Chapter 1 - Why Nations Fail

In this first chapter - So Far and Yet So Different the following assertion made on page 42 may be worthy of discussion at our ASET book club next month:

"The United States today is also far richer than . . . [third world countries] . . . because of the way its institutions, both economic and political, shape the incentives of businesses, individuals and politicians."

So far, so good. This institutional analysis is one that I suspect we might all agree on. But the authors go farther and, I would expect that the following argumentation will generate some discussion and disagreement. I hope that this discussion is analytic and based upon our previous text discussions rather than opinionated and based upon a lack of any evidence. The Liberty Fund discussion model would be very helpful here.

"Each society functions with a set of economic and political rules created and enforced by the state and the citizens collectively. Economic institutions shape economic incentives; the incentives to become educated, to save and invest, to innovate and adopt new technologies and so on. It is the political process that determines what economic institutions people live under, and it is the political institutions that determine how this process works."

I wonder to what extent the authors of confused correlation with causality here. That is, because a set of economic and political institutions appear together does not in any way establish causality. In a previous book, Acemoglu and Robinson try to make that argument ( Economic Origins of Dictatorship and Democracy )

So, over on page 43 we read: ". . . it is politics and political institutions that determine what economic institutions a country has."

I look forward to the assessment of my fellow book clubbers on how well this assertion is supported in the book.