MIB: Daron Acemoglu on the Importance of Institutions

Daron Acemoglu, is the Killian Professor of Economics at the Massachusetts Institute of Technology. He is the recipient of numerous awards, including the 2005 John Bates Clark Medal, and is co-author of Why Nations Fail: The Origins of Power, Prosperity, and Poverty.

He explains why institutions are the key to understanding a society’s economic success or failure. They are why some countries tumble into dictatorship while others become robust democracies. The failures of legal, educational, and governmental institutions are a substantial basis for the expanding wealth and income inequality in America.

This is a decidedly non-partisan approach to analyzing the underlying basis for inequality. It is notably different than the approach taken by other economists, most notably, Thomas Piketty. Analyzing the structural rather than political basis for inequality helps to explain why Acemoglu – a rock star among economics – is one of the most cited academic economists among his peers.

He also disagrees with the default position of economists that inequality reflects unequal human capital or productive capabilities, and what people earn is commensurate with their contribution to their employer. He believes this thesis is wrong due to the impact of both technology and institutions.

All of the books Acemoglu references are here.

You can stream/download the full conversation, including the podcast extras, on iTunesSoundCloudOvercast and on Bloomberg. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak with Ned Davis, technician and founder of Ned Davis Research.






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