In this insightful conversation, the interviewee, Darren, engages with Adam Smith, who was recently awarded a significant prize for his work on the institutional factors influencing prosperity and the disparity between rich and poor nations. Darren shares his surprise and excitement upon receiving the award news, highlighting his academic journey and the motivations behind his research on economic development.

Adam Smith delves into the reasons behind economic disparities, emphasizing the importance of institutions in determining a country's economic trajectory. The conversation touches upon why certain nations remain impoverished, the historical impact of colonialism, and the significance of democracy in modern-day governance. Through these lenses, Smith examines how past events and present conditions shape economic outcomes and the continuous challenge in democratic practice.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. trajectory [trəˈdʒɛktəri] - (noun) - The path or direction that something is moving or aiming towards. - Synonyms: (course, path, direction)

But institutions, especially your broad institutional trajectory over time, is a major determinant.

2. amazed [əˈmeɪzd] - (adjective) - Greatly surprised or astonished. - Synonyms: (astonished, astounded, impressed)

Are you amazed by just how large the difference is between the rich and poor nations?

3. proximate [ˈprɒksɪmət] - (adjective) - Closest in relationship; immediate; direct cause. - Synonyms: (immediate, nearest, direct)

We can try to understand that via sort of proximate causes of economic development.

4. determinant [dɪˈtɜːrmɪnənt] - (noun) - A factor that decisively affects the nature or outcome of something. - Synonyms: (factor, cause, element)

Institutions, especially your broad institutional trajectory over time, is a major determinant.

5. exogenous [ɛksˈɒdʒənəs] - (adjective) - Originating from outside; having an external cause. - Synonyms: (external, extrinsic, foreign)

But the one factor was the disease environment, because that was rather exogenous to Europeans.

6. trajectory [trəˈdʒɛktəri] - (noun) - A path followed by a projectile flying or an object moving under the action of given forces. - Synonyms: (path, course, route)

But institutions, especially your broad institutional trajectory over time, is a major determinant

7. jarringly [ˈdʒærɪŋli] - (adverb) - In a manner that is shockingly or startlingly disruptive. - Synonyms: (shockingly, disturbingly, startlingly)

Although really jarringly in the US, but not just in the US, throughout the western world.

8. democracy [dɪˈmɒkrəsi] - (noun) - A system of government by the whole population or all the eligible members of a state, typically through elected representatives. - Synonyms: (republic, self-government, representative government)

I definitely fear for democracy because I am convinced that democracy is a pretty good system.

9. inequality [ˌɪnɪˈkwɒlɪti] - (noun) - Difference in size, degree, circumstances, etc.; lack of equality. - Synonyms: (disparity, imbalance, difference)

A major contributor to further inequality, further weakening of democracy with data collection.

10. colonial [kəˈloʊniəl] - (adjective) - Relating to or characteristic of a colony or colonies. - Synonyms: (imperial, invasive, occupying)

And also look in my work with Simon Johnson and Jim Robinson at the colonial origins of these institutional differences.

First Reactions - Daron Acemoglu, prize in economic sciences 2024 - Telephone interview

Hi. Hi. Is this Darren? Yes, it's me. Is it Adam Smith? It is. This is Adam Smith. Hi. Wonderful. Great talking to you. Very wonderful. Many, many congratulations. Thank you. It's amazing news. I imagine that you're pretty busy most of the time, but today must be just extraordinary. A lot of phone calls.

That's right. Where were you when the news actually reached you? I'm actually in Athens right now. I was in Athens. I had just given a talk, and I had some press interviews, and then I went to my hotel room. I was sitting on the balcony. Then I got an email from per Crucell asking for my phone number. So that's how I got some idea that whether this is about something. And then the office called me. Nice news. And I imagine a nice view to go along with it. Yes, exactly. It was a great view of the Riviera. Although by the time I was talking to them, I was inside my room concentrating. I was like, what are they gonna say?

Who was the first person you told? Well, actually, I couldn't tell my wife because she's asleep in Boston. I called her after the press conference, but she was still asleep. I just talked to her now. She must be happy. She's happy. Delighted. Of course, people have spoken about you being awarded the prize for quite a time. So you must have thought, this moment may come. You know, you never dream of such thing. Or you can dream, but you never expect such things, let's say. So it's a wonderful event. You have worked on the institutional drivers prosperity and the differences between rich and poor nations, and that makes us stop and think about those differences.

And are you amazed by just how large the difference is between the rich and poor nations? Well, that's. I am, of course, amazed. That's why I actually started working on these topics once I started looking at the data and reading what other social scientists we're already working on in the 1990s, as I was finishing my dissertation at the LSE, I just got so interested in these topics because, you know, if a country is 50% richer than another one, you might say, well, perhaps that's natural. They have some resources or some other advantages. But there's nothing natural about 30, 40, 50 fold differences in income per capita in a globalized, connected world.

Is there anything one can say about why some countries are trapped in poverty or seem to be trapped? Well, you know, essentially the way that, you know, in my work with Jim Robinson and with Simon Johnson, the way that I like to sort of break that down is we can try to understand that via sort of proximate causes of economic development. You know, differences in education, you know, differences in efficiency with which you use things, differences in the amount of machinery you have, and some other important factors. But then you go one layer down, and that's where we think that institutional factors are the most dominant.

Of course, other things influence human capital, other things influence efficiency. But institutions, especially your broad institutional trajectory over time, is a major determinant. And then you, of course, have to ask about what it is that makes countries end up with bad versus good institutions. And why do they stick with those institutions. And that's some of the issues that I try to explore in my work, trying to model the choice of democracy. And why dictatorships or other bad institutions survive.

And also look in my work with Simon Johnson and Jim Robinson at the colonial origins of these institutional differences. Because the colonial experiment, which started 500 years or so ago, was really a transformative one for about more than half of the world. It really changed deeply their institutional trajectories. And moreover, it's not just one size fits all. There was so much variation within the colonial world. And the types of institutions that took root for a variety of reasons. And so we really wanted to understand and analyze these.

And the one factor that at first we focused on, although later we looked at other things, like population density and other things. But the one factor was the disease environment, because that was rather exogenous to Europeans. And rather stark because they did not have immunity to some diseases. And we tried to sort of explore the pathways that went from the disease environment facing Europeans to how that affected their early colonization efforts and how that ended. That led to very different institutional trajectories, which then persisted and shaped a variety of economic incentives throughout the 19th and 20th century.

It's a natural experiment which proved to be such fruitful territory to explore, didn't it? Thank you. Thank you. Thank you for saying that. One crucial thing that comes out of it, and which you've very much worked on, is how institution building can function most efficiently. Correct.

The conclusion one would like to draw, especially in today's world where democracy is talked about so much, is that democracy is a. Is an absolutely key thing to institute. But it's obviously. That's obviously a bit simplistic. Well, it is simplistic in the following sense, that you cannot institute democracy from above. It's a very different, difficult process. And democracy is not the only dimension of institutions that matters. Although, you know, my work does emphasize that democracy by itself matters as well.

But the problem is really alive today. In the industrialized world, where you would think, and many political scientists have claimed, that democracy is safe and secure and would never be under threat, you know, it is under threat. Support for democracy is at an all time low, not just in the US, although really jarringly in the US, but not just in the US, throughout the western world. So democracy is not easy to make work, because democracy is about democratic citizenship. It's about consensus, it's about communication, it's about accepting defeat, making compromises and understanding the other side. And all of those things are always difficult. They become more difficult during times of turbulence which we are living through.

And they become harder when the infrastructure, for example, the communication infrastructure, makes this sort of democratic citizenship harder, which I think is not the only factor. But social media has certainly played that role. Yes. Your recent work, especially with Simon Johnson on the role of technology, who controls it, who benefits from what it brings, plays into this. Absolutely. Picking up on a theme that came up with last week's prizes on Geoff Hinton, in particular, his fears of AI. What's your greatest fear?

Well, I mean, I have so many, but I definitely fear for democracy because I am convinced that democracy is a pretty good system, considering the alternative. As Winston Churchill said, it is the best one that equips us to deal with the turbulent times. So I am really worried about support for democracy. And often I view it as self inflicted pain that democracy and democratic parties have not always delivered on the promises of democracy, especially in terms of inclusivity, in terms of clean government, in terms of shared prosperity.

But I do also worry about AI, not in the way that Jeff Hinton does not worried at all about super intelligent AI. I'm worried about dumb AI because I think there is great potential there. And if we don't use it or if we use it in the wrong way, I think a, it will be lost potential. But even more importantly, I think if used the wrong way, it will be a major contributor to further inequality, further weakening of democracy with data collection and manipulation by some actors. And it would really contribute to the emergence of a two tier society, which I think we are already starting to suffer from.

Thank you very much indeed. We will get to talk about all this greater length once everything has died down a bit. I just wanted to close by asking about, you work on the difference between different nations, and you yourself are sort of concatenation of different nations. I am indeed armenian heritage, turkish born, now living in the states, well, also educated in the UK, so, you know, quite a bit of picture there, a lovely mix I'm proud of all my heritages, and I'm delighted that I have been able to learn from many different experiences.

Do you think you'll get a chance to celebrate, or is it going to be phone calls all day? Of course. Well, you know, I'm right now in Athens. I'll be on my way to Boston tomorrow morning, and I'll celebrate with my family tomorrow evening. Lovely. Thank you very much indeed. Lovely speaking to you. Thank you. Bye bye. Thank you, Darren. Bye bye.

Economics, Politics, Global, Institutional Development, Democracy, Inequality, Nobel Prize