*Why Nations Fail*

The authors are Daron Acemoglu and James Robinson and the subtitle is The Origins of Power, Prosperity, and Poverty.  Could there be a better and more up to date book on the importance of economic institutions?  Self-recommending!  Excerpt:

[In Russia] Opposition to railways accompanied opposition to industry, exactly as in Austria-Hungary.  Before 1842 there was only one railway in Russia.  This was the Tsarskoe Selo railway, which ran seventeen miles from St. Petersburg to the imperial residencies of Tsarskoe Selo and Pavlovsk.  Just as Kankrin opposed industry, he saw no reason to promote railways, which he argued would bring a socially dangerous mobility, noting that “Railways do not always result from natural necessity, but are more an object of artificial need or luxury.  They encourage unnecessary travel from place to place, which is entirely typical of our time.”

This book has literally hundreds of good examples of how to apply institutional economics and property rights theory to economic history.

If I have a worry about the book, it is this.  I do not disagree with the claims about institutions.  But I am less sure that Acemoglu and Robinson dispose of the more “fundamentalist” theories, which might invoke say geography or other pre-institutional factors behind economic growth, political change, or for that matter levels of interpersonal trust.  Where exactly do the institutional changes come from?  They seem to come from other institutional changes (see p.209 for one example of many), elephants all the way down.  I would have chosen the alternative subtitle: “Power, Prosperity, and Poverty, Everything but the Origins.”  That’s still a lot.

The book is due out March 20.