Framing the debate surrounding the 2024 Nobel Prize in Economics

The University of York ought to take pride in this year’s Nobel Prize for Economics, which was unprecedentedly won by an alumnus, Daron Acemoglu. However, the announcement of his award together with Simon Johnson and James Robinson (hereafter collectively AJR), has inspired a considerable debate.

The lauded 2001 paper postulates that the purpose of colonial institutions, determined by the survivability of European colonies, has a causal relationship with the future success or failure of post-colonial states. They distinguish between extractive and inclusive institutions and argue that the gap in economic conditions between different former colonies is explainable by the form of their original colonial institutions. (Acemoglu et al., 2001)

Criticism of the paper can be separated into two strands: doubting the validity of the findings on methodological grounds; and questioning of the social implications of the paper – especially due to the sensitive nature of Colonialism.

Concerning the former, academia has mostly focused on data selection. Because the data is historical, and draws data from a wide range of places, with different methodologies and levels of reliability, a major debate before 2010 concerned the legitimacy of the economic instrument of settler mortality used. Between 2004 and 2012, Albouy spearheaded this criticism in several revisions of a paper, which was responded to in detail on each occasion by AJR (Albouy, 2012) (Acemoglu et al., 2012). An alternative set of instruments, which reached the same conclusions as AJR’s original paper, was also put forward by Auer (Auer 2007). While the field has reached a consensus on the validity of the 2001 paper, it was certainly contested.

Since the prize’s announcement, the paper has been scrutinised by journalists, who submitted a selection of criticisms on both an economic and social level. First, Hauge’s article in The Conversation argues that Singapore, South Korea and Taiwan are counterexamples to the implication that non-inclusive institutions do not lead to economic success (Hauge 2024). South Korea was a victim not of European but rather Japanese imperialism, so it is understandable not to include it in a study which relates European settler mortality to institutional development. Taiwan is similarly exceptional due to the short time that it was governed by a European power. However, the conclusion of the paper notes in brief that South Korea and Japan exploded their economy only after drastic institutional change (Acemoglu et al., 2001). China was never completely colonised by Europeans and existed as a state parallel to its colonisation, rather than being displaced by a new colonial state. This makes comparison difficult. Hong Kong and Singapore are undermined as counterexamples because they can be found in the paper following AJR’s theory.

The second relevant journalistic article written by French in Foreign Policy puts forward a novel criticism of an economic nature: namely, that it does not account for the failure of settled post-colony Zimbabwe, and a lack of horses in the poorer post-colonial areas of South America and sub-Saharan Africa (French, 2024). The second critique can be deftly countered by the paper’s controlling for latitude. However, Zimbabwe’s exception fails to find a reply in controls for current racial makeup, or for ethnolinguistic fragmentation. This counterexample introduces a concern common to both the above journalistic works: the apparent negligence regarding the brutality of settler colonialism. 

The second category of criticism that AJR’s Nobel prize has incurred: the social damage done by apparently legitimising institution-building colonialism which promotes future economic success. This accusation, levied as “the West succumbing to a kind of self-flattery” (French, 2024) finds its academic home in Khan’s 2012 paper, which points out that settler colonies developed property rights only after enacting drastic levels of erasure upon native populations, amounting to ethnic cleansing and genocide. He repudiates the causal link between property rights and economic development because the growth of the successful colonies involved the killing and displacement of native populations outside the framework of property rights (Khan, 2012). With this in mind, we might posit that had Rhodesia been able to continue to restrict the property rights of the native African majority, they might have had a future as successful as the US, Canada or Australia. Rather than a lack of stable property rights as a consequence of extractive early institutions, Zimbabwe is left with weak institutions because, in the early colonial phase, those institutions never applied to the vast majority of Zimbabweans. In this way, AJR’s paper risks being interpreted to imply that the most violent and destructive colonial regimes to the existence of native peoples are the most economically successful, and therefore desirable.

Acemoglu indicates that this paper was unconcerned by normative questions (Smialek, 2024). This seems to be a premature judgement when considering the variety of normative choices made in the paper. It has been argued that the institutional methods used by colonists varied wildly between time and place, making AJR’s comparisons unjustified (Olsson, 2004). Settler mortality and the economic success of a post-colony are also impacted by the period. Normativity pervades all academic disciplines; economics is no exception, and to ignore it could be considered shortsighted. This paper strengthens the argument that Western-style institutions achieve better economic results. As it has had normative consequences, it is questionable to avoid discussion of a normative component to the research.

Contrarily, economists might argue that the social ramifications of Colonialism ought not to be laid at the feet of economists earnestly attempting to discover more about the relationship between development and institutions. If researchers were to consider the social ramifications of scientific work, progress could be avoided to satisfy political sensibilities. That other disciplines take issue with this attitude merely reaffirms the right of economics to pursue objective questions – however uncomfortable the answers might be. With that said, the paper does not attempt to excuse Colonialism and further demonstrates that the brutal system of extraction has devastated the countries it affected well beyond their gaining independence.

Regardless of our view on the role of economics in society, it is clear that this year’s Nobel Prize has rendered a debate on it more urgent than ever.

By E.J Walker

Bibliography:

Acemoglu, D. and Johnson, S. and Robinson, J. 2001. The Colonial Origins of Comparative Development: An Empirical Investigation. The American Economic Review, 91(5), pp. 1369-1401

Acemoglu, D. and Johnson, S. and Robinson, J. 2012. The Colonial Origins of Comparative Development: An Empirical Investigation: Reply. The American Economic Review, 102(6), pp. 3077-3110

Albouy,  D. 2012. The Colonial Origins of Comparative Development: An Empirical Investigation: Comment. The American Economic Review, 102(6), pp. 3059-3076

French, H. 2024. Why This Year’s Nobel in Economics is So Controversial. Foreign Policy.  [Online] Available at: https://foreignpolicy.com/2024/10/25/nobel-prize-economics-global-inequality-controversy-acemoglu-johnson-robinson/(Accessed 22nd  November 2024).

Hauge, J. 2024. This year’s Nobel prize exposes economics’ problem with colonialism. The Conversation. [Online] Available at: https://theconversation.com/this-years-nobel-prize-exposes-economics-problem-with-colonialism-241400 (Accessed 22nd  November 2024).

Khan, M. 2012. Governance and Growth: History, Ideology, and Methods of Proof. SOAS Research Online.  [Online] Available at: https://eprints.soas.ac.uk/17299/1/Governance%20and%20Growth%20History%20Ideology%20and%20Methods%20of%20Proof.pdf  (Accessed 22nd  November 2024).

Olsson, O. 2004. Unbundling Ex-Colonies: A Comment on Acemoglu, Johnson, and Robinson, 2001. Working Papers in Economics 146, University of Gothenburg, Department of Economics.

Smialek, J. 2024. Three Receive Nobel in Economics for Research on Global Inequality. The New York Times. [Online] Available at: https://www.nytimes.com/2024/10/14/business/economy/nobel-economics.html   (Accessed 22nd  November 2024).