The 2024 Nobel Prize in Economics was awarded to Daron Acemoglu, Simon Johnson and James A. Robinson for their research on “how institutions are formed and their impact on prosperity”.
The research demonstrated the importance of societal institutions for a country’s prosperity.
Types of Institutions:
- Extractive Institutions: Formed in some colonies to exploit the indigenous population and extract natural resources to benefit the colonisers.
- Inclusive Institutions: Colonisers built inclusive political and economic systems for the long-term benefit of European Settlers in colonies that were sparsely populated and supported more European settlers.
Institutional Traps: The researchers explain that some societies are trapped in extractive institutions, limiting progress.
Role of Economic and Political Institutions in Shaping National Prosperity:
- Resource Allocation and Property Rights: E.g. Article 300A (Right to Property) ensures that no person shall be deprived of their property except by authority of law.
Niti Aayog: It is the premier policy think tank of the Government.
- Incentives for Investment: E.g. The National Innovation Foundation (NIF) promotes grassroots innovation.
- Sustainability: Effective institutions ensure sustainable resource management. Poor institutions can lead to over-extraction, harming the environment and future growth.
- Regulations: E.g., Competition Commission of India (CCI) promotes fair competition and prevents monopolies and anticompetitive practices.
- Governance and Rule of Law: Political institutions ensure stable governance and the rule of law, reducing corruption and fostering a fair environment for investment. E.g., Article 14 provides equality before the law.
- Inclusiveness: E.g., Tribal Advisory Council (TAC) for the welfare and advancement of Scheduled tribes in states.
- Conflict Resolution: E.g., National Legal Services Authority (NALSA), along with other legal Services Institutions , organizes Lok Adalats to resolve disputes efficiently and reduce legal bottlenecks.
About The Sveriges Riksbank Prize in Economic Sciences commonly known as Nobel Prize of economics
- Establishment: In 1968 by Sveriges Riksbank (Sweden’s central bank).
- It is not one of the five Nobel Prizes established by Alfred Nobel’s will in 1895.
- First recipients: To Ragnar Frisch and Jan Tinbergen in 1969.
- Amartya Sen was the first Indian to receive Nobel Prize for Economics in 1998 for his contributions to welfare economics and social choice theory.
- Prize consists: A medal, a personal diploma, and a cash award.