The Prize from the Bank of Sweden of 2024 for Economic Sciences in memory of Alfred Nobel, commonly called Nobel Prize for Economics (but not foreseen in the creator’s will), this year it was awarded to three great economists: Daron Acemoglu, Simon Johnson (both from MIT in Boston) e James A. Robinson (of the University of Chicago) who, with their work, wanted to enhance the fundamental role of social institutions in reducing the economic inequalities between countries and impacting the prosperity of nations. The winners studied how political and economic institutions influence the internal economic situation of a country and also the behavior of the population. In short, they argue that the inclusive institutions (i.e. those that involve the population in fundamental state decisions) are essential for economic growth, while those called extractive (which concentrate power and decisions in the hands of a few people) would tend to hinder their development.
Below is the translation of the statement by Jakob Svensson, Chairman of the Bank of Sweden Prize Committee for Economic Sciences:
Reducing the huge income differences between countries is one of the greatest challenges of our time. The winners demonstrated the importance of social institutions in achieving this goal.
But what differentiates inclusive and extractive institutions? The inclusive institutions they are social, political and economic structures and systems that support participation of all citizens to the economic and decision-making life of a country. These institutions were often introduced in countries that were economically underdeveloped and therefore very poor at the time of colonization. The three Nobel Prize-winning economists have demonstrated that this very type of institution, over time, has contributed to improve the economic situation of the States in which they were created. On the contrary, countries with extractive institutionsthat is, with political and economic structures that concentrate power and resources in the hands of a few people and thus limit the opportunities for the majority of the population to participate in state development decisions, tend to show a lower economic growth.
The substantial difference between these two types of institutions (inclusive and extractive), as well as in substance, would be linked to time factor: Inclusive institutions would create long-term benefits for a much larger portion of the population, while extractive ones would guarantee short-term gains mainly to the people in power. According to Acemoglu, Johnson and Robinson, in extractive countries there is a certain skepticism on the part of the population towards the intentions of those who govern, since it is believed that the main objective of those in power is to maintain control rather than promote real progress. This would be one of the reasons why great improvements in terms of economic development have not occurred in states where extractive institutions are more consolidated.