MIT, University of Chicago Professors Win Nobel in Economics for Research on Institutions

Acemoglu, Johnson, and Robinson from MIT and University of Chicago Win Nobel Prize in Economics for Research on Institutions and Prosperity

The Royal Swedish Academy of Sciences has awarded the 2024 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Daron Acemoglu, Simon Johnson, and James A. Robinson for their groundbreaking studies on how societal institutions are formed and their impact on national prosperity. The three laureates, who are affiliated with the Massachusetts Institute of Technology (MIT) and the University of Chicago, have significantly advanced the understanding of the relationship between institutions and economic growth.

Key Contributions: Understanding Institutional Impact on Prosperity

Acemoglu and Johnson, both professors at MIT, along with Robinson from the University of Chicago, have demonstrated through their research that the quality of institutions, such as the rule of law, governance, and political structures, plays a crucial role in determining a country’s economic development. Societies with inclusive institutions that foster participation, accountability, and protection of individual rights are more likely to achieve sustained prosperity. Conversely, societies with extractive institutions, which concentrate power and resources in the hands of a few, often struggle to grow economically.

The laureates' work explains the historical context of these institutional differences, particularly focusing on the colonial era. They highlighted how European colonization led to the establishment of diverse institutional frameworks across regions. In some colonies, inclusive political and economic systems were developed, benefiting European migrants and fostering long-term prosperity. In others, extractive systems were set up, aimed at resource extraction and exploitation of the local population, leading to enduring economic challenges.

Insights on Political Change and Economic Reform

The research also delves into why some nations are unable to break free from cycles of poverty. Acemoglu, Johnson, and Robinson have argued that extractive institutions, despite their negative long-term impacts, provide short-term gains for those in power, creating a resistance to reform. The inability to credibly commit to reforms hinders the shift towards more inclusive institutions, perpetuating economic stagnation.

Their findings further suggest that threats of revolution can sometimes lead to political change. Faced with mass dissatisfaction, leaders might be forced to consider democratization as a way to maintain stability, marking a shift towards more inclusive governance.

Prize and Background Information

The Nobel Prize in Economics this year comes with an award of 11 million Swedish kronor, which will be shared equally among the three laureates. The Chair of the Committee for the Prize, Jakob Svensson, remarked, “Reducing the vast differences in income between countries is one of our time’s greatest challenges. The laureates have demonstrated the importance of societal institutions for achieving this.”

Laureate Backgrounds:

Daron Acemoglu: Born in 1967 in Istanbul, Türkiye. He completed his PhD at the London School of Economics and is currently a professor at MIT.

Simon Johnson: Born in 1963 in Sheffield, UK. He earned his PhD from MIT and is a professor at the same institution.

James A. Robinson: Born in 1960, with a PhD from Yale University, he is a professor at the University of Chicago.