The Nobel Prize in Economics is awarded to three economists for their research

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STOCKHOLM — The Nobel Memorial Prize in Economics was awarded Monday to Daron Acemoglu, Simon Johnson and James A. Robinson for research on why societies with weak rule of law and exploitative institutions fail to generate sustainable growth.

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The three economists “have shown the importance of social institutions to a country's prosperity,” the Nobel Committee of the Royal Swedish Academy of Sciences said at an announcement in Stockholm.

Acemoglu and Johnson work at the Massachusetts Institute of Technology, and Robinson conducts research at the University of Chicago.

“Reducing the huge income gaps between countries is one of the greatest challenges of our time. The winners have shown how important social institutions are in achieving this goal,” said Jakob Svensson, chairman of the Economic Sciences Prize Committee.

He said their research provided “a much deeper understanding of the root causes of countries' failures or successes.”

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Reached at the academy in Athens, Greece, where he is scheduled to speak at a conference, Turkish-born Acemoglu, 57, said he was surprised and shocked by the award.

“You never expect something like this,” he said.

Acemoglu said the research honored with the award highlights the value of democratic institutions.

“I think overall the work we have done is conducive to democracy,” he said in a telephone call with the Nobel Committee and reporters in Stockholm.

However, he added that “democracy is not a panacea. Introducing democracy is very difficult. When you introduce elections, sometimes it creates conflict.”

In an interview with the Associated Press, Robinson expressed doubts that China would be able to maintain economic prosperity if it maintained a repressive political system.

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“There are many examples in world history of societies that have done well for 40, 50 years,” Robinson said by phone. “You see it never lasts. … The Soviet Union did well for 50 or 60 years. During World War I, Argentina was one of the richest countries in the world. Our theory predicts that this is a temporary situation.

Robinson said many societies have successfully moved toward what he, Acemoglu and Johnson call an “inclusive society.”

“Look at the United States,” Robinson said. “It was a country of slavery and privilege where women were not allowed to participate in the economy or vote. … Every country that is relatively inclusive and open today has made this transformation. In the modern world, you have seen this in South Korea, Taiwan and Mauritius.

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Acemoglu and Robinson wrote the 2012 bestseller “Why Nations Fail: The Origins of Power, Prosperity and Poverty,” in which they argued that man-made problems are responsible for keeping countries in poverty.

In their works, the winners looked, for example, at the city of Nogales, which lies on the US-Mexico border.

Despite the same geographical location, climate, many of the same ancestors and a common culture, life on both sides of the border is completely different. In Nogales, Arizona, in the north, residents are relatively wealthy and live long lives; most children finish high school. In the south, in Mexican Nogales in Sonora, the inhabitants are much poorer and there is organized crime and corruption.

Economists have found that the difference is that the American system protects property rights and gives citizens a say in government.

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Acemoglu expressed concern on Monday that democratic institutions in the United States and Europe were losing public support. “Democracies perform particularly poorly when the public believes they are underperforming,” he said. “This is a time when democracies are going through a difficult period.[…]In a sense, it is very important that they regain the basis for better governance.”

Robinson agreed. “You have undoubtedly attacked inclusive institutions in this country,” he said. “You had a presidential candidate who denied that he lost the last election. That's why President Trump has rejected democratic government by the people.[…]Of course I'm worried, I'm a concerned citizen.”

Economists have also studied the institutional changes that European powers such as Britain and Spain introduced as they colonized much of the world from the 17th century onwards. They introduced different policies in different places, giving later researchers a “natural experiment” to analyze.

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Colonies that were sparsely populated offered less resistance to foreign rule and therefore attracted more settlers. In these places, colonial governments tended to establish more inclusive economic institutions that “encouraged settlers to work hard and invest in their new homeland. This in turn led to demands for political rights that gave them a share of the profits,” says the Nobel Committee.

In more densely populated places, which attracted fewer settlers, colonial regimes restricted political rights and created institutions that focused on “benefiting the local elite at the expense of the broader population… Paradoxically, this means that parts of the colonized world that were relatively around 500 years ago were the most prosperous those who are currently relatively poor.” For example, India's industrial production surpassed that of the American colonies in the 18th century.

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The economics prize is formally known as the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel. The central bank established it in 1968 as a memorial to Nobel, the 19th-century Swedish businessman and chemist who invented dynamite and established five Nobel Prizes.

Although Nobel purists point out that the economics prize is not technically a Nobel Prize, it is always awarded alongside the others on December 10, the anniversary of Nobel's death in 1896.

Last week, the Nobel Prize in Medicine, Physics, Chemistry, Literature and Peace was announced.

— Corder reported from The Hague, Netherlands, and Wiseman reported from Washington

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