Jeff Sachs reviews Why Nations Fail..

A superb critical review of the Why Nations Fail book by Jeff Sachs.

The authors’ story is soothing. Western readers will no doubt take comfort in the idea that democracy and prosperity go hand in hand and that authoritarian countries are bound to either democratize or run out of economic steam. Indeed, Acemoglu and Robinson predict that China will go the way of the Soviet Union: exhausting its current economic success before transforming into a politically inclusive state.

This tale sounds good, but it is simplistic. Although domestic politics can encourage or impede economic growth, so can many other factors, such as geopolitics, technological discoveries, and natural resources, to name a few. In their single-minded quest to prove that political institutions are the prime driver or inhibitor of growth, Acemoglu and Robinson systematically ignore these other causes. Their theory mischaracterizes the relationship among politics, technological innovation, and growth. But what is most problematic is that it does not accurately explain why certain countries have experienced growth while others have not and cannot reliably predict which economies will expand and which will stagnate in the future.

Interesting stuff…

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