Why nations fail

The author's key argument is that extractive institutions lead to state failure. Like most theories of state failure, there's some good examples but enough weak or counter examples to discredit it as 'the' answer. At best, I'd argue that extractive institutions are a block to success: countries with them have one fewer barrier to overcome.<p>I recently researched the thorny issue of what consititutes art, and the leading idea in that field is a cluster theory: a set of ten ideas which commonly associated with things accepted as art. Some objects don't have all ten, but together they provide a powerful guide. My point in mentioning this is that state failure seems to follow the same pattern. Geography (ie Jared Diamond's theory) is a factor in state success and failure. Culture is another factor. Economic system and the nature of institutions (extractive or inclusive) are two more factors. (And there's bound to be a few more).<p>A state can succeed with only a couple of these. Lacking them all is a sure sign of failure. Having them all likely comes as close to guaranteeing success as possible. But thinking there's some single indicator that determines state failure is a doomed project.

Joseph A. Tainter's <i>The Collapse Of Complex Societies</i> is a bit academic but very good study of civilizational collapse. It has a lot of data, studies many different civilizations and examines all popular theories of civilizational collapse. It points to diminshing marginal returns on increasing complexity in civilizations as the mechanism of collapse.<p>It's far better than the trendy Jared Diamond writing. IMHO, Jared Diamond's collapse is a book written from end to beginning, much like Guns, Germs and Steel to simply reconfirm existing left of center ideas by torturing and cherry picking the data to ignore anything that doesn't reconfirm accepted and popular political narratives.

I am always wary of these grand theories people come up with about why great civilisations fall. People tend to project their own values onto history. Conservatives invariably argue that societies fall because they become decadent and valueless, while liberals contend that societies became too stagnant and inflexible to survive. Observer bias is a big problem in the study of history.

Note that this is a review by the (economically conservative) <i>Economist</i>.<p>I haven't read <i>Why Nations Fail</i>, but I do read their blog[1] and my interpretation of their theories is much less absolute than the Economist's is - or rather, I think the emphasis is more on the problems of <i>Extractive institutions</i> (which may well be state institutions, but also could be private institutions or hybrids or the two).<p>For example, even in the review the Economist highlights the example of Botswana which is a good example of state power as a good.<p>Another example: the (book) authors are very positive about the potential impact of Jim Yong Kim on the World Bank: <a href="http://whynationsfail.com/blog/2012/3/27/mr-kim-vs-the-world-bank.html" rel="nofollow">http://whynationsfail.com/blog/2012/3/27/mr-kim-vs-the-world...</a><p>[1] <a href="http://whynationsfail.com/" rel="nofollow">http://whynationsfail.com/</a>

Hour long chat on econtalk with Acemoglu: <a href="http://www.econtalk.org/archives/2012/03/acemoglu_on_why.html" rel="nofollow">http://www.econtalk.org/archives/2012/03/acemoglu_on_why.htm...</a>

Earlier discussion (57 comments) from another summary (though a shorter one) of the same book: <a href="http://news.ycombinator.com/item?id=3765492" rel="nofollow">http://news.ycombinator.com/item?id=3765492</a>

Reading this review - and others - I was reminded of Ralph Peters essay 'Spotting the Losers: Seven Signs of Non-Competitive States'<p><a href="http://www.carlisle.army.mil/USAWC/Parameters/Articles/98spring/peters.htm" rel="nofollow">http://www.carlisle.army.mil/USAWC/Parameters/Articles/98spr...</a><p>Which doesn't really explain 'why' but does set out in concise form 'what failure looks like'.

The authors have a blog over at <a href="http://whynationsfail.com/" rel="nofollow">http://whynationsfail.com/</a><p>Pretty good reading.

<i>Nations fail because their leaders are greedy, selfish and ignorant of history</i><p>This is the kind of thinking that got the US stuck in Iraq for a decade. "We'll change the country by killing this one guy".<p>If a nation's leader is a failure it's because the nation itself is a big pile of fail, not the other way around.

The author's main point seems to be that corrupt governments allow <i>too much money in too few hands.</i><p>Maybe this isn't the grand theory to support them all, but it reminds me a lot of why cancer is so destructive. One part of a large community using far too many resources. There could be a cluster theory to support the causes of cancer as well, but cluster theories are very hard to find solutions for. We don't just need to casually understand the problem. We need to prevent it if possible.<p>At least this theory gives us a reasonable means of experimenting with and analyzing future failures.<p>Edit:removed my opinion of others' opinions.

"Amid weak and accommodating institutions, there is little to discourage a leader from looting. Such environments channel society’s output towards a parasitic elite, discouraging investment and innovation"

A good read is the book "The Mystery of Capital" by Hernando DeSoto. It doesn't address failed states, but talks about why capitalism succeeds in some countries and not in others.

This sounds like game theory, the best solution in this case seems to be when everybody is better off (inclusive), instead of just trying to achieve individual gain (extractive).

I appreciate that The Economist clearly states their thesis as the subtitle - i.e., it's not a hook - it's an outline for the article.

The EconTalk podcast recently featured an interview with Acemoglu on this topic:<p><a href="http://www.econtalk.org/archives/2012/03/acemoglu_on_why.html" rel="nofollow">http://www.econtalk.org/archives/2012/03/acemoglu_on_why.htm...</a>

I can't get past how needlessly wordy this article is. It's as if someone is trying to flaunt their language skills and it distracts me from the actual content; I must admit that I read the whole thing and did not catch wind of the author's point.<p>Sentences like these just read as nonsense to me:<p>"The intuition behind the theory is nonetheless compelling, which makes the scarcity of policy prescriptions frustrating."

There is fundamentally sound economics behind the authors theory, but there's also really easy to understand logic: IF you have a strong state that controls the economy, then everything that is done must be authorized by the state. This is necessary if the purpose of the state is to extract the nations wealth to profit an elite few. If you have a weak state, then experiments can be tried, and while many experiments will be failures (such as most companies can fail) the ones that are successful really have a lasting and long term positive impact across the whole society. DEC, Apollo and many others failed, but IBM, Apple and Microsoft succeeded.<p>The other reason this works is that businesses have to accommodate the needs and desires of their customers, their shareholders and their employees. Businesses need all three in order to thrive. Governments don't need to accommodate anyone's desires or needs, short of that which would cause a revolution that overthrows the government... government imposes its edicts using violence while businesses can only attempt to pursuade or entice people.<p>Naturally this means that government is less interested in accepting economic reality, while businesses have to react very quickly... and if they don't, the entire economy of businesses overall will react quickly (e.g.: your business will get supplanted by one that accommodates the new reality.)<p>The lesson here for those who wish to enslave a populace and extract wealth from them is rather than have an overarching government with extreme control, allow a great deal of liberty and then impose a %10 tax on it. %10 is better than %50 when its %10 of an economy 1,000 times bigger.<p>Unfortunately, all states I'm aware of historically, no matter how rooted in liberty, eventually become parasitical and over the years start to extract more and more of the wealth to profit politicians and more and more controlling to make protect that extractive policy.

Once again Occam's butterknife is spotted in the wild. Richard Lynn, call your office:<p><a href="http://en.wikipedia.org/wiki/IQ_and_the_Wealth_of_Nations" rel="nofollow">http://en.wikipedia.org/wiki/IQ_and_the_Wealth_of_Nations</a>

States are engineered to fail by foreign entities who wish to pillage their resources.

Nations fail due to low average intelligence and high average psychopathic tendencies. The reasons for those things are multitudinous, of course, but the ruling class is a result more often than a cause.