Acemoglu on Past, Present, Future and Beyond

The World our Grandchildren Will Inherit: The Rights Revolution and Beyond

By Daron Acemoglu (daron@mit.edu)

URL: http://econpapers.repec.org/paper/nbrnberwo/17994.htm

(a free download version is available in Acemoglu’s profile)

Abstract

Following on Keynes’s Economic Possibilities for Our Grandchildren, this paper develops conjectures about the world we will leave to our grandchildren. It starts by outlining the 10 most important trends that have defined our economic, social, and political lives over the last 100 years. It then provides a framework for interpreting these trends, emphasizing the role of the expansion of political and civil rights and institutional changes in this process. It then uses this framework for extrapolating these 10 trends into the next 100 years.

Review by Anna Missiaia

This NBER working paper by Daron Acemoglou was distributed by NEP-HIS on 2012-04-23. The contents covers 200 years of worldwide economic life, 100 from the past and 100 from the future. The grip for this reflection on the past and future economic, social and political trends is the birth of the author’s second child. Acemoglu develops several conjectures on what world we will leave to his grandchildren, who will probably be in their 40s or 50s a century from now. The most interesting feature of this paper is the ambitious connection established between past and future. Acemoglu attempts a quite punctual forecast of what the next generations to come should expect.

The hit parade of the main trends he considered is, in order of importance, as follows: the increasing spread of civil rights; the sweep of technology; the sustained economic growth; the uneven growth; the geographic division of labour; the widespread improvement of health; the globalization of technology; the decline in wars; the rising success of “counter-Enlightment” in politics and finally the explosion of the world population.

The trend that is judged to be the most important is the expansion of civil and political rights, which took place over the 20th century and according to Acemoglu will continue in the 21st. Acemoglu connects this trend to a specific type of institutions, which he calls inclusive institutions. Inclusive political institutions are the ones that have both a “pluralistic, broad-based distribution of political power” and a

sufficient state centralization, so that there is a sort of monopoly of violence in the hands of the state […] upon which order and security […] can be grounded.

Opposed to these, there are political extractive institutions, where the power is in the hands of few and the majority is subject to their power. Political institutions of the two types lead to inclusive and extractive economic institutions. The trend of wide spreading civil and political rights is seen as happening in the context of inclusive institutions and is closely connected to the second trend of spreading technology. The diffusion of technology is shaped by the spread of inclusive institutions. These two are the main trends to look at, while other trends like economic (uneven) growth, shift of jobs towards low wage areas and increase in health conditions all generate from the first two trends.  The globalization of technology and the end of wars are also made possible by the rights revolution. The last two trends are two for which we should be worried with respect to our grand-children’s future.

As for the role of the so-called “counter-Enlightment” movements, which are for the author mostly religious movements (above all fundamentalist Christians and fundamentalist Islamists) and possible neo-fascist movements. The threat their represent is downplayed by Acemoglou by saying that although it is possible that these threats “are largely far-fetched”. The last trend is concerned with population rising to the point that resources will be scarce and the environment will not be able to cope anymore. This point is neutralized by again bringing up technology: the transition to clear energy will be able to solve both the scarcity of resources (namely fossil fuels) and emissions caused by the increase in population. Politically, this will be viable only by

international agreement [that] can ensure the transition to alternative energy sources – even if this means higher costs in the short term for participating countries.

Daron Acemoglu

There are many possible critiques often moved to institutions as explanation to economic and social development. It is beyond the scope of this post to do the usual laundry list of these critiques. Leaving aside this debate, what strikes the most about this work by Acemoglou is it pervasive optimism. All the “positive” trends are described as well established and mostly likely to continue while the main two negative are underplayed and seen as temporary. In particular, Acemoglou claims that “bad” extractive institutions tend to disappear as the majority has an incentive to rise up against the extractive elite. His prediction for the spread of civil rights is that it will continue, as the spread of technology, the end of wars, the increase in health and the continuing economic growth. All these in Acemoglou’s view are actually  emanated by the rights revolution. Very often it is the author himself offering to the reader the main critique to each of this claims. For example, extractive institutions often persist because of the political and economic power of the elites and civil rights have been undermined by the rise of religious extremism in many parts of the world. The paper concludes with a reflection on climate change and fossil fuel consumption, which are closely correlated and appear to be Acemoglou’s main concern on his grandchildren’s future. The author claims that “only an international agreement can ensure the transition to alternative energy sources” which are crucial to winning this battle. The predictions that appear more hazardous are the ones on the end of wars in spite of the affirmation of unconventional wars in the last decade, the fundamental harmlessness of religious extremism when this has been fuelling the former for about a decade if not more and the agreement on the development of alternative energy in spite of the “higher costs in the short term for participating countries” when the same countries have been unable to reach most environmental agreements that would have had these effects (see Kyoto protocol).

In principle there is no reason why all the trends described by Acemoglou cannot evolve in the way optimistically described here. However, Acemoglou’s grandchildren, as our own, will surely need a lot of luck and possibly, optimism.

See the link below to follow Professor Acemoglu’s (along with Professor James Robinson) discussion on the origin of power, prosperity and poverty, whynationsfail.com

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