Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 583

A Nobel Prize for work on why nations succeed and fail

The 2024 Nobel Prize in Economics has been awarded to three US-based economists who examined the advantages of democracy and the rule of law, and why they are strong in some countries and not others.

Daron Acemoglu is a Turkish-American economist at the Massachusetts Institute of Technology, Simon Johnson is a British economist at the Massachusetts Institute of Technology and James Robinson is a British-American economist at the University of Chicago.

The citation awards the prize “for studies of how institutions are formed and affect prosperity”, making it an award for research into politics and sociology as much as economics.

At a time when democracy appears to be losing support, the Nobel committee has rewarded work that demonstrates that, on average, democratic countries governed by the rule of law have wealthier citizens.

The committee says the richest 20% of the world’s countries are now around 30 times richer than the poorest 20%. Moreover, the income gap is persistent; although the poorest countries have become richer, they are not catching up with the most prosperous.

Acemoglu, Johnson and Robinson have connected this difference to differences in institutions, and they find this derives from differences in the behaviour of European colonisers in different parts of the world centuries ago.

The denser the indigenous population, the greater the resistance that could be expected and the fewer European settlers moved there. On the other hand, the large indigenous population – once defeated – offered lucrative opportunities for cheap labour.

This meant the institutions focused on benefiting a small elite at the expense of the wider population. There were no elections and limited political rights.

In the places that were more sparsely populated and offered less resistance, more colonisers settled and established inclusive institutions that incentivised hard work and led to demands for political rights.

The committee says, paradoxically, this means the parts of the colonised world that were the most prosperous around 500 years ago are now relatively poor. Prosperity was greater in Mexico under the Aztecs than it was at the same time in the part of North America that is now called Canada and the United States.

More so than in previous years, this year’s winners have written for the public as well as the profession. Acemoglu and Robinson are probably best known for their 2013 best-seller Why Nations Fail: The Origins of Power, Prosperity and Poverty.(It has pictures and no equations.)

Last year Acemoglu and Johnson published Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity.

In May this year Acemoglu wrote about artificial intelligence, putting forward the controversial position that its effects on productivity would be “nontrivial but modest”, which is another way of saying “tiny”. Its effect on wellbeing might be even smaller and it was unlikely to reduce inequality.

This year’s award makes the cohort of Nobel winners a little less US-dominated.

Although all three are currently working at American universities, Acemoglu is from Turkey and the others are British. There is even an Australian link. Robinson taught economics at The University of Melbourne between 1992 and 1995.

Winning the prize is life-changing for more reasons than the 11 million Swedish kroner (about $A 1.5 million) the winners share. As Nobel winners, they will have a higher profile. Their opinions will be accorded more respect by most but not all.

Sixteen former winners recently issued a widely reported statement saying they were “deeply concerned about the risks of a second Trump administration for the US economy”. Rather than address their arguments, the Trump campaign called them “worthless out-of-touch Nobel prize winners”.

The new winners might get the same treatment. Johnson has critiqued Trump’s proposal to raise tariffs. Acemoglu has called Trump “a threat to democracy”.The Conversation

 

John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of Canberra.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

RELATED ARTICLES

Australia is lucky the British were the first 'intruders'

Gross National Happiness?

The prospects for investors in India

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Retirement

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

Shares

Boom, bubble or alarm?

After a stellar 2025 to date for equities, warning signs - from speculative froth to stretched valuations - suggest the market’s calm may be masking deeper fragilities. Strategic rebalancing feels increasingly timely.

Property

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Economy

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Shares

Is the iPhone nearing its Blackberry moment?

Blackberry clung on to the superiority of keyboards at the beginning of the touchscreen era and paid the ultimate price. Could the rise of agentic AI and a new generation of hardware do something similar to Apple?

Fixed interest

Things may finally be turning for the bond market

The bond market is quietly regaining strength. As rate cuts loom and economic growth moderates, high-quality credit and global fixed income present renewed opportunities for investors seeking income and stability. 

Shares

The wisdom of buying absurdly expensive stocks (or not!)

Companies trading at over 10x revenue now account for over 20% of the MSCI World index, levels not seen since the dotcom bubble. Can these shares create lasting value, or are they destined to unravel?

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.