite their geographical and cultural similarities, the two cities exhibit vastly different living conditions due to the institutional frameworks in place. In Arizona, citizens enjoy better living standards and access to education, while those in Sonora face challenges such as organized crime and corruption. The Nobel committee emphasized that the disparity stems from a U.S. system that effectively protects property rights and encourages civic engagement. Acemoglu voiced concerns regarding the waning support for democratic institutions in the U.S. and Europe, stressing that “democracies particularly underperform when the population thinks they underdeliver.” He advocated for a renewed commitment to effective governance to address these challenges and to strengthen democratic institutions globally.

The Nobel Prize in Economics, officially known as the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968 as a tribute to Alfred Nobel, the inventor of dynamite and founder of the Nobel Prizes. Although some purists argue that it should not be classified among the traditional Nobel Prizes, it is presented alongside them each year on December 10, the anniversary of Nobel’s death in 1896. This year’s announcement of the Nobel honors follows the recent recognitions in fields such as medicine, physics, chemistry, literature, and peace, marking a significant moment in the academic landscape as the world grapples with ongoing issues related to economic inequality and institutional effectiveness.