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Why Are Some Nations Rich While Others Are Poor?

Today on Esquire's website, Daron Acemoglu, a professor at MIT, tackles an age-old question: Why are some nations wealthy while others are poor?

There have been plenty of sweeping theories to choose from, as Acemoglu notes. In the 18th century, the French political philosopher Montesquieu was proposing that people in hotter places are just lazier. Today, in a similar way, Jeffrey Sachs of Columbia University's Earth Institute says a lot of it boils down to geography and the weather.

But according to Acemoglu, while these theories may help explain aspects of poverty, they ignore the incentives that truly drive prosperity. In Acemoglu's view, if countries create sound institutions and improve their governments, then their citizens can expect that their hard work will be protected by the rule of law and poverty can be fixed. While rich nations may not be able to totally force their institutions onto other countries, according to Acemoglu, they can push for government reforms and even help the citizens of poorer nations by providing them with educational opportunities and technology.

Acemoglu's connection between economic incentives and the rule of law is appealing but it ultimately fails to answer the initial question. Certainly there is a correlation between good government and economic prosperity. But why do some nations develop sound, transparent institutions while others settle for warlords or corrupt puppet governments?

And it can't all come down to education. Russia, for example, has excellent universities and a literacy rate close to 100 percent. Yet the International Finance Corporation ranks Nigeria and Pakistan as better places to do business.
Social scientists will keep on trying to isolate that single causal factor that explains wealth and poverty. But what if there simply isn't one to be found? After all, even Iraq was once home to the center of civilization.

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