Magazine : 
Three Economists Awarded Nobel for Unraveling Wealth Disparities Between Nations
The Royal Swedish Academy of Sciences awarded the Nobel Prize in Economic Sciences to three US economists for providing new insights into why there are such vast differences in prosperity between nations, trying to help solve the puzzle why some countries are rich and others poor.
Triumph in studies on how institutions are formed and have an effect on prosperity earned a coveted honour to three academics: Daron Acemoglu and Simon Johnson from Massachusetts Institute of Technology (MIT) and James A. Robinson from the University of Chicago in the US.
Acemoglu, Johnson, and Robinson have demonstrated the significance of societal institutions for a country's prosperity.
Societies with poor rule of law and institutions that exploit the population do not generate growth or change for the better. Their research helps us understand why, the Academy said.
"Reducing the vast differences in income between countries is one of our time's greatest challenges. The laureates have demonstrated the importance of societal institutions for achieving this", stated Jakob Svensson, Chairman of the Committee for the Prize in Economic Sciences.
The Europeans colonized many parts of the world, changing but not in the same way everywhere their institutions. The Nobel laureates have gone to show that one explanation for cross-country differences in prosperities is the societal institutions introduced during colonization.
Some colonies focused on the exploitation of the native population and exploitation of natural resources for them to benefit the colonizers to reap all such advantages. On the other hand, there were those colonizers who formed diversified political and economic systems with an objective of long-term advantages of the European settlers.
"This is the main reason why former colonies that formerly were rich turned into poorer ones and vice versa", as according to a statement by the Academy.
The researchers also stated that unless the political system promises elite in control, nobody will trust promises about future economic reforms. According to the laureates, that is why nothing improves.
However, inability to make any credible promises of positive change can explain why democratisation sometimes occurs.
The elite, however, are placed in a dilemma during the moment of revolution. They would desire to maintain power and win the multitudes with promises of reforms on the economy, but the masses are never going to believe they will not revert to the old system once things go back to normal," observed the Academy. In this respect, it is the only thing that could be done-in transferring power and establishing democracy.
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