U.S. professors awarded Nobel Prize in economics for wealth disparity studies

The Royal Swedish Academy of Sciences on Monday awarded the 2024 Nobel Prize in economic sciences to three professors for their work in explaining why some countries grew rich while others became poor. Professors Daron Acemoglu and Simon Johnson teach at the Massachusetts Institute of Technology, while James A. Robinson teaches at the University of Chicago. Reducing broad differences in wealth between countries is one of the greatest challenges of modern times, said Nobel Economic Sciences Prize Committee Chairman Jakob Svensson. These laureates demonstrated how differences in societal institutions heavily influence wealth development in a country, Svensson said.

How did they explain international wealth inequality? The professors examined the political and economic systems introduced by European colonizers and noted a relationship between societal institutions and prosperity, the Nobel committee said. The professors compared and contrasted the different institutional models enacted by colonizing countries. They characterized some institutions as extractive, meaning they were established by attempting to extricate natural resources from colonized areas and use indigenous populations for their own benefit. Conversely, the professors classified certain political and economic institutions as inclusive, meaning they allowed citizens of the colonizing country to retain long-term benefits in the overtaken land.

The professors found that inclusive institutions were commonly enacted in countries that were already poor upon colonization, and over time developed into a generally prosperous population. The laureates described this model as an important reason why former colonized countries that were once rich are now poor, and vice versa, the committee explained.

Countries with extractive institutions and low economic growth allowed short-term gains for the people in power, the laureates noted. These countries struggled with economic improvement because no one trusted promises of reform from those in power. However, sometimes the hollow promises of leaders led to democratization when leaders were faced with rebellion, the professors claimed.

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