NATIONS FAIL: INSTITUTIONS I want to counter Subramanian’s criticism of Acemoglo

http://www.the-american-interest.com/article.cfm?piece=1334WHY NATIONS FAIL: INSTITUTIONS

I want to counter Subramanian’s criticism of Acemoglou and Robinson. In his review, he states that ” …the inability of Acemoglu and Robinson to explain the development trajectories of [India and China] is a fault not of their rich and excellent book but of the sui generis, uncooperative reality of Chinese and Indian history. “

Their book fails to account for the difference between creating new technical advancements and ‘consuming’ them. India and china are consumers of knowledge capital created elsewhere. Their growth will run out when they have consumed those marginal differences. If they manage to ‘repair’ their cultures and governments (institutions) by using the profits from this consumed knowledge, then they might have a chance at innovating in the future. It is not hard to take risks on known methods of production of known products. But it is much harder to use fragmentary knowledge and relationships dispersed throughout an economy, and to take risks on those subjects than it is on those that are more established.

I don’t really think Subraminian has much of a criticism here. I disagree with Acemoglu and Robinson’s argument that representative democracy is superior to alternatives. I agree that institutions can establish the norms needed for a high trust society. I also agree that it is difficult to establish those institutions if there is not support for the norms that they would impose in the population.