Professor Achamed Acemoglu of the Turkish University has written a new book entitled “Modern Economic Development: Alternative Polities, Alternative Economies?” It is an engaging and detailed look at the prospects for economic growth in Turkey and the wider region. Unlike many of his predecessors, Acemoglu uncovers the important lessons that have been overlooked in the study of development. In this comprehensive study he seeks to demonstrate how the failures of economic development can be turned into the foundation for successful economic growth. His arguments are compelling and have the potential to significantly influence policy makers in the United States and other developed countries to think more carefully about the methods by which they address issues of development.
In this concise book, we learn that economic development is intimately connected with social development. The differences between advanced and developing countries can often be attributed to the differing ways in which societies approach the problem of economic growth. In the United States and many other countries today, the debate about the role of government in economic growth is often accompanied by uncomfortable debates about the role of private enterprise in particular. In some countries, public policies have been criticized for causing greater economic volatility.
Many people, it seems, believe that economic development occurs automatically through increased levels of government regulation and intervention. By placing greater control over the distribution of resources, governments can ensure that needy individuals are not overburdened by high prices or left behind in the race for improved goods and services. Through education, they can ensure that the right skills are provided and that those who do become economically successful are encouraged to spread their productivity and thus boost national income and living standards. These policies, it is argued, can exacerbate the differences between developed and developing countries, leaving those countries with even larger gaps between them as they compete for the same future opportunities. It also suggests that by promoting growth through regulation and active policymaking, a government can promote economic development in the long-term, even in situations where past efforts to promote economic growth have failed.
Much of this debate rests upon the validity of Acemoglu's primary model, which he uses to suggest that there is a relationship between growth and development, and also that this relationship is likely to be positive for most countries. His models have been challenged on several different fronts. One of these challenges concerns whether there is a link between growth and development, and also whether Acemoglu's ideas about economic dynamics are inconsistent with recent research.
Several recent studies have attempted to show that Acemoglu's model does not adequately capture important elements of the development process. Some of these studies also argue that Acemoglu's growth rates are too high, arguing that growth does not follow high rates of productivity. Furthermore, they argue that the growth rates implied by Acemoglu's model are unrealistic for many historical cases, and thus the model fails to account for many aspects of economic development.
Critics also argue that Acemoglu's prescriptions for economic policies do not account for important aspects of economic development. They point out that Acemoglu's prescription for high growth relies on highly unrealistic assumptions about both productivity and capital formation, as well as unrealistic definitions of the level of state investment needed in a country. Further, high growth is based on large scale international trade and also assumes that international trade will continue to increase at the same rate for a very long time. Studies that look at the impact of free trade on development have also shown that free trade has little to no effect on levels of development. Lastly, critics argue that high growth is not possible because of the lack of infrastructure development needed in developing nations.
These are not the only criticisms that have been raised against Acemoglu's theory of economic development, however. Many of these criticisms center upon the . . . . . . use of sophisticated statistical models to predict the path of development. Critics also point out that most development research so far has failed to take into account key aspects such as poverty and infrastructure problems in developing countries. Furthermore, many economic development experts argue that even if the models do correctly forecast the path of development they fail to take into account important aspects such as political systems and civil society participation that will affect policy implementation. Finally, critics argue that Acemoglu's focus on technological change as the driving engine behind economic development is also flawed as technology does not affect all aspects of development.
Although Acemoglu's original paper enjoys a great deal of criticism from his critics, this writer believes that Acemoglu has presented an elegant theory that is able to explain many economic phenomena. He has also offered an explanation for the discrepancies between developed and developing countries, arguing that factors like differences in literacy and health can lead to a difference in economic growth. In addition, Acemoglu has also provided a detailed description of the development process and how it differs between the two periods. Furthermore, he has provided a number of powerful tools for testing and validating the accuracy of the growth model. While the results may not convince all critics, they do present an interesting theoretical argument that deserves further investigation by both policy makers and the academia.