Some answers to the complex poverty question?

Here’s a great article in the New York Times which reviews a book, “Why Nations Fail,” written by Daron Acemoglu, a Turkish M.I.T. professor, who is on a serious rise to fame in his career as an economist.

Why is this so interesting? Two reasons:

  • He tries to answer the most important question of his profession which is: “Why are some countries rich while others are poor?”
  • It brings home for me the reasons the importance of the work Landesa is doing: helping to secure land rights for the world’s poor.

Acemoglu’s book, which he co-wrote with James Robinson, challenges “that the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy.” The NYT author, Adam Davidson, goes on to explain Acemoglu’s thesis so well:

“When a nation’s institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help.” And I might add, any other private philanthropic efforts may possibly be wasted.

Davidson, cited a perfect example from Alcemoglu’s book: farmers “lack incentive to improve their yield because any surplus is taken by the wealthy elite.” However, 40 years of research by Landesa has shown that if farmers are given property rights, they are more likely to invest in the land to attain the greatest possible yield.

My favorite paragraph of the article:

“…the true value of a nation is its people. If national institutions give even their poorest and least educated citizens some shot at improving their own lives-through property rights, a reliable judicial system or access to markets- those citizens will do what it takes to make themselves and their country richer.”

Time to read Adam Smith’s “Wealth of Nations”!

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