Figuring Out Why Economies Develop

The oldest question of economics is Adam Smith's question: why are some countries rich and others poor? Many economists and other intellectuals have tried to provide an answer to this question and authors Daron Acemoglu and James Robinson wish to add their own theory to the pile. Why Nations Fail gives an institutionalist answer to the question of the wealth of nations. In other words, it argues that wealth differences are due to institutional differences, differences in the enforced legal and often informal rules that govern private property and the implementation of legislation. Nations succeed economically when they have "inclusive" institutions and they tend to fail when they have "extractive" institutions.

The distinction is explored elsewhere in the guide. But its importance here is to emphasize that the main theme of Why Nations Fail is that we can figure out why economies develop, namely...