Fixing Poverty

Daron Acemoglu describes what makes a nation rich in a new article for Esquire. According to Acemoglu, experts who believe geography or the weather or technology are to blame for persistent poverty are missing a much simpler economic explanation: people respond to incentives. “People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money,” he writes. “And the key to ensuring those incentives is sound institutions — the rule of law and security and a governing system that offers opportunities to achieve and innovate.” In other words, if you want to fix poverty, you’ll have to fix governments first. [%comments]

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  1. r edsley neoson daniel says:

    the article is very optimistic but fails to address the points of colonialism and weapons proliferation that de-stabilize economies and regions as a cause of poverty in many regions of the world.

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  2. Caliphilosopher says:

    And this is new? Haven’t we known this for a while?

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  3. Jason says:

    I can buy that governments play a key role in the prosperity of nations, but then circle back to the question of why progress-centered governments are less likely in certain areas. Are there geographic conditions that provide a greater/lesser incentive for these types of governments to form? Are there conditions that are more fertile for less progressive ruling styles? It seems that governments are as much an output as an input, and thus we still lack the fundamental cause of poverty.

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  4. Thomas says:

    How very true. That is why our foreign aid program and that of almost every developed country and international institution are complete disasters. Despite the good intentions, these programs do nothing more than prop up corrupt governments and hinder real economic progress.

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  5. Joe Smith says:

    “And this is new? Haven’t we known this for a while?”

    Indeed. In the 1160s Bishop Absalon built a fortification and sought to suppress bandits and pirates in a lawless and impoverished borderland. His imposition of law and order was so successful that the community around the fortification became knows as “Merchants’ Harbor” – the root of its current name as one of the great, and most peaceful and prosperous, cities of the world.

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  6. Dorm girl says:

    You can attribute religion for setting this kind of mindset., eg God will provide, Blessed are the poor, Greed is bad, etc.

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  7. Miguel says:

    On one hand, I have to agree with the fact that governments play a key role in the development of a nation. On the other, rich nations benefit from keeping other nations poor such as African countries. Take for example, cheap oil from Nigeria, World Bank loans with optimistic forecasts that dont really payoff and sale of weapons by Asian countries to places like Zimbabwe and the so. This is no secret. As things get worse on one side of the trade, they get better on the other. Simple balance.

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  8. twenty-niner says:

    Nations become wealthy because of innovation and technology. If it weren’t for invention, we’d still be living in trees. The countries that innovate the best become the wealthiest. The latest stats:

    Japan filed 994 patents per million people
    South Korea – 779 patents per million
    United States – 289
    Sweden – 271
    Germany – 235
    France – 205

    Of course, many factors contribute to how effectively a country innovates: education, culture, corruption, etc. But the outcome is clear – there is significantly more value in an LCD television that the bits of metal, silicon, and petroleum that go into it.

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