In a year marked by deepening concerns over global inequality and the future of democratic institutions, two MIT professors, Daron Acemoglu and Simon Johnson, have been awarded the Nobel Prize in economics for their groundbreaking work on the subject.
The award — also shared this year with James Robertson of the University of Chicago — recognized their research on the fundamental question of why some countries enjoy great wealth and opportunity, while others don’t, and the role institutions play in shaping prosperity.
“We were then and we are now interested in questions of why do some countries become so much richer than other countries,” Johnson said on Boston Public Radio Monday. “Within countries, do you generate shared prosperity or not? What determines that?”
Acemoglu added that at the heart of their Nobel-winning work is the idea that institutions — the laws, rules and practices that govern political and economic relations — help determine whether a country thrives or falls behind.
The timing of the award and recent presidential election has prompted many questions in the United States.
Acemoglu said journalists have called to ask about the potential impact of President-elect Donald Trump’s economic policies. Acemoglu said he responds to those questions by shifting the discussion from the president to what his term could mean for the country’s institutions.
“Because for the longer term health of the U.S. economy … there’s probably nothing more important than its institutions. If any president, any politician, any party damages those institutions, that’s the first thing we should focus on,” said Acemoglu.
He argues that voters reacted to the fact that they haven’t actually experienced steady economic growth and President-elect Trump was directly promising to address that issue. Acemoglu acknowledged the widespread frustration with economic stagnation, particularly in the wakes of the 2008 financial crisis and the COVID-19 pandemic.
Johnson argued that Trump’s proposed economic policies, which he categorizes as populist, would make the economy worse.
“Populism often exacerbates the inequality, makes people more angry, which then leads to more populism,” Johnson said. “So there is a real danger we’ll go down that route.”
“Democracy has to deliver on shared prosperity,” Johnson added. “Otherwise people get very annoyed and they question the system.”
While the U.S. economy has shown strong post-pandemic recovery, the concerns of inflation and stagnation in wages for the working class remain.
“Inflation has come down,” Acemoglu said. “But the memory of the jack up of the prices of food in the supermarket are so fresh in people’s minds.”
The professors are hopeful that their research will help inform policy decisions and strengthen democratic institutions worldwide.
