"Inclusive institutions are good for long-run growth and prosperity." Economic sciences prize 2024

Summary

The Economic Sciences Prize this year highlights the critical role of societal institutions—political and economic—in explaining disparities in prosperity among nations. The laureates emphasize that inclusive institutions foster sustainable growth while extractive institutions hinder it, despite their unpopularity. Their groundbreaking research provides empirical evidence and theoretical insights into this relationship, underscoring the importance of prioritizing inclusivity for long-term prosperity. With a diverse group of laureates, the prize reflects an interdisciplinary approach, suggesting a future trend towards collaborative research in economics and political science.

Takeaways

• 🌍 The 2024 Economic Sciences Prize focuses on explaining differences in prosperity between countries, highlighting the role of societal institutions.
• 🏛️ Inclusive institutions, such as property rights and political rights, promote economic prosperity, while extractive institutions hinder growth.
• 🔍 The prize demonstrates a clear causal link between institutions and prosperity, which is challenging to empirically establish.
• 📉 Extractive institutions lead to economic stagnation and are often maintained even though they are undesirable.
• 📈 Democracies tend to foster more stable economic growth compared to autocracies, although not all autocratic countries are poor.
• 👨‍🎓 The laureates are from diverse backgrounds: one from Turkey and two from Britain, despite working in American universities.
• 📞 The call to inform the laureates about the prize took place in an informal setting, highlighting the global nature of the event.
• 🤝 The research emphasizes the importance of interdisciplinary approaches, blending economics with political science and economic history.
• 🔗 The findings suggest that establishing inclusive institutions should be a top priority for long-term growth.
• 🔮 Future prizes may increasingly reflect cross-disciplinary research, as economists expand their study areas.

Q & A

What is the main focus of this year's economic prize?

The prize focuses on explaining the differences in prosperity between countries, emphasizing the role of societal institutions in both political and economic contexts.

What types of institutions are considered 'inclusive'?

Inclusive institutions are those that broadly protect investments and provide political rights, such as the right to vote, contributing positively to prosperity.

How do extractive institutions impact prosperity?

Extractive institutions allow the state to seize resources from ordinary people, leading to poorer growth outcomes and long-term stability.

What groundbreaking aspect is highlighted about this year's prize?

This year's prize provides empirical evidence demonstrating the causal relationship between institutions and prosperity, a significant theoretical advancement.

Why is it difficult to implement inclusive institutions if they are known to be better for growth?

The laureates have developed a theoretical explanation for the persistence of institutions, indicating that societies can become 'trapped' in extractive systems despite not wanting them.

What should be prioritized according to the findings discussed in the interview?

The findings suggest that setting goals to develop inclusive institutions should be a high priority for long-term growth and prosperity.

How do democracies compare to non-democracies in promoting economic growth?

Democracies are generally better at promoting long-term growth compared to non-democracies, although there are exceptions, such as China.

What is notable about the laureates of this year's prize?

Interestingly, none of the laureates are originally from the United States; one is from Turkey, and two are British.

What was the setting of the call to inform the laureates about the prize?

The call took place while one of the laureates was on his hotel balcony in Athens, expressing excitement upon receiving the news.

What is the significance of this research for political science?

The research crosses disciplinary borders, impacting both economics and political science, which underscores its political implications and importance for the discipline.