Daron Acemoglu – Inclusive institutions, democracy and the key drivers of economic growth

Summary

In this interview, Daron Acemoglu, an Institute professor at MIT, discusses the pivotal role of institutions in fostering economic growth. He emphasizes the importance of inclusive economic institutions that provide stability and equal opportunities, and stresses the interplay between economic and political factors. Acemoglu also addresses the challenges facing democracies, including the rise of autocratic tendencies in Central Europe. Furthermore, he delves into the impact of automation on labor markets, highlighting the need for a balanced approach to technological change. His journey into economics was inspired by a desire to understand the connections between democracy, economic development, and social well-being.

Takeaways

• 🌟 Daron Acemoglu is an Institute professor at MIT, focusing on political economy and the impact of technological change on productivity, inequality, wages, and employment.
• 🏛️ Acemoglu emphasizes that good institutions, which provide stability and secure rights for individuals, are key drivers of economic growth and shared prosperity.
• 🔄 The economist argues that inclusive economic institutions are both incentive-related, encouraging investment and innovation, and opportunity-related, ensuring a level playing field for all.
• 🤝 Acemoglu points out the interdependence of economic, political, and social factors, noting that economic institutions are shaped by and cannot be separated from political ones.
• 🌍 He discusses the challenges democracies face globally and in Central Europe, highlighting the retreat of democracy since the early 2000s and the exploitation of democratic weaknesses by autocratic leaders.
• 👷‍♂️ The interview touches on the relationship between labor and technological growth, with Acemoglu noting the potential disruptions and social backlash caused by automation.
• 🛠️ Acemoglu criticizes the focus on automation over the past 20 years, suggesting it has led to a neglect of new tasks and activities that could compensate for job displacement.
• 💡 He suggests that institutions are not just designed but evolve from historical processes and political interactions, making them difficult to change simply by altering constitutional provisions.
• 🌱 Acemoglu's interest in economics was sparked by his teenage experiences in Turkey during a military dictatorship, leading him to explore the links between democracy and economic development.
• 📚 His academic journey led him to discover economic historians like Douglas North, who inspired him to pursue questions about the institutional foundations of economic development.

Q & A

What are the main areas of research focus for Daron Acemoglu?

Daron Acemoglu focuses on political economy, particularly the institutional foundations of long-run economic development, poverty, prosperity, and technological change and its impacts on productivity, inequality, wages, and employment.

How does Daron Acemoglu define good institutions in relation to economic growth?

Good institutions, according to Acemoglu, are those that create stability and secure rights for individuals to engage in economic transactions, investment, education, and legal functions. These institutions are inclusive and provide a level playing field and equal opportunities for a broad cross-section of society.

What is the relationship between economic institutions and political power according to Acemoglu?

Acemoglu emphasizes that economic institutions are shaped by political institutions and the distribution of political power in society. Economic institutions cannot remain inclusive if political institutions and structures are against inclusivity.

Why does Acemoglu argue that designing institutions is challenging?

Acemoglu points out that institutions are evolved things, resulting from historical processes, interactions between politics and norms, and people's participation in politics. They cannot be easily designed or changed by just altering the provisions of a constitution; it requires a bottom-up process and active participation.

What are the current challenges that democracies face worldwide and specifically in Central Europe?

Acemoglu notes that democracy has been in retreat globally since the early 2000s, with powerful leaders and autocratic tendencies undermining democratic structures. In Central Europe, despite economic success, the relatively new democratic experiment leaves vulnerabilities that are being exploited.

How does Acemoglu view the role of democracy in fostering economic growth and social development?

Acemoglu believes that democracy, while necessary, is not sufficient on its own. It must be accompanied by inclusive political and economic institutions to cultivate values and participations that contribute to economic growth, education, and child health.

What is Acemoglu's perspective on the impact of automation on labor markets?

Acemoglu sees automation as a double-edged sword: it improves productivity but can displace labor and generate social backlash. He argues that while automation has been a part of technological change, it has often been accompanied by the creation of new tasks and activities that have kept labor engaged and provided a stable labor share of national income.

How did Daron Acemoglu's early life experiences influence his decision to become an economist?

Acemoglu's interest in economics was sparked by his experiences growing up in Turkey during the 1980s under a military dictatorship. He was intrigued by the relationship between democracy, economic conditions, and freedom of the press, which led him to study economics to understand these issues.

What was Acemoglu's initial misconception about the field of economics and how did it change?

Acemoglu initially thought economics would directly address questions of democracy and dictatorship, but soon realized it was broader. He continued to be drawn to economics for its ability to tackle important social questions through quantitative analysis and later found a way to reconnect with his initial interests during his PhD.

How does Acemoglu describe the evolution of tasks and activities in relation to technological change?

Acemoglu describes the evolution of tasks and activities as a response to technological change, where new tasks emerge that did not exist before, often becoming central to labor's gainful employment and share of national income.

What does Acemoglu suggest is the current problem with the direction of technological change and public policy?

Acemoglu suggests that the current problem is an overemphasis on automation to reduce costs, neglecting the development of new activities where labor is central. This has led to an environment of disruption without sufficient compensatory measures, indicating a need for a change in the direction of technological change and public policy.