Daron Acemoglu and James A. Robinson, the 2024 Nobel Prize winners in economics, have written books together, and more than one. One of the most famous works was co-authored by the two (Why Countries Fail).
In their book, Acemoglu and James A. Robinson answer a core question: What creates the wealth gap between countries?
There have been several debates on this issue in history, and several schools of thought have emerged, but each school has loopholes.
For example, one of the earliest explanations was racial determinism. It was believed that the reason why some countries were backward was because of their race. There were many people who supported this view. Even Galton, one of the founders of modern statistics, was a supporter of this view. However, this view was gradually overturned. If it is mentioned again today, it has a certain racial discrimination connotation.
Jared Diamond, one of the key scholars who opposes this view, believes that the key to the development prospects of a place depends on its resource endowment. This view was proposed by the French political scientist Montesquieu as early as the 18th century, and Diamond has added a lot of evidence to this view.
For example, why was Eurasia strong in the past, while South America lagged behind? Diamond said that this was mainly because Eurasia had many plants and animals that could be domesticated and raised on a large scale. In South America, the only plant that could be grown in large quantities was corn, and the only animal that could be domesticated was the alpaca. You couldn't expect this thing to produce too much meat, nor could you expect to ride it into battle. As a result, neither agriculture nor the military could develop, and even basic food and clothing and safety became a problem, let alone innovation.
However, Acemoglu and Robinson found that Diamond's explanation also had loopholes. For example, before colonization, the gap between the rich and the poor in the Inca Empire and Spain was less than twice. But when the Spanish brought their own crops to South America, the gap between the rich and the poor between the two not only did not narrow, but widened. You see, this is impossible to explain.
In addition to the ethnic hypothesis and geographical hypothesis mentioned above, there is also the cultural hypothesis, which believes that the culture of a place determines the economy. But this hypothesis has also been overturned. Some countries have very similar cultures, but large economic gaps. Some people have also proposed the ignorance hypothesis, saying that the reason why a region's economy is backward is because the person in charge is too ignorant, and it is all caused by individual incompetence. But obviously, this statement is also untenable, because in most cases, the economic strategy of a place is not decided by one person, and there is often a large team behind it.
So, after overturning the geographical hypothesis, cultural hypothesis, and ignorance hypothesis, what is the factor that determines the strength of a place's economy? Acemoglu and Robinson believe that the determining factor is the system.
Specifically, this system is divided into two situations.
The first type is called inclusive system, which is conducive to economic development.
For example, in 1775, Watt applied for a patent for the steam engine he invented and prepared to put it into large-scale production. He also wrote to his father, saying that I finally obtained a parliamentary bill to grant property rights to the new lighter, and I hope this will bring me huge benefits. In fact, Watt did make a lot of money because of the steam engine.
This system that encourages and protects innovation is an inclusive system.
On the other hand, the second type of system is called an extractive system. For example, in medieval Russia, many of the fruits of the serfs' labor were taken away by the landlords. Obviously, in this state, how can people have the desire to innovate?
So how did this institutional difference come about? Acemoglu and Robinson believe that it is not entirely the result of human design. Often, it is an inadvertent event in history that determines a country's institutional orientation.
For example, in the 14th century, the Black Death swept across Europe. This was originally a huge disaster, killing half of the population. However, it also triggered a series of unexpected chain reactions in Western Europe. First, the population reduction led to a shortage of labor. Once there is scarcity, there is a voice. Serfs can ask the lord to reduce taxes. Secondly, the lord knew very well that if the taxes on the serfs were not reduced, they might flee to other places. If all the serfs left, their own land would be abandoned.
Therefore, the lords had to make concessions and reduce taxes for the serfs. Finally, some peasants who had gained more rights and freedom had the opportunity to leave the land and engage in business and handicrafts in the city. You see, with business and handicrafts, the economic development had a better foundation.
However, the situation in Russia, located in the eastern part of the European continent, was different when it also encountered the Black Death. At that time, Russia also encountered the Black Death. But the Russian lords were more organized. To put it bluntly, they were more likely to team up to deal with the serfs. In order to prevent the loss of serfs, the Russian lords not only did not improve their treatment, but intensified their control and exploited them more severely than before. This is also known as the second serfdom system in history.
An accidental historical event, because of the different ways in which the country handled it, led to the subsequent systems taking different paths, and the subsequent differences became larger and larger. This phenomenon is also called institutional drift.
Blockchain is the innovator of labor relations
The core research of Daron Acemoglu, Simon Johnson and James A. Robinson, winners of the 2024 Nobel Prize in Economics, revolves around how institutions affect economic prosperity. There is an interesting connection here: blockchain is essentially a decentralized institutional innovation. Assuming that the Nobel Prize review will take into account the potential of blockchain, doesn’t this imply that future economic prosperity may depend on innovative institutions like blockchain?
Now, let’s dive into the arguments why blockchain is the future:
1: Blockchain reshapes the trust mechanism. The core of the traditional economic system is trust, which is usually established through intermediaries (banks, governments). Blockchain, through decentralized technology, directly establishes trust between network participants. It's like changing from protecting the vault with a lock to allowing everyone to see every piece of gold in the vault. Why is this important? Because it reduces the space for corruption and fraud and reduces transaction costs.
The success of Bitcoin not only proves the feasibility of blockchain technology, but also shows how it can work without a central authority. The application of smart contracts, such as on Ethereum, has extended this trust mechanism to multiple fields such as finance and law. 24 years later, more public chains provide practical convenience.
Second: Blockchain promotes financial inclusion There are still many people in the world who cannot enjoy traditional banking services. Blockchain provides an opportunity for these people to participate in financial activities through smartphones. Just as the Internet popularized information, blockchain is expected to popularize financial services.
It is estimated that nearly 40% of the world’s population does not have a bank account, but decentralized financial services (DeFi) provided by blockchain are changing this situation, especially in Latin America and places where national currencies are devaluing.
In some developing countries, farmers in Kenya, Nigeria, and South Africa use blockchain to store and transfer funds, eliminating the high fees and cumbersome procedures of traditional banking services.
3. Economic efficiency of blockchain Through smart contracts, the execution of many transactions and contracts can be automated, reducing human intervention and delays. This not only improves efficiency but also reduces costs.
Many large companies and start-ups are exploring or using blockchain technology to optimize areas such as supply chain management and logistics tracking, saving a lot of time and costs.
Some countries have begun piloting the application of blockchain technology in public services such as land registration and notarization, which has significantly improved administrative efficiency.
4: The future of blockchain and AI Although the 2024 Nobel Prize points to the huge potential of artificial intelligence, the combination of blockchain and AI will be the dual-core driver of future technology. Blockchain can provide data security and privacy protection for AI.
The selection of Nobel Prizes often heralds the forefront of academia and technology. As an emerging economic system, blockchain, just like the theory of institutional change studied by Nobel Prize winners, may bring a new governance model and operation mode to the global economy. Through the reconstruction of trust, financial inclusion, improvement of economic efficiency, and integration with artificial intelligence, blockchain is becoming a hot topic in economic research and a leader in future economic trends. This is not only a technological advancement, but also an innovation in the economic model. Just as the Internet changed the flow of information, blockchain may soon reshape the way value flows.#Blockchain#Nobel #Web3
