Criticisms of Nobel laureates AJR’s views

Source: The post criticisms of Nobel laureates AJR’s views has been created, based on the article “A Nobel in hand, but where AJR’s model falls short” published in “The Hindu” on 26th October 2024

UPSC Syllabus Topic: GS paper3- Growth and Development

Context: The article discusses the 2024 Nobel Prize winners, Daron Acemoğlu, Simon Johnson, and James Robinson, and critiques their Eurocentric view on economic prosperity. It argues that their framework oversimplifies history, ignores diverse development paths, and fails to account for the complexities of colonial institutions.

For detailed information on Nobel Prize in Economics 2024 read this article here

What is the Nobel-winning theory of economic development by Acemoğlu, Johnson, and Robinson (AJR)?

The 2024 Nobel winners in Economic Sciences, Daron Acemoğlu, Simon Johnson, and James Robinson, studied how institutions affect economic prosperity.
They found that institutions created during colonial times shaped the economic growth of today’s nations.
Where Europeans faced high death rates, they set up “extractive” institutions that exploited resources, slowing long-term growth.
Where Europeans could settle, they built “inclusive” institutions with secure property rights and checks on power, which encouraged growth.

For detailed information on How different types of institutions impact a country’s prosperity read this article here

What are the criticisms of AJR’s view?

1. Eurocentric Perspective
2. AJR’s framework suggests that European-style “good institutions” are universally ideal for development, promoting a Eurocentric view.
3. They imply that nations should aim to replicate Europe’s model to achieve prosperity, ignoring diverse development paths like those in East Asia.
4. Misrepresentation of Western Development
5. AJR’s emphasis on “good” Western institutions overlooks exclusion and cronyism as drivers of growth in the West.
6. For instance, Britain’s Industrial Revolution, cited as a triumph of inclusive institutions, relied heavily on labor exploitation and political disenfranchisement.
7. Overlooked Role of State Intervention
8. AJR’s framework omits the role of state intervention and industrial policy in Western development.
9. Economist Ha-Joon Chang highlights that countries like the U.S. and U.K. used protectionism and state-led planning to build industrial strength before adopting inclusive, free-market policies.
10. Simplistic Historical Interpretation
11. AJR classify institutions as either “extractive” or “inclusive,” overlooking the complexity of historical processes.
12. Scholars Frederick Cooper and Mahmood Mamdani note that colonial institutions were often hybrids, blending local governance with imposed authority, creating diverse outcomes.
13. Ignorance of Colonial Legacies
14. AJR’s theory downplays the impact of colonial institutions, which entrenched structural dependencies favoring colonizers.
15. Dependency theory argues that colonial powers’ exploitation left countries like Congo impoverished despite natural wealth, while Europe gained economically.

For detailed information on How western industrialization led to political and economic advantages over the East read this article here

Question for practice:

Examine the criticisms presented against AJR’s Eurocentric view on economic development in the context of diverse global development paths.