Nobel Prize in Economics: the delicate balance between technology, institutions and power

In today’s cli­mate, where democ­ra­cies are under­mined by the lat­est tech­no­log­i­cal inno­va­tions, eco­nom­ic researchers are look­ing at the ques­tion of inequal­i­ties between rich and poor coun­tries. In 2024, three researchers – Daron Ace­moğlu, Simon John­son and James A. Robin­son – were award­ed the Nobel Prize in Eco­nom­ics “for their stud­ies of how insti­tu­tions are formed and affect pros­per­i­ty.” Pierre Boy­er, Héloïse Cloléry, Matías Núñez and Pauline Rossi answer our ques­tions on the con­tri­bu­tions of this work, shed­ding light the impacts of this research the 2024 Nobels Prize winners. 

Pierre Boy­er. The work of the Nobel Prize win­ners was already renowned before they received this pres­ti­gious dis­tinc­tion. Since the 2000s, their research has inspired and influ­enced many researchers them­selves. What’s more, their work is close­ly linked to cur­rent events. For exam­ple, the elec­tion of Don­ald Trump and the ques­tion­ing of checks and bal­ances are sub­jects that res­onate strong­ly with their research. These events are a reminder that insti­tu­tions are con­stant­ly evolv­ing, and that sta­bil­i­ty can nev­er be tak­en for grant­ed. This year’s Nobel lau­re­ates are also look­ing at the impact of arti­fi­cial intel­li­gence on our soci­eties and the chal­lenges of hav­ing inclu­sive institutions. 

They often ask the fol­low­ing ques­tion: to what extent will a tech­no­log­i­cal rev­o­lu­tion be monop­o­lised by a minor­i­ty for its own ben­e­fit, or will it ben­e­fit the great­est num­ber? The answer will depend on the insti­tu­tions put in place to share the rev­enues and ben­e­fits of these inno­va­tions, so that they ben­e­fit everyone. 

Héloïse Cloléry. For my part, the work of the prize-win­ners inspired me a great deal dur­ing my dis­ser­ta­tion, par­tic­u­lar­ly the notion they defend that we still need insti­tu­tions to make col­lec­tive deci­sions. There are many con­tem­po­rary prob­lems, such as the cli­mate cri­sis or glob­al pan­demics, that can­not be solved indi­vid­u­al­ly. A sin­gle indi­vid­ual does not car­ry enough weight to play a piv­otal role, and there is a high risk of free-rid­er behav­iour, where some indi­vid­u­als take advan­tage of the efforts of oth­ers. I’ve always found the ques­tion of ‘how do we organ­ise our­selves col­lec­tive­ly’ fas­ci­nat­ing. As mem­bers of a soci­ety, we need an author­i­ty to make deci­sions for the group. But once pow­er has been del­e­gat­ed to insti­tu­tions, how do we ensure that these same insti­tu­tions don’t extract all the wealth for their own gain? Daron Ace­moğlu and James A.Robinson insist in their recent work on the bal­ance that must con­stant­ly be main­tained between the pow­ers of an elite and the pow­ers of soci­ety. With­out a bal­ance of pow­er, there can be no eco­nom­ic growth. I think it’s very impor­tant to keep this idea in mind, because the issues we’re cur­rent­ly fac­ing require us to think about new ways of organ­is­ing our­selves collectively. 

Matias Núñez. The Nobel lau­re­ates are essen­tial ref­er­ences in polit­i­cal econ­o­my. Their con­tri­bu­tions stand out for the rel­e­vance and qual­i­ty of their rea­son­ing, as well as for the breadth of the sub­jects they address and the tech­niques they employ. They don’t just the­o­rise; they back up their analy­ses with sol­id empir­i­cal data, mak­ing their argu­ments par­tic­u­lar­ly con­vinc­ing. By explor­ing the inter­ac­tions between polit­i­cal insti­tu­tions, eco­nom­ic devel­op­ment and his­tor­i­cal tra­jec­to­ries, they help us to bet­ter under­stand the com­plex dynam­ics of our soci­eties. I high­ly rec­om­mend that inter­est­ed read­ers check out Daron Ace­moğlu’s polit­i­cal econ­o­my course at MIT. The course mate­ri­als and exer­cis­es, avail­able free online, pro­vide an excel­lent overview of the lat­est advances in the field. 

PB. What also makes these Nobel lau­re­ates so influ­en­tial for all three of us, and for oth­ers as well, is that they open doors rather than close them, in many fields. Their work is enabling new gen­er­a­tions of researchers to fol­low in their foot­steps and pur­sue inno­v­a­tive research. For exam­ple, faced with the emer­gence of a new tech­nol­o­gy such as arti­fi­cial intel­li­gence, their research into the links between tech­nol­o­gy and insti­tu­tions is help­ing us to antic­i­pate the impact of such an upheaval and to under­stand the fragili­ty it may engen­der for our democ­ra­cies. In the cur­rent con­text, their work offers a real read­ing grid. 

PB. The work of the win­ners high­lights the fact that insti­tu­tions are not immutable and can evolve, for bet­ter or for worse. It is cru­cial to bear this fragili­ty in mind. Twen­ty years ago, the idea that the old democ­ra­cies of Europe or the Unit­ed States might be vul­ner­a­ble might have seemed incon­gru­ous. Today, how­ev­er, it is clear that even these estab­lished democ­ra­cies can be affect­ed by the warn­ings expressed in their research. 

HC. The idea that demo­c­ra­t­ic polit­i­cal pow­ers can fail is not new. How­ev­er, in recent years, the work of the prize-win­ners has been very much in the news. We are cur­rent­ly wit­ness­ing the rise to pow­er of pop­ulist move­ments and polar­i­sa­tion phe­nom­e­na that divide opin­ion in many democ­ra­cies. These phe­nom­e­na are accel­er­at­ing and gain­ing con­sid­er­able momen­tum because of social media and the rapid spread of fake news. Dig­i­tal upheavals some­times take gov­ern­ments by sur­prise. The Unit­ed King­dom is a good exam­ple, where dis­in­for­ma­tion cam­paigns played a major role in the out­come of the Brex­it vote. Insti­tu­tions today must adapt to deal with cyber inter­fer­ence and new tech­nolo­gies, a sub­ject Daron Ace­moğlu knows well. 

PB. This approach stems direct­ly from the work of the Nobel Prize win­ners. They chose to devel­op dynam­ic mod­els incor­po­rat­ing sev­er­al states of nature, for exam­ple, a more or less egal­i­tar­i­an dis­tri­b­u­tion of wealth. Based on these mod­els, they con­struct read­ing grids with var­i­ous pos­si­ble tra­jec­to­ries lead­ing to these states. As Héloïse point­ed out, this method makes it pos­si­ble to visu­alise the dif­fer­ent tra­jec­to­ries and bifur­ca­tion points at which events can steer a coun­try towards an egal­i­tar­i­an democ­ra­cy or an ine­gal­i­tar­i­an autoc­ra­cy, depend­ing on endoge­nous and exoge­nous factors. 

HC. I think the notion of tran­si­tion is linked to their research ques­tions. They are obsessed with under­stand­ing why some coun­tries remain poor while oth­ers have man­aged to become rich. From there, their aim is to under­stand the fac­tors that explain the con­nec­tion. Iden­ti­fy­ing these fac­tors is cru­cial if these coun­tries are to be lift­ed out of this eco­nom­ic sit­u­a­tion. Insti­tu­tions today have to adapt to deal with cyber inter­fer­ence and new tech­nolo­gies, a sub­ject Daron Ace­moğlu knows well. 

MN. Of the var­i­ous tran­si­tions they exam­ine, the polit­i­cal regime tran­si­tions dis­cussed in their book Eco­nom­ic Ori­gins of Dic­ta­tor­ship and Democ­ra­cy are par­tic­u­lar­ly rel­e­vant. The authors argue that the choice of a country’s polit­i­cal sys­tem results from the inter­ac­tion between var­i­ous social groups and eco­nom­ic shocks. They illus­trate this the­o­ry through numer­ous his­tor­i­cal exam­ples, such as the Unit­ed King­dom’s tran­si­tion in the 19^th Cen­tu­ry from a ‘house­hold­er fran­chise’ (vote) to a more demo­c­ra­t­ic one. 

PB. There are still some grey areas! If social sci­ence research were to give us a mir­a­cle recipe, it would be applied by everyone. 

MN. In eco­nom­ics, a the­o­ry often rep­re­sents one pos­si­bil­i­ty among oth­ers, with no sin­gle answer. Sev­er­al expla­na­tions can coex­ist simul­ta­ne­ous­ly. How­ev­er, econ­o­mists have the abil­i­ty to ask per­ti­nent ques­tions that pro­voke numer­ous reac­tions. For exam­ple, the impact of arti­fi­cial intel­li­gence on West­ern democ­ra­cies, a ques­tion that the prize-win­ners have been look­ing at recent­ly, is a sub­ject that stim­u­lates debate and research. 

Interview by Marie Varasson