How ‘big-picture thinking’ can solve big questions today.
Daron Acemoglu is an esteemed economist and author, currently serving as the Killian Professor of Economics at the Massachusetts Institute of Technology. His main areas of research include political economy, economic development and growth, network economics, human capital and technological innovation.1 Much of his work studies the political, economic and social origins of the differences in economic development across societies. He has also explored the institutional and political evolution of nations and the role that technology plays in shaping economic growth. Acemoglu’s track-record of addressing conventional economic principles in a highly original and astute fashion makes him one of the best regarded thought leaders in the field.
Acemoglu is probably best known for his book - Why Nations Fail: The Origins of Power, Prosperity, and Poverty (co-authored with James Robinson),2 which made the New York Times Bestseller List in 2012. His other books include: Economic Origins of Dictatorship and Democracy (also with James Robinson)3, which was awarded the Woodrow Wilson and the William Riker prizes, Introduction to Modern Economic Growth and Principles of Economics (co-authored with David Laibson and John List)4 and The Narrow Corridor: States, Societies, and the Fate of Liberty (with James Robinson)5.
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“Inclusive economic institutions require secure property rights and economic opportunities not just for the elite but for a broad cross-section of society.”
How Institutions Determine Nation-Building
Since their initial meeting in 1993, Daron Acemoglu and James Robinson have devoted almost three decades to exploring the interaction between political forces, institutions and economic growth. In their best-known publication ‘Why Nations Fail: The Origins of Power, Prosperity, and Poverty’, they argue that differences in the economic development of countries are best explained by the differences in their political and economic institutions. This was a major departure from the literature at the time, especially since most scholars had prioritised factors such as geography or culture as determinants of development. Instead, Acemoglu and Robinson drew from examples around the world to support the view that a country’s economic trajectory is best explained by whether it has been subject to ‘extractive’ or ‘inclusive’ institutions. Extractive institutions are said to be aimed at excluding the majority of a population from political decision-making and economic prosperity, while inclusive institutions promote the opposite. They compare the extractive nature of institutions in Central and South America with more inclusive institutions in the US and Canada to get their point across.
“We (referring to James Robinson) realized you could not divorce the economic trajectory of a nation from its political dynamics”.
Why Nations Fail quickly became a must read for all economics and political science students, however the authors were not immune to some critical feedback. Amongst the most prominent academics to dispute their claims were Jared Diamond (arguing that geography is a better determinant of economic growth), Jeffrey Sachs (holding the view that sometimes authoritarian regimes can lead to economic growth, like in China) and William Easterly (pointing to the lack of data and potential bias in some of their case studies). In 2019, Acemoglu and Robinson published another book on this topic - The Narrow Corridor: States, Societies, and the Fate of Liberty, which built on their previous work and explored how Western ideals of liberty and democracy are only achieved when a “delicate and incessant balance is struck between state and society”5.
“Economics has gained the title Queen of the Social Sciences by choosing solved political problems as its domain.”
Technology and the Workplace
Acemoglu argues that new technologies such as artificial intelligence and robotics will bring great disruption to the global economy, just like the Industrial Revolution did over 200 years ago. Much of his work in this area draws historical examples of labour market disruption, e.g. after the Second World War.6 He observes a pattern of ‘enabling’ and ‘replacing’ technologies; the former holding the potential to improve productivity levels and the standard of living for most people, while the latter will likely lead to workplace automation and the loss of millions of jobs, especially in blue-collar industries.
“The mechanization of agriculture is one of the greatest achievements of the American economy but it was hugely disruptive for millions of people who suffered joblessness.”
Acemoglu argues that policy-makers can prepare for technological disruption by investing in flexible education that puts the labour force in a better position to deal with job market turbulence, and allows them to develop ‘complementary’ skills in the new technological era. He admits this will not be a seamless transition, and requires great public policy foresight and industry collaboration.7
“Economic institutions shape economic incentives: the incentives to become educated, to save and invest, to innovate and adopt new technologies, and so on. It is the political process that determines what economic institutions people live under, and it is the political institutions that determine how this process works.”
Daron Acemoglu was born in Istanbul, Turkey in 1967. His family is of Armenian origin. He received a B.A. in economics at the University of York 1989, followed by an M.Sc. in mathematical economics and econometrics at the London School of Economics, and a Ph.D. in economics, also from the London School of Economics. The title of his doctoral thesis was "Essays in Microfoundations of Macroeconomics: Contracts and Economic Performance."1
Acemoglu began lecturing at LSE in 1991 until two years later when he moved to take up a position at MIT, where he continues to teach today. He was the Charles P. Kindleberger Professor of Applied Economics from 2004 until 2010 - when he took up his current position as the Elizabeth and James Killian Professor of Economics.
“Everybody responds to incentives. For the vast majority of people, there is a continuum between ambition and greed, and this is where institutions play a role. Institutions can put a stop to excess by functions such as the regulation of monopolies so that they don’t crush the opposition. Greed is only bad if it is channeled into doing bad things. Institutions can channel greed into excellence.”
While much of Acemoglu’s early work focused on macroeconomic trends, particularly around labour and human capital, by the mid 1990s he began to focus on the topic that would dominate his career - the interplay between political institutions in economic development. It was around this time that he struck up a working relationship with the political scientist James A. Robinson, which Acemoglu describes as ‘a transformative moment’.
Acemoglu and Robinson published their first book in 2006, titled - Economic Origins of Dictatorship and Democracy. It was however, their 2012 book Why Nations Fail: The Origins of Power, Prosperity, and Poverty that garnered the duo the most attention, both in academic circles and mainstream audiences. The book went on to become a New York Times bestseller, and was nominated for several awards including the Financial Times and Goldman Sachs Business Book of the Year and the 2013 Lionel Gelber Prize. The pair published another book in 2019, The Narrow Corridor: States, Societies, and the Fate of Liberty.
“Technological change is only one of the engines of prosperity, but it is perhaps the most critical one.”
Acemoglu has been outspoken on a range of issues in the modern political economy, including income inequality8, labour unions9, and the COVID-19 pandemic10.
He has received several awards and fellowships, including the Kiel Institute’s Global Economy Prize, the Distinguished Science Award from the Turkish Sciences Association, the T. W. Shultz Prize from the University of Chicago, and the Sherwin Rosen Award for his contribution to labor economics. He was named a Carnegie fellow in 2017, and is an elected fellow of the National Academy of Sciences (United States), the Turkish Science Academy, the Econometric Society, the European Economic Association, and the Society of Labor Economists. The magazine Foreign Policy named him one of their ‘Top 100 Global Thinkers’ twice, and according to the organisation Research Papers in Economics (RePEc), Acemoglu was the most cited economist of the decade by 2015. He also holds Honorary Doctorates from several universities around the world.
“I am actually quite concerned about the size of companies like Apple, Amazon, Netflix, and Facebook, especially because they control things which we didn’t think were so critical in the past but we now understand are vital for the functioning of modern life and modern social and political discourse. That has implications.”
Key Academic Papers
- Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty. Currency.
- Acemoglu, D. (2012). Introduction to economic growth. Journal of economic theory, 147(2), 545-550.
- Acemoglu, D., & Autor, D. (2011). Skills, tasks and technologies: Implications for employment and earnings. In Handbook of labor economics (Vol. 4, pp. 1043-1171). Elsevier.
- Acemoglu, D. (2002). Technical change, inequality, and the labor market. Journal of economic literature, 40(1), 7-72.
- CIFAR (2018). Robotics, AI, and the Future of Work.
- MIT Sloan Global Programs. The Narrow Corridor - Daron Acemoglu & James Robinson
- The Economist (2012). Why Nations Fail
- MIT (2012). Daren Acemoglu on Why Nations Fail.
- New Economic Thinking (2019). Why We Need to Think of AI as a Platform
- Finance & Development (2010). ‘People in Economics’
- Curriculum Vitae (2020). Daron Acemoglu. Accessed Online 13/01/2021: https://economics.mit.edu/faculty/acemoglu/cv
- Acemoglu, D. & Robinson, J.A (2013). Why nations fail: The origins of power, prosperity, and poverty. London
- Acemoglu, D., & Robinson, J. A. (2006). Economic origins of dictatorship and democracy. Cambridge University Press.
- Acemoglu, D. (2009). Introduction To Modern Economic Growth. Princeton: Princeton University Press.
- Acemoglu, D., & Robinson, J. A. (2020). The narrow corridor: States, societies, and the fate of liberty. Penguin Books.
- MIT News (2018). 3Q: Daron Acemoglu on technology and the future of work. Accessed Online 13/01/2021: https://news.mit.edu/2018/3q-daron-acemoglu-technology-and-future-work-0201
- CIFAR (2018). Daron Acemoglu: Robotics, AI, and the Future of Work. Accessed Online 13/01/2021. https://www.youtube.com/watch?v=vgT5kh-aJGI
- Freakonomics (2011): Daron Acemoglu on Inequality. Accessed Online 12/01/2021: https://freakonomics.com/2011/12/16/daron-acemoglu-on-inequality/
- Acemoglu, D., Aghion, P., & Violante, G. L. (2001, December). Deunionization, technical change and inequality. In Carnegie-Rochester conference series on public policy (Vol. 55, No. 1, pp. 229-264). North-Holland.
- Project Syndicate (2020) Four Possible Trajectories after COVID-19. Accessed online 13/01/2021: https://www.project-syndicate.org/onpoint/four-possible-trajectories-after-covid19-daron-acemoglu-2020-06?barrier=accesspaylog
- MIT (2012). Daren Acemoglu on Why Nations Fail. Accessed online 13/01/2021: https://www.youtube.com/watch?v=2z5RAZlv2UQ
- Finance & Development (2010). ‘People in Economics’ https://www.imf.org/external/pubs/ft/fandd/2010/03/pdf/people.pdf
- The Politic.org. Interview with Daron Acemoglu. Accessed Online 13/01/2021: https://thepolitic.org/an-interview-with-daron-acemoglu-mit-economist/