Nobel in economics 2024. Daron Acemoglu, Simon Johnson and James A. Robinson with the award

Economics is a field not mentioned in Alfred Nobel's will. The distinction, awarded since 1969, is formally called the Bank Award Sweden them. Alfred Nobel and is the only one financed by the Swedish Central Bank.

“This year's Economics Laureates – Daron Acemoglu, Simon Johnson and James Robinson – have demonstrated the importance of social institutions to a nation's prosperity. Societies with weak rule of law and institutions that exploit people do not generate growth or change for the better. The winners' research helps us understand why this happens,” explained the Royal Swedish Academy of Sciences.

– Reducing the huge income gaps between countries is one of the greatest challenges of our time. The winners have shown how important social institutions are in achieving this goal, said Jakob Svensson, chairman of the committee awarding the Nobel Prize in Economic Sciences.

“As Europeans colonized much of the globe, the institutions in these societies changed. Sometimes dramatically, but not in the same way everywhere. In some places the goal was the exploitation of indigenous peoples and the exploitation of resources by the colonizers. In others, the colonizers created inclusive political systems and economically with a view to long-term benefits for European migrants,” the award justification explained.

It highlighted that “the winners showed that one explanation for the differences in countries' prosperity lies in the social institutions that were introduced during colonization”, and “inclusive institutions were often introduced in countries that were poor when they were colonized, which over time led to general well-being of the population.”

“This is an important reason why former colonies that were once rich are now poor and vice versa,” the Academy wrote.

She added that “some countries are trapped in exploitative/exclusionary institutions and low economic growth” and “introducing inclusive institutions would bring long-term benefits for everyone, but exploitative/exclusionary institutions ensure short-term gains for those in power.”

“As long as the political system guarantees they maintain control, no one will trust their promises regarding future economic reforms. According to the winners, this is why there is no improvement,” it was noted.

The justification also states that “this inability to make credible promises for positive change may also explain why democratization sometimes occurs.”

“When there is a threat of revolution, people in power face a dilemma. They would rather stay in power and try to calm the masses by promising economic reforms, but the population is unlikely to believe that they will not return to the old system as soon as the situation calms down. Ultimately, the only option may be transfer of power and establishment of democracy,” it said.

Daron Acemoglu and Simon Johnson are faculty members at the Massachusetts Institute of Technology (MIT), and James A. Robinson teaches at the University of Chicago.