The Wealth and Poverty of Nations
Why are some countries rich and others poor? This foundational question has puzzled economists for centuries.
Articulate the central question of development economics and major explanatory frameworks.
Core Teachings
Key concepts with source texts
Around 1800, a dramatic split occurred: Western Europe and its offshoots began growing exponentially while much of the world stagnated. Understanding this divergence is key to development economics.
From the Source Texts
"The reversal of fortune is one of the most important facts about economic development. Former colonies that were relatively rich in 1500 are relatively poor today."
Commentary
This 'reversal' is powerful evidence against geography—the land didn't change, but colonial institutions did.
Understanding why nations fail isn't just academic—it's essential for designing effective development policies, foreign aid programs, and understanding global inequality.
- ×Poor countries are poor because they lack natural resources—actually, the 'resource curse' shows abundant resources can hinder development
- ×Culture is destiny—institutions can change culture over time, as seen in South Korea vs. North Korea
- ×Geography is deterministic—similar geographies (North vs. South Korea) can have vastly different outcomes
Study Materials
Primary sources with guided reading
Why Nations Fail | Talks at Google
To understand the institutions hypothesis directly from its originator and 2024 Nobel laureate.
- 1.What evidence does Acemoglu use to support the institutions hypothesis?
- 2.How does he respond to the geography critique?
- 3.What role do 'critical junctures' play in institutional change?
You should be able to explain why Acemoglu believes institutions, not geography or culture, are the fundamental cause of development.
Key Takeaways
- Institutions are the fundamental cause of development
- Inclusive institutions create virtuous cycles
- Critical junctures can shift institutional trajectories
2024 Nobel Prize: Scientific Background
The Nobel Committee's explanation of why Acemoglu, Johnson, and Robinson won for their work on institutions and prosperity.
Key Takeaways
- Colonial institutions created long-lasting effects
- Settler mortality affected institutional quality
- Natural experiments help establish causation
Additional Resources
The seminal 2001 paper by Acemoglu, Johnson & Robinson that established the causal link between colonial institutions and modern development using settler mortality as an instrument.
Write your thoughts before revealing answers
Consider these points:
- •What was the key difference after 1945?
- •If geography mattered most, what would we expect?
- •How quickly did the divergence occur?
Your Thoughts
Writing your thoughts first will deepen your understanding
Bridge notes help connect the resources and show how they relate to the learning outcome.
AI-generated notes synthesize the lesson outcome and resource summaries. Human-reviewed before publishing.
According to Acemoglu and Robinson, what is the fundamental cause of differences in prosperity across nations?
What does the 'reversal of fortune' refer to in development economics?