fbbva-16-economia-acemoglu

Daron Acemoglu

FRONTIERS OF KNOWLEDGE LAUREATE

Economics Finance and Management

9th edition

The BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category goes, in this ninth edition, to Daron Acemoglu, for fundamental contributions to the economics of growth and development that highlight the important role of institutions in economic development, using an innovative mix of theory, historical data, and sophisticated econometric analysis.

CITATION (EXCERPT)

The BBVA Foundation Frontiers of Knowledge Award in Economics, Finance and Management goes, in this ninth edition, to Daron Acemoglu for his fundamental contributions to the economics of growth and development.

In a series of writings that include multiple journal papers and books, he and his coauthors highlighted the important role of institutions in economic development. One of his best known papers used differences in the mortality rates and settlement patterns of European colonizers across colonies to identify exogenous variation in the adoption of institutions, and to show that differences in institutions have had a significant causal impact on colonies’ economic development. This work has established that, contrary to an influential earlier hypothesis, geography alone cannot explain differences in economic development.

His prolific research employs an innovative mix of theory, historical data, and sophisticated econometric analysis, is widely cited, and has been influential not only in economics, but also in political science, history, and social sciences more broadly.

Daron Acemoglu has made substantial contributions on the theoretical front as well. He showed how directed technical change can explain a number of puzzling observations such as the concomitant increases in the wages of skilled workers and their supply. He also showed that unemployment insurance, while encouraging the search for higher-wage jobs, need not reduce output. Recently, he has worked extensively on the economics of networks.

BIO

Daron Acemoglu (born in 1967 in Istanbul, Turkey, of Armenian descent and now an American citizen) graduated from the University of York (United Kingdom) in 1989 then went on to earn a PhD in 1992 from the London School of Economics, where he stayed on teaching for a year. In 1993, he joined the faculty at Massachusetts Institute of Technology (MIT) where he is currently Elizabeth and James Killian Professor of Economics.

He has authored around 120 papers in leading international publications like the ‘American Economic Review’, ‘Journal of Political Economy’ or ‘Review of Economic Studies’, as well as four books.

A member of the American Academy of Arts and Sciences, the European Economic Association and the Econometric Society, at the age of just forty he was appointed editor of the society’s journal ‘Econometrica’. His multiple distinctions include the 2005 John Bates Clark Medal, which the American Economic Association then bestowed biennially on the most outstanding U.S. economist under forty.

CONTRIBUTION

Speech

Economics, Finance and Management 9th edition

Micro interview

“We need to find new institutions so technologies can create jobs and wage growth”

Daron Acemoglu grew up a member of a minority community in 1980s Turkey. This made him something of a skeptic about traditional channels of authority and led him to wonder “whether the dysfunctional economy of the country and the widespread poverty of its people were related to its repressive political system.” Of Turkish origin and Armenian descent, he added his current U.S. citizenship into the mix after studying at universities in the United Kingdom. It was this transit between societies with differing degrees of social and economic development that first drew him towards growth theory.

And right away, Acemoglu found that traditional analyses in this branch of economics emphasized factors such as human or physical capital, while tending to sideline others that he felt were equally if not more decisive, starting with political structures and institutional influences.“Most of the work I’ve been doing over the last twenty-four years has been motivated by trying to understand the sources of poverty, to dig deeper into its causes.”

“Most of the work I’ve been doing over the last twenty-four years has been motivated by trying to understand the sources of poverty, to dig deeper into its causes.”

TUITEAR

Acemoglu is currently Elizabeth and James Killian Professor of Economics at Massachusetts Institute of Technology, the center that was his first choice to pursue postgraduate studies. MIT was keen to have him on account of his sparkling CV but turned him down for a scholarship, so Acemoglu decided to continue his education in Britain and enroll for a PhD at the London School of Economics. This change of plan would color his whole future in research, for it was during his studies in the UK capital that he met Professor James Robinson. The two men quickly realized that they had been engaging with similar issues from a parallel perspective, and embarked on what Acemoglu describes as a “very productive relationship.” It is with Robinson that he has worked on most of his publications on the subject of growth and economic development.

The approach taken by Acemoglu – and co-authors Robinson and Professor Simon Johnson – in ‘The Colonial Origins of Comparative Development: An Empirical Investigation’ (2001) marked a break with tradition by spotlighting factors that had not previously been seen as central: how a society is organized and why it makes the choices or adopts the policies that it does. “The role of technology, education and so on are very well understood,” Acemoglu explains. “But what was missing, in a sense, was to ask questions about why it is that nations don’t invest more in education or why they don’t encourage the adoption of the best technologies.” These are the decisions that give rise, with time, to each society’s institutions – understood as the set of formal and informal rules governing human interaction – and they, in turn, will determine its greater or lesser degree of economic development. It is for elaborating this concept of institutions and establishing its causal impact on economic development that Daron Acemoglu has received the BBVA Foundation Frontiers of Knowledge Award in Economics, Finance and Management.

In 2012, again with Robinson, Acemoglu published ‘Why Nations Fail’, in which the authors revisit their thesis about the quality of institutions to create a wider, more global theory of economic development. In its pages, they refine their concept of inclusive institutions (stable, ensuring legal certainty and equal access to opportunities) and extractive institutions (in which certain minorities use power to further their own interests).

The starting point for these publications – probably the best known in Acemoglu’s catalog – is plainly empirical in nature but anchored on a firm historical foundation. As he himself remarks, “economics is an empirical discipline, but it is in combination with theory that it achieves its greatest power for understanding social phenomena.”

More recently, Acemoglu has developed influential theories in the emerging field of network economics, applying them in one of his investigations to financial systems. He sustains that any negative shock, even a small one (like a defaulted loan), can trigger a chain of bankruptcies that extends across the economy. This contagion model gained particular currency after the global financial crisis of 2008, when “we saw instances of this play out before our eyes.”

But Daron Acemoglu, as the Frontiers jury recognizes, has also made substantial contributions on the exclusively theoretical front, as in one of his earliest studies (from the start of the 1990s) in the labor economics field. Its central premise was that unemployment insurance, by allowing workers to be choosier about accepting a given job offer, can actually boost the level of output in the economy – contrary to the traditional wisdom – improving productivity, welfare and wealth.

Acemoglu is the author of four essential books and over one hundred papers published in leading journals such as ‘American Economic Review’. In the words of the jury’s citation, his work has resonated deeply and broadly “across the social sciences.”