On the Occasion of Daron Acemoğlu Becoming a  Nobel Laureate: The Importance of Institutions for Turkiye

Assoc. Prof. Dr. Ali Oğuz Diriöz

For  DPE

October 16, 2024

This year’s, 2024, Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel; i.e. the Nobel Prize in Economics, was awarded to Daron Acemoğlu, Simon Johnson, and James A. Robinson. Acemoğlu, Johnson and Robinson were awarded the Nobel Prize in Economics for their work explaining how institutions are formed and affect prosperity of nations.

According to the Nobel Committee;

The award was given for their work explaining vast differences in prosperity of various nations. An important explanation they suggest is that, persistent differences in societal institutions demonstrate a relationship between institutions and prosperity. They have also developed theoretical tools that can explain why differences in institutions persist and how institutions can change.[1]

Prof. Dr. Acemoğlu, a Proffessor at the Massachusetts Institute of Technology – MIT, is a native of Istanbul and an alumni of the prestigious Lycée de Galatasaray in Istanbul. He is the third Turkish citizen  to become a Nobel Laureate. We want to wholeheartedly congratulate Prof. Dr. Acemoğlu, and would like to discuss the importance of institutions on the occasion of this extraordinary achievement.

According to Acemoğlu, Johnson and Robinson, institutions are key in explaining why some countries are richer than others. In that sense, their theories suggest that unlike Ibn Khaldoun’s “geography is destiny”, that destiny may change because of institutions in the same geography. To support this view they provide examples of cities in the same geography, with similar ancestry and culture of the residents, but divided by political borders and hence under different institutions. Their arguments are that the difference varies due to the quality of institutions.

The income gap between the richest and poorest countries are extraordinary and persistent over the years. One explanation for this persistent gap – differences in a society’s institutions.  Acemoglu, Johnson and Robinson examine Europeans’ colonization of large parts of the globe to understand the difference of the institutions. One important explanation for the current differences in prosperity is the political and economic systems that the colonizers introduced, or chose to retain, from the sixteenth century onwards. The laureates also explain why some societies become stuck in a trap of “extractive institutions”, and why escaping from this trap is so difficult. However, they also show that change is possible and that new institutions can be formed. In some circumstances, a country can break free of its inherited institutions to establish democracy and the rule of law. In the long run, these changes also lead to reduced poverty.[2]

Explaining the difference on the poverty or wealth of nations was indeed one of the original topics in the field of economics. The seminal work in the field of Economics by Adam Smith was entitled “The Wealth of Nations.” On a similar name, Acemoğlu and Robinson had co-authored a very impactful book in 2012 entitled “Why Nations Fail: The Origins of Power, Prosperity, And Poverty.”[3]

Some of these topics are also addressed by the other influential works of the Nobel Laureates, such as “The Narrow Corridor: How Nations Struggle for Liberty”[4], and “Power and Progress: Our thousand-year struggle over technology and prosperity.”[5]  

Another native of Istanbul and prominent Harvard University Professor who underscores the importance of Institutions is Dani Rodrik. Like Acemoğlu, Johnson and Robinson, in the highly cited paper Rodrik, Subramanian and Trebbi discusses the importance and primacy of Institutions over Geography. Rodrik’s highly cited 2004 dated article entitled “Institutions Rule,” was originally published in 2002 as an IMF Working Paper.[6]

This brings us to the importance of institutions for Turkiye. Since the founding of the Republic of Türkiye in 1923, principle ethos of Turkish Foreign Policy has been “Peace at Home, Peace in the World,” which continued from the period of Atatürk and tandearly years of the Republic to the present day. In that respect, republican institutions such as the Ministry of Foreign Affairs, and the Central Bank are institutions which had strong institutional traditions and systems of meritocracy in their respective policy recommendation practices. Not only for economic and societal prosperity, but also for the consistency in diplomacy, it is necessary to have strong institutions, and in the following part, the overall importance of institutions are discussed.

Institutions are necessary not only for national governments, but also for efficient international governance. This year the Japanese anti-nuclear weapons group, Nihon Hidankyo, was awarded the 2024 Nobel Peace Prize “for its efforts to achieve a world free of nuclear weapons and for demonstrating through witness testimony that nuclear weapons must never be used again.”[7] Nuclear non-proliferation is possible and relies on efficient institutional inspections mechanism from the International Atomic Energy Agency – IAEA.

Values ​​such as Universal Human Rights, honoring ‘agreements’ (pacta sunt servanda) and having rules based systems are features that can be furthered through reinforced institutions. By the same token, abiding to rules and having rules based systems such as meritocracy, strengthen the institutions in return. National interests are the main motivations of all states, domestic and foreign policy are only reinforced through strong institutions, which provide sound economic policies as well as sound diplomatic relations.

These are times where international governance and stronger institutional order would be indispensable to address current international crises such as in Gazza, Lebanon, Israel, Russia and Ukraine. Institutions and collective security organizations such as NATO play a key role as security provider to the North Atlantic, Europe, and Türkiye. NATO’s most importance as a valuable ‘insurance’ against geopolitical crises is well understood from Finland and Sweden memberships after 2022.

In conclusion, it is important to understand the importance of Institutions as providers of development and prosperity. I sincerely hope that the importance of national institutions as well as multilateral institutions such as NATO would not be undermined. I once again congratulate Prof. Acemoğlu and thank him for making us proud and reminding us once again the role of institutionalism both for International good governance, and for Türkiye’s future development. The benefit of Turkiye’s development would reflect on Turkiyes’s citizens, and likewise the citizens and society in Turkiye must reflect the necessity of effective institutions.

[1] The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2024. NobelPrize.org. Nobel Prize Outreach AB 2024. Tue. 15 Oct 2024. https://www.nobelprize.org/prizes/economic-sciences/2024/summary/

[2] The Nobel Prize in Economic Sciences 2024, Popular Science Background: https://www.nobelprize.org/uploads/2024/10/popular-economicsciencesprize2024.pdf 

[3] Acemoğlu, D. & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity and poverty. London: Profile.

[4] Acemoglu, D., & Robinson, J. A. (2019). The narrow corridor: How nations struggle for liberty. Penguin UK.

[5] Johnson, S., & Acemoglu, D. (2023). Power and progress: Our thousand-year struggle over technology and prosperity. Hachette UK.

[6] Rodrik, D., Subramanian, A. & Trebbi, F. Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development. Journal of Economic Growth 9, 131–165 (2004). https://doi.org/10.1023/B:JOEG.0000031425.72248.85

[7] Nobel Prize :https://www.nobelprize.org/prizes/peace/2024/nihon-hidankyo/facts/