Nobel Prize in Economics: the delicate balance between technology, institutions and power

In today’s cli­mate, where demo­cra­cies are under­mined by the latest tech­no­lo­gic­al innov­a­tions, eco­nom­ic research­ers are look­ing at the ques­tion of inequal­it­ies between rich and poor coun­tries. In 2024, three research­ers – Daron Acemoğlu, Simon John­son and James A. Robin­son – were awar­ded the Nobel Prize in Eco­nom­ics “for their stud­ies of how insti­tu­tions are formed and affect prosper­ity.” Pierre Boy­er, Héloïse Cloléry, Matías Núñez and Pau­line Rossi answer our ques­tions on the con­tri­bu­tions of this work, shed­ding light the impacts of this research the 2024 Nobels Prize winners. 

Pierre Boy­er. The work of the Nobel Prize win­ners was already renowned before they received this pres­ti­gi­ous dis­tinc­tion. Since the 2000s, their research has inspired and influ­enced many research­ers them­selves. What’s more, their work is closely linked to cur­rent events. For example, the elec­tion of Don­ald Trump and the ques­tion­ing of checks and bal­ances are sub­jects that res­on­ate strongly with their research. These events are a remind­er that insti­tu­tions are con­stantly evolving, and that sta­bil­ity can nev­er be taken for gran­ted. This year’s Nobel laur­eates are also look­ing at the impact of arti­fi­cial intel­li­gence on our soci­et­ies and the chal­lenges of hav­ing inclus­ive institutions. 

They often ask the fol­low­ing ques­tion: to what extent will a tech­no­lo­gic­al revolu­tion be mono­pol­ised by a minor­ity for its own bene­fit, or will it bene­fit the greatest num­ber? The answer will depend on the insti­tu­tions put in place to share the rev­en­ues and bene­fits of these innov­a­tions, so that they bene­fit everyone. 

Héloïse Cloléry. For my part, the work of the prize-win­ners inspired me a great deal dur­ing my dis­ser­ta­tion, par­tic­u­larly the notion they defend that we still need insti­tu­tions to make col­lect­ive decisions. There are many con­tem­por­ary prob­lems, such as the cli­mate crisis or glob­al pan­dem­ics, that can­not be solved indi­vidu­ally. A single indi­vidu­al does not carry enough weight to play a pivotal role, and there is a high risk of free-rider beha­viour, where some indi­vidu­als take advant­age of the efforts of oth­ers. I’ve always found the ques­tion of ‘how do we organ­ise ourselves col­lect­ively’ fas­cin­at­ing. As mem­bers of a soci­ety, we need an author­ity to make decisions for the group. But once power has been del­eg­ated to insti­tu­tions, how do we ensure that these same insti­tu­tions don’t extract all the wealth for their own gain? Daron Acemoğlu and James A.Robinson insist in their recent work on the bal­ance that must con­stantly be main­tained between the powers of an elite and the powers of soci­ety. Without a bal­ance of power, there can be no eco­nom­ic growth. I think it’s very import­ant to keep this idea in mind, because the issues we’re cur­rently facing require us to think about new ways of organ­ising ourselves collectively. 

Matias Núñez. The Nobel laur­eates are essen­tial ref­er­ences in polit­ic­al eco­nomy. Their con­tri­bu­tions stand out for the rel­ev­ance and qual­ity of their reas­on­ing, as well as for the breadth of the sub­jects they address and the tech­niques they employ. They don’t just the­or­ise; they back up their ana­lyses with sol­id empir­ic­al data, mak­ing their argu­ments par­tic­u­larly con­vin­cing. By explor­ing the inter­ac­tions between polit­ic­al insti­tu­tions, eco­nom­ic devel­op­ment and his­tor­ic­al tra­ject­or­ies, they help us to bet­ter under­stand the com­plex dynam­ics of our soci­et­ies. I highly recom­mend that inter­ested read­ers check out Daron Acemoğlu’s polit­ic­al eco­nomy course at MIT. The course mater­i­als and exer­cises, avail­able free online, provide an excel­lent over­view of the latest advances in the field. 

PB. What also makes these Nobel laur­eates so influ­en­tial for all three of us, and for oth­ers as well, is that they open doors rather than close them, in many fields. Their work is enabling new gen­er­a­tions of research­ers to fol­low in their foot­steps and pur­sue innov­at­ive research. For example, faced with the emer­gence of a new tech­no­logy such as arti­fi­cial intel­li­gence, their research into the links between tech­no­logy and insti­tu­tions is help­ing us to anti­cip­ate the impact of such an upheav­al and to under­stand the fra­gil­ity it may engender for our demo­cra­cies. In the cur­rent con­text, their work offers a real read­ing grid. 

PB. The work of the win­ners high­lights the fact that insti­tu­tions are not immut­able and can evolve, for bet­ter or for worse. It is cru­cial to bear this fra­gil­ity in mind. Twenty years ago, the idea that the old demo­cra­cies of Europe or the United States might be vul­ner­able might have seemed incon­gru­ous. Today, how­ever, it is clear that even these estab­lished demo­cra­cies can be affected by the warn­ings expressed in their research. 

HC. The idea that demo­crat­ic polit­ic­al powers can fail is not new. How­ever, in recent years, the work of the prize-win­ners has been very much in the news. We are cur­rently wit­ness­ing the rise to power of pop­u­list move­ments and polar­isa­tion phe­nom­ena that divide opin­ion in many demo­cra­cies. These phe­nom­ena are accel­er­at­ing and gain­ing con­sid­er­able momentum because of social media and the rap­id spread of fake news. Digit­al upheavals some­times take gov­ern­ments by sur­prise. The United King­dom is a good example, where dis­in­form­a­tion cam­paigns played a major role in the out­come of the Brexit vote. Insti­tu­tions today must adapt to deal with cyber inter­fer­ence and new tech­no­lo­gies, a sub­ject Daron Acemoğlu knows well. 

PB. This approach stems dir­ectly from the work of the Nobel Prize win­ners. They chose to devel­op dynam­ic mod­els incor­por­at­ing sev­er­al states of nature, for example, a more or less egal­it­ari­an dis­tri­bu­tion of wealth. Based on these mod­els, they con­struct read­ing grids with vari­ous pos­sible tra­ject­or­ies lead­ing to these states. As Héloïse poin­ted out, this meth­od makes it pos­sible to visu­al­ise the dif­fer­ent tra­ject­or­ies and bifurc­a­tion points at which events can steer a coun­try towards an egal­it­ari­an demo­cracy or an ineg­al­it­ari­an auto­cracy, depend­ing on endo­gen­ous and exo­gen­ous factors. 

HC. I think the notion of trans­ition is linked to their research ques­tions. They are obsessed with under­stand­ing why some coun­tries remain poor while oth­ers have man­aged to become rich. From there, their aim is to under­stand the factors that explain the con­nec­tion. Identi­fy­ing these factors is cru­cial if these coun­tries are to be lif­ted out of this eco­nom­ic situ­ation. Insti­tu­tions today have to adapt to deal with cyber inter­fer­ence and new tech­no­lo­gies, a sub­ject Daron Acemoğlu knows well. 

MN. Of the vari­ous trans­itions they exam­ine, the polit­ic­al regime trans­itions dis­cussed in their book Eco­nom­ic Ori­gins of Dic­tat­or­ship and Demo­cracy are par­tic­u­larly rel­ev­ant. The authors argue that the choice of a country’s polit­ic­al sys­tem res­ults from the inter­ac­tion between vari­ous social groups and eco­nom­ic shocks. They illus­trate this the­ory through numer­ous his­tor­ic­al examples, such as the United King­dom’s trans­ition in the 19^th Cen­tury from a ‘house­hold­er fran­chise’ (vote) to a more demo­crat­ic one. 

PB. There are still some grey areas! If social sci­ence research were to give us a mir­acle recipe, it would be applied by everyone. 

MN. In eco­nom­ics, a the­ory often rep­res­ents one pos­sib­il­ity among oth­ers, with no single answer. Sev­er­al explan­a­tions can coex­ist sim­ul­tan­eously. How­ever, eco­nom­ists have the abil­ity to ask per­tin­ent ques­tions that pro­voke numer­ous reac­tions. For example, the impact of arti­fi­cial intel­li­gence on West­ern demo­cra­cies, a ques­tion that the prize-win­ners have been look­ing at recently, is a sub­ject that stim­u­lates debate and research. 

Interview by Marie Varasson