Nobel Prize in Economics Awarded for Groundbreaking Research on Institutions and Global Inequality
Three economists have been awarded the 2024 Nobel Prize in Economic Sciences for their research on how institutions shape the prosperity of nations. Daron Acemoglu, Simon Johnson, and James A. Robinson were recognized for their work, which explores how colonial institutions and their long-term impact contribute to the stark economic disparities between countries today.
The Nobel committee highlighted how societies that established "inclusive institutions" during colonisation—institutions that support the rule of law and benefit the wider population—tend to experience long-term prosperity. In contrast, those that developed "extractive institutions," which exploit resources for the benefit of a select few, struggle with low economic growth.
The trio’s research has been critical in understanding why certain nations remain poor while others thrive. Their findings show that nations with inclusive systems enjoy greater stability and innovation, while authoritarian regimes face difficulties sustaining long-term growth.
"Reducing the vast differences in income between countries is one of our time's greatest challenges," said Jakob Svensson, Chair of the Committee for the Prize in Economic Sciences.
In their influential book, Why Nations Fail, Acemoglu and Robinson argue that institutional strength, rather than geography or culture, plays a central role in determining a country’s economic success. They use examples like the two Nogales towns—one in Arizona and the other in Mexico—to illustrate how better institutions lead to healthier, wealthier populations.
Simon Johnson added to this conversation, pointing out how established institutions in developed countries are also facing stress. He cited Donald Trump’s refusal to accept the 2020 U.S. election results as an example of how even strong democracies can be tested.
Acemoglu also touched on how authoritarian regimes, such as China, have challenged the idea that inclusive institutions are necessary for growth. However, he maintains that such regimes are less likely to achieve long-term sustainable innovation, despite their current success in fields like artificial intelligence.
The award highlights the growing importance of institutions in economic discourse. Acemoglu, Johnson, and Robinson’s findings have influenced the way economists and policymakers think about development, democracy, and innovation. Their research also sheds light on the persistence of global inequality and provides insight into potential solutions.
This Nobel Prize follows last year's recognition of Claudia Goldin, who was honoured for her work on the gender pay gap. Like Goldin’s research, this year’s prize-winning work underscores how historical factors shape modern-day economic outcomes.
