Why Nations Fail: The Origins of Power, Prosperity, and Poverty

by Daron Acemoğlu

While in 1818 there were 338 banks in operation in the United States, with total assets of $160 million, by 1914 there were 27,864 banks, with total assets of $27.3 billion. Potential inventors in the United States had ready access to capital to start their businesses.

Instead of paying for the shares right away, Slim managed to delay payment, using the dividends of Telmex itself to pay for the stock.

Chinese poverty until Mao Zedong’s death had nothing to do with Chinese culture;

poor countries are poor because those who have power make choices that create poverty.

Hwang Pyŏng-Wŏn managed to hide and avoid being drafted into the North Korean army. He stayed in the South and worked as a pharmacist.

the average North Korean can expect to live ten years less than his cousins south of the 38th parallel.

Lack of private property meant that few people had incentives to invest or to exert effort to increase or even maintain productivity.

We call such institutions, which have opposite properties to those we call inclusive, extractive economic institutions—extractive because such institutions are designed to extract incomes and wealth from one subset of society to benefit a different subset.

Inclusive economic institutions also pave the way for two other engines of prosperity: technology and education.

The low education level of poor countries is caused by economic institutions that fail to create incentives for parents to educate their children and by political institutions that fail to induce the government to build, finance, and support schools and the wishes of parents and children.

One implication of this is that even if a society under extractive institutions initially achieves some degree of state centralization, it will not last.