May 31, 2016

Why Nations Fail by Daron Acemoglu and James A. Robinson book review

"Why Nations Fail" explores the historical and economic lessons learned by humanity over the past ten thousand years and why, in general, most societies succumb to increasing greed and inequality, and very few "break the mold" to produce relatively egalitarian, innovative nations.

          The general thesis is twofold; first, many societies are built with extractive political and economic institutions that help the few oligarchs and exacerbate inequality, and some form inclusive institutions that encourage innovation and trade.  Second, the institutions that make a society extractive will tend to perpetuate themselves in a "vicious circle", while inclusive institutions will also experience positive feedback as "virtuous circles".  If the meat of this book is the historical evidence, then this thesis is the bread, cheese, and everything else.  "Why Nations Fail" tends towards repetition, but in doing so it presents an undeniably strong fundamental idea that will change, or at least refine, the way readers approach socio-economic problems for decades to come.

          The primary idea is that certain political institutions become extractive; that is, a tribal chief, sect of priests, emperor, or "Supreme Leader" commands enough power to divert resources to themselves without contributing much to their production, and may rule arbitrarily and dictatorially, leading to relatively poor, unhappy, and unmotivated peasants.  In contrast, some institutions become inclusive, where any individual can trade and reap the rewards of their labor, and is given opportunity under stable and fair rule of law.

Ancient Egyptian social hierarchy, a typical extractive structure.  An extractive structure was still more successful than anarchy and lawlessness, however.

          The fundamental idea behind this overarching theory is one of incentives, which I feel as an economic-minded individual, is on the right track for a broad theory as this one, unlike geography or race, which are debunked in the very first chapter.  The idea that countries fail not because their dictators are ignorant as to how to improve the lives of the paupers, but because the dictators know it is not best for themselves personally, leaves one with a rather sobering realization that human nature is often just as petty and selfish as we feared, but also how incredibly fortunate we are to live in the first sustained period in history to have broken from this trend.

          More miraculous yet is that this break from the mold is not due to a magical reversal of human nature, but that a few chance sequences of events nudged by a few motivated individuals was enough to tip the scales in favor of inclusive institutions that would be sustained by the very same forces of self-interest that barred humanity from thriving for millenia.

          One thing that becomes apparent while reading this book is the strong command of historical knowledge that the authors wield.  Any time a concept is introduced or elaborated upon, there is an accompanying historical instance, and often a counter-instance, demonstrating specifically why the world seems to work in this way.  Coupled with the strong theory of "extractive versus inclusive institutions", it forms a compelling, undeniably relevant explanation for most of the inequality between nations that exists in the world today.   

The Koreas at night, illustrating how it is political and economic, rather than geographic, differences that create prosperity

          What it does it does well, it does very well, and this strong but subtly complex theory is reinforced vigorously over several hundred pages with intense and fascinating historical evidence.  While the book may tend to err on the side of excess history and repetition of ideas, the core ideas are only stronger for it.  Anyone studying economics, history, politics, or sociology will be left with one very powerful meme to haunt their studies and help them think in terms of incentives and cycles whether they realize it or not.

Educational value: 5/5
Entertainment value: 3.5/5
Factual fortitude: 5/5

No comments :

Post a Comment

Questions, comments, concerns, complaints? Leave your thoughts below!