A (deserved) Nobel Prize in economics that goes hand in hand with history

The award of the 'Sveriges Riksbank for Economic Sciences (in memory of Alfred Nobel)', i.e. the Nobel Prize in Economics awarded to the economists Daron Acemoglu, Simon Johnson and James Robinson, is in perfect continuity with the one awarded in 1993 to Douglass North, a leading figure of the 'new institutional economics'. North demonstrated that, in economics, 'history matters'. Acemoglu, Johnson and Robinson, on the other hand, stand out for having used history in a way 'that' matters, i.e. to investigate issues of primary importance to present-day societies, using historical evidence. Why, over the centuries, have some societies become increasingly rich while others seem doomed to remain poor? And how is it possible that, instead of narrowing, the gap has
increased? Would it not be reasonable to expect that, once it became clear that some societies had discovered the recipe for prosperity, all others would imitate them?

Unfortunately, history can get in the way, and institutions in particular can: which are, yes, designed by human beings, but which tend to change slowly and sometimes prove almost impossible to alter. Why? Because, and for our economists this would be at the origin of Latin America's relative lag in growth compared to North America, and of the difficulties that sub-Saharan Africa has encountered and continues to encounter, inefficient institutions may be detrimental to the community as a whole, but some benefit them - and, usually, the most advantaged are precisely the members of the political and socio-economic elites who have the possibility of influencing the institutional set-up of their country more decisively. Corruption, 'extraction' and predatory behaviour, therefore, can take root and persist over centuries, despite generating inefficiency. This explains the relative failure of some societies compared to others blessed with better institutions: in particular, for the three economists, better political institutions that are more open, inclusive and oriented towards an ideal path that culminates in Western democracy.

Institutions, therefore, matter, indeed a great deal - but they are not all that matters. In one of their early articles, Acemoglu, Johnson and Robinson explore the origins of the divergence between Northern and Southern Europe from the 16th century onwards. In their analysis, the new opportunities offered by the opening up of trade routes across the Atlantic Ocean mainly benefited those states that had the most open political institutions, and thus were most ready to take on board and make their own the demands of innovative economic elites: these were the rare republics of the time, such as the Dutch, Genoese or Venetian republics, or the English monarchy whose power was beginning to be challenged by Parliament. But it was not enough: geography also determined relative advantages or disadvantages, decreeing the success of the states located on the Atlantic coasts and the tendency decline of the Italian Republics, at the time highly advanced in economic, commercial and institutional terms but somehow trapped in the Mediterranean.

Apart from reminding us that there was a time, now largely in the past, when Italian institutions were the envy of Europe, the three economists' study of the consequences of the opening of the Atlantic routes leads one to reflect on their use of history. On the positive side, their excellent knowledge of historiography is noteworthy, which undoubtedly contributes to enriching their work by making it not only more scientifically sound, but also more enjoyable to read. From a more critical perspective, however, one notes a certain tendency to cherry-pick materials and adopt sharp definitions and categorical classifications (can we really say that sixteenth-century Spain was a more 'absolute' monarchy than England? Answer: almost certainly not) which, if they are instrumental in applying an economic model to historical reality, inevitably turn the noses of many historians. But in the social sciences there is room for everyone, and diversity of views is an asset: one can therefore only fully endorse the Nobel Foundation's decision to award, once again, economists who love history.