Why nations fail?

In a previous post, I discussed the book Collapse by Jared Diamond. In this book, Diamond discusses how societies fall apart and cease to exist due to a number of different factors. Most of the factors relate to biological causes, for instance, deforestation and a rapid growth in population. However, Acemoglu and Robinson argue that there are different determinants that contribute to a society’s downfall.

In their book, Why Nations Fail, they discuss that the determinants have to do with the institutions that are present in a nation. There are two types of institutions, inclusive institutions, and extractive institutions. Inclusive means that citizens have political freedom and can partake in political decision-making in one way or another. Extractive would mean that citizens do not have such freedom and that their country is ruled by someone who has (close to) absolute power.

They further expand this theory as to say that inclusive institutions lead to prosperity, while extractive ones do not. In nations with inclusive institutions, there is an incentive and freedom to engage in being innovative. The authors show that many of the greatest inventors lived in societies with inclusive institutions. This will lead to overall prosperity in a society.

What makes their explanation of their thesis so interesting is the fact that they provide many historical examples to back up their claims. The authors also refute other previous claims made by other scientists before them. These include geography, culture, and ignorance. Acemoglu and Robinson clarify that nations aren’t historically determined to have one of the two types of institutions, but most if it relies on contingency.