Posts com a Tag ‘Crown (E)’

From Adam Smith to the modern randomistas, economists have repeatedly asked themselves the same troubling question: what are the main drivers of sustained growth? Trying to provide an adequate answer to this problem, researchers have recently devoted their attentions to micro-level analyses, arguing that small, punctual measures lead to significant results in economic development. Policies such as providing de-worming treatments or offering nutritional supplements for school pupils, they claim, are very effective in reducing poverty and thus should be treated as a priority by those willing to promote economic growth around the globe. However interesting the micro- -level studies may be, they seem to miss the elephant in the room: small policy reforms can only be implemented in a relatively stable social structure, otherwise it is very unlikely that they will be carried out correctly, if at all. Therefore, macro elements still matter.

Daron Acemoglu and James Robinson bring the big picture back into focus. In Why Nations Fail, an ambitious and thought-provoking book, the authors assert that good institutions are the key for economic growth. According to Messrs Acemoglu and Robinson, it is politics –not geography, culture or ignorance – the factor that better explains the current disparities in the wealth of nations. Pluralistic political institutions create a level playing field where most citizens can, amongst other things, enjoy secure property rights, have access to an independent judicial system and develop their personal skills freely. These in turn foster technological innovation and economic activity, the critical engines of steady economic progress. In short, political freedom paves the way for prosperity. Exclusive institutions, in contrast, have disastrous effects on growth. In those environments, not only citizens do not have incentives to invest or innovate since most of their output will likely be expropriated by the governing elite, but also the powerful are not willing to accept creative destruction due to the challenges it may pose to their privileged economic or political status. As a result, although the elite may enjoy very high standards of living, the nation itself will at best stagnate or, at worst, fail. Leia Mais