Why Nations Fail

One of the great experiences of my stint in grad school was taking Advanced Macro classes from a fellow who at the time was regarded as a promising young professor at MIT — Daron Acemoglu.  It was well worth making the bike trip from Harvard, down Mass. Ave., to learn from him.  He is surely the most productive economist alive.  And his frequent collaborator Jim Robinson may just be the most interesting political scientist.  Their joint research program — figuring out what works and what doesn’t in economic development — involves asking some of the most important questions any social scientist can ask.  

And now we all have the opportunity to learn from Daron and Jim.  They have a popular book coming out: Why Nations Fail: The Origins of Power, Prosperity, and Poverty. And even better, the book has provided them with the impetus to also start a blog devoted to understanding … why nations fail.

If their first post is any indication — it’s about understanding the link between educational attainment and cotton exports in Uzbekistan — this is going to be a great blog to follow.  They’ve already earned a spot in my RSS feed.


It seems that every blogging economist is promoting Why Nations Fail, and rightfully so. It's an incredible wealth of information and they're only a few posts in.


Nations fail for the same reason other entities do....because the misallocate their resources and render themselves unable to respond to competitive threats.

With regards to the US consider the following two facts:

1) We spend far more on prisons each year than we do on education.
2) The largest discretionary item in the federal budget by a long ways is the Defense Department...despite the fact that there has not been an attack on US soil by a foreign nation since 1944.

If you wonder why things are starting to look somewhat bleak, those are two reasons why...


I've never seen someone "really nail it" quite like you did here: "Nations fail for the same reason other entities do….because the misallocate their resources and render themselves unable to respond to competitive threats." and then provide such terribly wrong examples.

1.) What does this have to do with mis-allocation of resources? Does spending less on prisons improve a nation's health? Does spending more on education improve a nation's health? Does their ratio imply mis-allocation? Where is the data to prove this?

2.) As a percentage of GDP, defense spending has not grown since the end of WWII. http://en.wikipedia.org/wiki/File:U.S._Defense_Spending_-_percent_to_Outlays.png

These growth rates, raw numbers, and trends are so stark - there is really no way to spin it. http://www.nytimes.com/interactive/2012/02/13/us/politics/2013-budget-proposal-graphic.html




They wrote this. http://econ-www.mit.edu/files/7601

"To understand why inequality at the top has surged since the 1970s , we have to turn to
politics—and to the increasing influence over the US political system by a narrow and wealthy
segment of society. The roots of this development appear to lie in the backlash by business
interests against the Great Society programs of the 1960s and early 1970s; in the reaction of
certain conservative segments of the US population to the civil rights movement; in the decline
of organized labor as an economic and political force; in the rise of an electorate (particularly
fundamentalist Christian voters) who care more about normative issues than the value of the tax
rate; and particularly in the increasing power of money in politics, possibly as a result of the rise
of television and other forms of mass media" and "
Third, the role of the media will be critical in determining the success of the movement.
The muckrakers had considerable influence, but it’s not a given that the media will play a
reformist role in society as the impact of the Fox News Channel today illustrate"

In other words, Captain Planet villains, racist conservatives, big oil companies, Jesus-Freaks, and Fox News are responsible for income inequality. This was written by ECONOMISTS. Come on guys, at least TRY to hide your political biases. I wonder if Greece failed because of fundamentalist Christians and the impact of Fox News?


Bobi C

And of course the huge growing economic gap between rich and the rest. When people have no stake in the country as is happening here they just don't put their energy into anything and productivity falls and businesses fail etc etc. It's all happening here on steroids.