Summary of Key Points
A recent article in The Economist criticized the research of 2024 Nobel laureate Daron Acemoglu as "unconvincing," sparking a heated debate in academia. Acemoglu responded to the criticism, calling it a "deliberate attack." Economics professor Tang Zhijun analyzed that while Acemoglu's theories have made significant contributions (such as quantifying institutional studies and proposing the "inclusive-extractive" institutional framework), they also have clear limitations. The core contradiction lies in the tension between the "endogeneity of institutions" (shaped by power struggles) and their "exogeneity" (required for causal analysis), as well as the oversimplification of history and the neglect of the evolutionary logic of power structures. This debate essentially explores the boundaries of "institutional determinism": institutions are important, but they are not the sole explanation for economic outcomes.
I. Acemoglu's Three Major Contributions: Turning Institutional Research from "Storytelling" to "Science"
Acemoglu's Nobel Prize-winning work is based on three breakthroughs:
1. Quantifying Institutional Research: Previous scholars (such as North) argued that institutions are important, but their arguments were often based on historical narratives that could not be verified. Acemoglu used the mortality rates of colonists during the colonial period as a tool to demonstrate the causal relationship between institutions and economic growth—this transformed institutional research from speculation into testable science.
2. Using Game Theory to Explain Why Bad Institutions Do Not Disappear: Some questioned why bad institutions, which hinder growth, do not change. Acemoglu explained that these institutions serve the interests of elites, and as long as the elites are not threatened by the population or experience internal divisions, they will not be altered. For example, feudal systems, in which landlords exploit peasants, have no incentive to change.
3. Proposing the "Inclusive vs. Extractive" Framework: He categorized institutions into two types: inclusive institutions (which protect property rights and encourage competition, such as those in Europe and America) and extractive institutions (where a few exploit the many, such as in some authoritarian countries). This framework makes it easier for laypeople to understand the reasons behind differences in national wealth.
II. "Inclusive vs. Extractive": A Useful Framework with Limitations
However, this framework is overly simplistic:
1. Circular Reasoning: Institutions are defined by outcomes—rich countries are considered inclusive, and poor countries are considered extractive, which is like "drawing the target after shooting the arrow." For example, Singapore is described as having a "strong government + high growth," but Acemoglu argues that this model is unsustainable; Haiti is democratic but poor, yet he claims it lacks centralization—either argument is valid and cannot be refuted.
2. Neglecting Historical Complexity: The decline of Venice was not due to its "oligarchic institutions"; rather, it was caused by the opening of new trade routes that deprived it of its trade dominance. Argentina's poverty was not due to institutional deterioration but rather by the collapse of commodity prices and changes in the international division of labor. attributing all problems to institutions is like blaming a cold on not wearing enough clothes, ignoring other factors.
3. Avoiding the Question of the Origin of Institutions: Acemoglu argues that institutions determine growth, but he does not clarify who determines these institutions. For example, he either attributes their formation to "accidental events during the colonial period" or to elite power struggles, without delving into how power structures are formed.
III. Methodological Controversies: The "Loopholes" in Acemoglu's Sophisticated Methods
Acemoglu's quantitative research has been questioned:
1. Poor Data Quality: The mortality data for 64 countries used in his 2001 paper included 28 estimates (for example, the mortality rate of missionaries was multiplied by 4.25 to estimate colonist mortality rates). Later corrections to the data weakened the correlation between institutions and mortality rates.
2. Impure Instrumental Variables: Colonists brought not only institutions but also culture and technology. For example, areas with lower mortality rates had more colonists, which also brought more education and technology—it is unclear whether institutions or culture drove economic growth.
3. Biased Sample: His sample mainly consisted of poor countries in Africa and Latin America, excluding cases like South Korea, which demonstrated that government-led growth can be effective, thus exaggerating the role of institutions.
4. Overemphasis on Methodology at the Expense of Mechanism: The focus on data accuracy overlooks the underlying logic of how institutions affect growth—for example, it is unclear whether inclusive institutions promote growth by encouraging innovation or by attracting investment.
IV. The Internal Contradiction: Describing Institutions as Both "Endogenous" and "Exogenous"
Acemoglu's theory contains a fatal contradiction:
- Theoretically: He argues that institutions are endogenous, determined by power struggles between elites and the population (e.g., when the population resists, elites may create inclusive institutions).
- Empirically: However, he treats institutions as exogenous, using colonial mortality rates as a tool that assumes institutions are determined by accidental events (such as mortality rates). This contradiction means his theory fails to explain both the origin of institutions and their impact on growth. For example, the modernization of Prussia was the result of complex interactions among the Junkers, bourgeoisie, and working classes, not a single "critical event" (such as colonization).
V. Going Beyond Institutional Determinism: Avoid Treating Institutions as a "Panacea"
Professor Tang Zhijun believes that to overcome Acemoglu's limitations, we need to focus on "power structures":
1. Institutions are a Product of Power Structures: Inclusive institutions do not emerge spontaneously but result from a balance of power, effective checks and balances, and openness (e.g., the separation of powers in the U.S.). If power is too centralized (e.g., in an authoritarian regime), even if the institutions appear inclusive, they can become tools for exploitation.
2. Power Structures and Institutions Influence Each Other: Inclusive institutions can foster a middle class, which in turn demands more political rights, reinforcing checks and balances (a positive cycle); extractive institutions, on the other hand, enrich the elite and strengthen their power (a negative cycle).
3. Do Not Ignore Other Factors: Geography (e.g., coastal countries with convenient trade), culture (e.g., countries that value education), and the international environment (e.g., globalization and technology transfer) all influence growth through power structures and institutions, making institutions not the sole determinant.
Conclusion: Acemoglu has raised awareness of the importance of institutions, but we should not treat them as the sole explanation for economic outcomes. Future research should move beyond institutional determinism to a comprehensive framework that considers "power structures, institutions, and performance"—first understanding how power structures are formed, then how they shape institutions, and finally how institutions affect growth. Only by doing so can we more accurately explain the reasons behind differences in national wealth.