lectrue four

• What are proximate causes of prosperity?

  High levels of human capital, physical capital, and technology

  
• What do institutions govern in a society?

  Formal and informal rules, including laws and regulations
• What are economic institutions concerned with?

  Rules regarding economic transactions
• What do inclusive economic institutions protect?

  Private property and uphold law and order
• What do extractive economic institutions fail to do?

  Protect private property rights and uphold contracts
• What do political institutions concern?

  Allocation of political power and its constraints
• What is creative destruction?

  New technologies replace old ones and skills
• What does political creative destruction refer to?

  Economic growth destabilizes existing regimes
• What do data show about GDP per capita across countries?

  There are huge differences in GDP per capita
• Why do some countries accumulate more physical capital?

  Due to differences in investment and technology
• What are fundamental causes of prosperity?

  Root differences in proximate causes of prosperity

  
• What are the three categories of fundamental causes of prosperity?

  Theories of geography, culture, and institutions

  
• What does the geography hypothesis argue?

  Geography, climate, and ecology determine prosperity
• What are some geographical disadvantages mentioned?

  Limited water, poor soil, and high temperatures
• Who argued that climate affects work effort?

  French philosopher Montesquieu
• What does Joshua Graff Zivin argue about temperature?

  Increases in temperature decrease cognitive performance
• What does J. Sachs suggest about sub-Saharan Africa?

  Infectious diseases hinder human capital development
• What can investments in infrastructure do?

  Redress geographic disadvantages
• What does the culture hypothesis suggest?

  Cultural values shape economic performance
• Who traced industrialization origins to Protestantism?

  Max Weber
• What do institutions shape according to Douglass North?

  Political, economic, and social interactions
• What does the institutions hypothesis argue?

  Societal organization differences shape prosperity
• What is the chain of reasoning in the institutions hypothesis?

  Different institutions create different incentives
• How do extractive institutions affect political power?

  Concentrate power in the hands of elites
• What is the relationship between economic growth and democracy?

  Democracy tends to promote economic growth
• What did research by Acemoglu et al. show about democratization?

  Democratizing countries grow faster in GDP
• What is the logic behind extractive economic institutions?

  They create economic losers opposed to change
• What does political creative destruction refer to?

  Economic growth reduces rulers' political power
• What happens to entrepreneurship under extractive institutions?

  Insecure property rights reduce entrepreneurship
• How do extractive institutions affect opportunity costs?

  They increase opportunity costs for entrepreneurs
• What did Europeans establish in different parts of the world?

  Inclusive or extractive economic and political institutions
• What motivated European colonialism?

  A profit motive to establish extractive institutions
• What are the key differences between inclusive and extractive economic institutions?

  • Inclusive institutions:
  • Protect property rights
  • Uphold contracts
  • Allow market entry
  • Extractive institutions:
  • Fail to protect property rights
  • Erect entry barriers
  • Benefit elites
• What are the main topics covered in the lecture outline?

  • Reasons for underdevelopment
  • Fundamental vs proximate causes of development
  • Role of institutions in economic development
  • Differences between inclusive and extractive institutions
  • Impact of extractive institutions on economic development