The Principled Agent

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Institutions and the Decline of Venice

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It’s not clear why Daron Acemoglu and James Robinson (A&R) wrote a short chapter on Venice in their recent book, “Why Nations Fail: The Origins of Power, Prosperity, and Poverty.” The Republic didn’t play a significant role in the research that led to the book, and even their telling of its rise doesn’t align with their emphasis on political inclusion as the first-mover (here, they state, economic institutions led to the political institutions.)

Yet the chapter is short and quickly digested, and spurred a Times article based on their book’s narrative of how broad-based economic opportunity and political participation led to Venice’s growth and inequality and concentration of political and economic power to its decline. The Times article writes itself: in today’s America, we are seeing the same “self-destruction of the 1 percent.”

A&R’s history of Venice therefore not only resonates with a deep-seated moral discomfort, but seems to substantiate it, to affirm its primacy as the determinant of national prosperity. In reality, Venice’s rise and fall speaks more to the importance of geostrategic factors outside the control of even the elite than the pernicious effects of concentrated elite power or “extractive” political and economic institutions. It’s not that political or economic institutions don’t matter at all, but that “good” institutions aren’t always the most externally competitive, and that technological changes and new competitors can lay to waste the greatest institutions and elevate the worst. Read the rest of this entry »

Written by Chris Prottas

December 2, 2012 at 4:07 pm

Posted in history