Question

Compare and contrast Mancur Olson’s views about why nations differ in their economic growth
with those of Daron Acemoglu and James Robinson

Answer 1

Views of Acemoglu and Robinson

Acemoglu and Robinson were authors of the famous economic journal, which was known as "Why Nations Fail". They widely wrote, why some countries are better than others in managing themselves because of the rise of institutions and governments which have realized the needs and wants of the countries as a whole respectively.

They emphasized on the fact that developed nations are those, which have free markets, protected by property rights and laws that protect contracts and have institutions that allow for economic development by being inclusive i.e. providing the benefits of development to all parts and sections of the society.

They rightfully said that in such markets, restrictions are very few, and limited in approach such that markets and labor can therefore prosper. The quality of products and services sold in these countries are relatively higher. Further people have faith in government institutions and realize that these are important for the country because of strict and stringent property and contract laws that protect and give power to the society.

The gave examples of countries like the United States of America or the United Kingdom in which such policies have led to the development of the state and have increased the overall quality of life.

On the other hand, both argued, that in some countries where these practices are negated and not followed, the countries fail and do not realize that these policies are important for a countries success largely see poverty in the long run even if they rise for a couple of years. They highlighted that the rise of extractive institutions are more likely in regions which are hit by dictatorship such as North Korea, Zimbabwe or Egypt which were or are having a colonial mindset while forming their institutions and have therefore rapidly failed.

Thus they highlighted the key differences between wealthy nations and nations that have failed.

Mancur Olson’s views:-

On the other hand Mancur Olson's views were very different he was off the view, that in stable countries unions arise which lead to influence on the government agencies.

He was off the view point that some countries develop more than others because of the unrest which takes place. He said that unrest arises because of unions coming into existence which lead to inefficient management and therefore the growth not being good.

As a result, social unrest prevails in the area which widely affects and changes the nature of the economy. Once social unrest begins to rise, people revolt as a result of which in the long run, unions fall apart and the economy again begins to grow.

He gave an example of Germany and Japan after World War 2 to explain the concept respectively.

Difference in approach:-

The difference in approach of both these viewpoints is, that while Acemoglu and Robinson viewed conditions of an economy and the institutions as the reason for development whereas Olson viewed unions and their fall and was very pragmatic and had a small approach.

In belief and practice, Acemoglu and Robinsons theory was much better in comparison as Olson’s views were only valid under special conditions but over the years the later has been related to more.

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