Expanding economic boundaries: The contributions of Acemoglu, Johnson, and Robinson

Acemoglu, Johnson , and Robinson ( AJR ) argue that the study of institutions at the core of economic research provides fresh insights into two key questions: Where do institutions come from? And what is their impact on economic activity? The new economics of power and institutions is the result of the institutional revolution’ that transformed the discipline.

AJR 's work has opened economics to complex arguments about market effectiveness that also consider the influence of cultural and political institutions.

They argue that inclusive institutions provide incentives for people to work, while extractive institutions offer fewer incentives, as individuals cannot be sure they will benefit from their efforts.

The authors argue that the problem of developing countries is not a lack of resources or education, but rather a lack good institutions that protect freedom and property rights.

Hayek famously argued that institutions are social rules that evolve gradually and accumulate because they work and coordinate social activities.

Douglas North defined institutions as “rules of the game in a society’s society which structure incentives in human exchange, whether political, social, or economic” ( North , 1990 ), Elinor Ostrom shared this perspective.

History shows that specific events can create “critical junctures” setting a country on one institutional path rather than another.