This points to the most obvious theory about growth, which is that it is strongly correlated with embracing capitalistic economics—independent of the political system. When a country focuses on getting infrastructure built and education improved, and it uses market pricing to determine how resources should be allocated, then it moves towards growth. This test has a lot more clarity than the one proposed by the authors, and seems to me fits the facts of what has happened over time far better.I wonder what Gates thinks about Hernando de Soto's "The Mystery of Capital," which more explicitly recognizes the role of capitalism and its relation to political institutions. Hernando de Soto's point is that capitalism does not work to its full extent if it is not inclusive.
Wednesday, March 6, 2013
Gates on Why Nations Fail
Ryan sent me a link to Bill Gates' review of Acemoglu and Robinson's book, "Why Nations Fail." I haven't read the book, but I am familiar with the literature on which it is based. Although I tend to think that Acemoglu and Robinson's perspective is the dominant one, I believe that Gates gives a fairly even-handed review. The rest of the review is worth reading, but here is the competing theory according to Gates: