


Social scientists have often asked why do some countries remain hopelessly poor while others enjoy the benefits of a high standard of living? The question they should have asked is. How? Because inequality is not predetermined. Nations are not like children—they are not born rich or poor. Their governments make them that way.



Social scientists have often asked why do some countries remain hopelessly poor while others enjoy the benefits of a high standard of living? The question they should have asked is. How? Because inequality is not predetermined. Nations are not like children—they are not born rich or poor. Their governments make them that way.
Montesquieu, Weber, Sachs, and Diamond ignore the power of incentives. People need incentives to invest and prosper; they need to know that if they work hard, they can make money and keep that money. And the key to ensuring those incentives is sound institutions—the rule of law and security and governing system that offers opportunities to achieve and innovate. That’s what determines the haves from the have nots—not geography or weather or technology.
In other words, fix incentives and you will fix poverty. And if you wish to fix institutions, you have to fix governments.
Acemoglu offers examples of rich countries (once impoverished Singapore and Botswana) and poor countries (North Korea, Egypt, Sierra Leone) which buttress his thesis.
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Acemoğlu is writing a book about his theory of inequality with James Robinson, a Harvard government professor.