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My Review of Why Nations Fail

June 5, 2013

Overall, “Why Nations Fail” is very overrated. I agree with many of the critiques that Bill Gates makes here. The authors reply is here. It reads like a simplified version of Doug North, and could do with a lot more microeconomic analysis. The book is well over 400 pages, so it’s not like they didn’t have enough room to fit it. I understand why monopolies and currency boards are extractive, but I’m sure that not all readers do.

Pros
Good “first estimate” model of politics – leaders seek to extract rents.

Easy to read for even the non-specialist. No math, no data, just storytelling. If you are an idiot, it’s ok, because they repeat each point like 500 times.

“Institutions” is a pretty good theory as to why some nations are poor. It’s certainly better than geography or capital investment. Still, as Easterly likes to say, there’s no one silver bullet. The authors would do well to recognize that.

They cover some very interesting historical examples, such as Venice and Bolivia. The case studies are the best part of the book.

Cons
Very Repetitive – You can read pretty much any chapter and get the ideas in the book. Concentrated power = bad, distributed power = good.

Counterexamples in the real world are not addressed sufficiently – India, Singapore. I got the impression the authors, rather than confronting the weaknesses of their theory, simply hoped no one noticed the flaws.

Not Data driven – Lots of just so stories and hand waving.

Very little discussion of which institutions are good and why

The critical juncture theory is unsatisfying. It might line up with historical examples, but there should be a better theory of why some countries go in a particular direction during a critical juncture.

Conclusion
The Dictator’s Handbook” by Bruce Bueno de Mesquita is better on politics (although his Econtalks are arguably better than the book), “Institutions, Institutional Change and Economic Performance” by Doug North is better on economics. It’s not worth slogging through this behemoth of a book.

Acemoglu’s Econtalks
Fukuyama’s review

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