The Nobel Prize goes to three economists who study the wealth and poverty of nations: NPR

Daron Acemoglu, Simon Johnson and James Robinson were awarded the Nobel Prize in Economics for their research on the institutional roots of national wealth and poverty.

CHRISTINE OLSSON/AFP

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CHRISTINE OLSSON/AFP

The wealth and poverty of nations has preoccupied economists since Adam Smith founded the discipline 250 years ago when he wrote a book entitled: The wealth of nations.

This year's Nobel Prize in Economic Sciences was awarded to three men who traced the institutional roots of national prosperity by studying the wildly different outcomes across former European colonies.

Daron Acemoglu and Simon Johnson of MIT and James Robinson of the University of Chicago will share the prize, worth about $1.058 million, for helping to explain how the various institutions in these former colonies continue to shape the economy today influence fate.

“Instead of asking whether colonialism is good or bad, we find that different colonial strategies have led to different institutional patterns that have persisted over time,” Acemoglu said during a press conference in Stockholm to announce the prize became.

Coincidentally, the announcement came on a holiday in the United States that honors both European explorer Christopher Columbus and the indigenous people of the New World.

The award-winning researchers found that colonies in which a large proportion of settlers survived tended to establish inclusive, democratic institutions and subsequently prosper. Those in which relatively few settlers survived often formed more autocratic, extractive institutions and were eventually forgotten.

Democratic vs. autocratic nations

The results were generally pro-democracy in nature, said Acemoglu, who co-authored the book with Robinson. Why nations fail. But he added that democracy is not a panacea.

“Introducing democracy is very difficult,” Acemoglu said. “When you introduce elections, sometimes it leads to conflict. And particularly in already polarized societies, elections can produce short-lived results that are sometimes not democratic in nature.”

China has now become the world's second largest economy and has lifted hundreds of millions of people out of poverty despite its autocratic government structure.

Acemoglu argued that autocratic governments can temporarily boost growth by pouring resources into favored industries, but that tends to be difficult to sustain. He acknowledged that democracies do not always realize their potential for general prosperity. He pointed to polling data showing support for democracy is at an all-time low.

“Democracies are in a difficult phase,” said Acemoglu. “And in some ways it is crucial that they reclaim the high priority of better and cleaner governance and deliver the promise of democracy, so to speak, to a wide range of people.”