It has been awarded to Daron Acemoglu, Simon Johnson and James A. Robinson for “studies of how institutions are formed and affect prosperity”.
- They have demonstrated the importance of societal institutions for a country’s prosperity.
- They also highlighted that democracy developed in various colonies as threat of revolution by masses could not be tackled through promise of social reforms.
Differences in Countries’ Prosperity
- Richest 20% of the world’s countries are now around 30 times richer than the poorest 20%.
- One factor for difference in nations’ prosperity is persistent differences in Societal Institutions, established by European colonisers. These include:
- Extractive Institutions: Formed in some colonies to exploit the indigenous population and extract natural resources to benefit the colonisers.
- These institutions caused the reversal of fortunes as richer nations turned poor after colonization.
- Ex. Industrial Production was higher in India compared to USA in mid-18th Century (before colonization).
- Inclusive Institutions: Colonisers built inclusive political and economic systems for long-term benefit of European Settlers in colonies that were sparsely populated and supported more European settlers.
- Extractive Institutions: Formed in some colonies to exploit the indigenous population and extract natural resources to benefit the colonisers.
- Factors influencing development of different societal institutions included number of European settlers, settler mortality due to prevalence of diseases in the region (more deadly diseases near equator), and geography or climate zone.