Nobel Laureate in Economics Acemoglu: Demystifying Institutions and Economic Growth

On October 14, local time, the Royal Academy of Sciences of Sweden announced that it would award the 2024 Nobel Prize in Economics to Darron· Acemoglu, Simon ·Johnson and James · Robinson in recognition of their outstanding contributions to the field of research on how institutions shape and affect economic prosperity.

In their citation, the Nobel Prize Committee said, "Closing the huge income gap between countries is one of the greatest challenges of our time, and these laureates demonstrate the importance of social institutions in achieving this goal." "As an authoritative figure in the field of economics, the core of Darong · Asimoglu's research is the decisive role of institutions in economic development. His research not only focuses on the technological and capital elements of economic growth, but also delves into the importance of institutions. Early economists often attributed economic growth to an increase in material resources, but through his work with Johnson and Robinson, he demonstrated the crucial role of institutions in economic prosperity. By analyzing the evolution of different institutions throughout history and their impact on the economic performance of countries, they reveal how good institutions drive economic development.

Daron Acemoglu · Daron Acemoglu is an internationally renowned economist born in Istanbul, Turkey · 1967. He began his academic career at York University in the United Kingdom, where he received his bachelor's degree with distinction in 1989. He then went on to study at the London School of Economics, where he obtained his MA and PhD in Economics in 1990 and 1992 respectively.

During his time at the London School of Economics, Acemoglu's academic talent was already on the horizon. After graduating, he chose to stay on as a lecturer and continue to work in the field of economics. However, his academic journey didn't stop there. A year later, he accepted an offer from the Massachusetts Institute of Technology in United States as an assistant professor, and began his illustrious career in United States academia.

At the Massachusetts Institute of Technology, Acemoglu's academic talents were on full display. His research interests include economic growth, technological evolution, income distribution, social networks, contract theory, and democratic politics. His papers frequently appear in top journals in many fields, attracting wide attention from economists. His academic output was so high that Harvard professor Mankiw quipped in his blog: "Acemoglu must have a twin brother who is helping him write." ”

Acemoglu's outstanding achievements have earned him numerous accolades. He received the 2004 Sulvin · Rosen Award (the highest award from the United States Association of Labor Economics), the 2005 Bates · Clark Award, and the first Schultz Prize established by the University of Chicago, a major city in economics. In particular, Seymour, a professor at the University of Chicago and editor-in-chief of the Journal of Political Economy, who presented the award to Acemoglu, was his disciple.

Acemoglu is best known for his research on the sources of economic growth from an institutional perspective. Early economists tended to explain economic growth in terms of material causes, believing that it was the increase in capital and labor that led to economic growth. However, this view does not explain why economic growth has taken on very different characteristics in countries with similar levels of labor and capital abundance. In order to better explain the phenomenon of economic growth, some economists began to take technology research and development, human capital investment, etc. as the starting point, forming the influential "endogenous growth theory" in the late 90s of the 20th century.

However, Acemoglu argues that endogenous growth theory still does not fundamentally explain the source of economic growth. He pointed out that since different investment in technology research and development and investment in human capital will cause huge differences in economic growth between countries and regions, there must be a more in-depth analytical perspective, that is, the institutional aspect.

Acemoglu and his collaborator Robinson have ingeniously demonstrated the decisive role of institutions in economic growth. They point out that the first countries to establish property rights protection systems have strong geographical correlations, which leads geographical determinists to believe that economic growth is ultimately dependent on geography. To get rid of this embarrassment, Acemoglu and Robinson chose the countries that imported the system as the object of study, and compared the differences in their economic performance to verify the role of the system.

They consulted records of early European colonizers in Africa and counted disease mortality rates from colonizers throughout Africa. They believed that if the colonizers found a place suitable for survival, they would try to introduce the same system of property protection as the suzerain; On the other hand, if an area is deemed unsuitable for survival, a grabbing policy will be implemented. Through sophisticated statistical analysis, they found a significant negative correlation between the mortality rate of early colonists and the current rate of economic growth, thus verifying the importance of the system.

In addition, Acemoglu and Robinson discuss the long-term effects after the Napoleonic Wars. They found that after the Napoleonic Wars, the original feudal system in some countries was destroyed, and the France-style democracy, legal system and property rights protection system were forcibly introduced; Others still maintain their feudal system. If the argument that property rights protection systems are conducive to economic development is correct, then the former group of countries will show better economic growth. This statement has also been validated by extensive quantitative analysis.

After proving that good institutions do contribute to economic growth, Acemoglu continued his research in an attempt to find out how the institutions themselves evolved. He disagrees with the "political Coase theorem" proposed by Ronald ·, the pioneer of new institutional economics, that is, when a system benefits some people and others suffer, the two sides can negotiate to reach an agreement to choose the most efficient system. According to Acemoglu, the reason for the change in the system is not its efficiency, but the change in the political forces of the various groups. He pointed out that the rise of the manor system in Western Europe was almost at the same time as the emergence of more severe serfdom in Eastern Europe, which did not explain the change in efficiency.

Acemoglu attributes the failure of the "political Coase theorem" in reality to the lack of a third-party guarantee mechanism. Due to the lack of guarantee mechanisms, conflicts between groups in the political market and institutional instability have become the norm. Therefore, the process of institutional evolution is a process of finding and forming a guarantee mechanism. In this process, the "elite group" that has won the struggle ultimately chooses the system based on the best interests of the group rather than the interests of the state or the people as a whole.

In recent years, AI technology has been gaining momentum, reshaping the world with its unparalleled potential and speed. In this technological revolution, economist Daron · Acemoglu has become an observer who cannot be ignored with his keen eye and deep insight. Although he has been closely following this major technological change, Acemoglu's attitude towards AI is particularly cautious and even skeptical, unlike other scholars who have unlimited aspirations for AI.

He profoundly pointed out that technology is like a double-edged sword, with infinite possibilities for improving social welfare, but also hidden risks for exacerbating social inequality. Historically, technological progress has not always led to widespread social prosperity. On the contrary, much technological innovation is often initially a feast for elites and owners of capital, while ordinary workers and low- and middle-income classes are often marginalized and unable to share in the fruits of technological progress. AI technology, as a new generation of technological innovation, is also likely to bring about these two very different impacts.

Acemoglu noted concern that the current trend towards AI technology seems to be more toward automation, which replaces human labor rather than the ability to augment or supplement human labor. This technological path could erode employment opportunities for low- and middle-skilled workers while increasing the wealth of capital owners and technology developers, leading to significant income inequality. In addition, AI technology may bring many negative effects such as privacy violations and demoralization. Without effective intervention, AI technology is likely to become an "abusive technology" that will cause immeasurable damage to human society.

Acemoglu reminds us that the advancement of AI technology is not just an economic phenomenon, but a social phenomenon involving changes in power structures. The current AI revolution could further exacerbate the concentration of power in Big Tech and wealthy elites, which is dangerous. To avoid this, he called for more democratic control of AI technology and the development of appropriate regulations and policies to effectively regulate it. At the same time, he advocates for taxing, redistribution, and policy interventions to balance the inequality effects of technology and prevent further concentration of capital, so as to ensure the healthy development of AI technology and maximize the well-being of society.