Photo/Illutration Academy of Sciences permanent secretary Hans Ellegren and the Nobel Assembly's Jakob Svensson and Jan Teorell announce the winners of the Nobel Memorial Prize in Economic Sciences in Stockholm on Oct. 14. (REUTERS) 

Shortly after the Lehman Shock of September 2008, Britain's Queen Elizabeth II asked a group of eminent economists, "How could nobody foresee it?"

No one had an answer. But eight months later, a three-page letter of explanation was sent to the queen.

Signed by 33 individuals, including economic experts, a central bank executive and related bureaucrats, the missive read a bit like a letter of apology. But it still makes an interesting read today.

The authors admitted that the failure of financial leaders to catch the signs of the impending crisis was owed to their "wishful thinking combined with hubris," and discussed in great detail why.

"In summary, Your Majesty," they concluded, "the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole."

I recalled this old news because this year's Nobel Memorial Prize in Economic Sciences was awarded to three academics, including Daron Acemoglu, professor at the Massachusetts Institute of Technology, for their research that "demonstrated the importance of societal institutions for a country's prosperity."

Their research data confirmed that societal institutions that are characterized by broad public participation in politics promote long-term economic growth.

In his co-authored book "Why Nations Fail," Acemoglu used "institutions" as the perspective from which to interpret the last 300 years of world history.

And categorizing the institutions into "inclusive" and "extractive"—the former is where power is distributed multidimensionally and the latter where power is concentrated in the hands of a minority—he concluded that "inclusive" is more desirable.

All of Acemoglu's published works are lengthy and not easy to understand. But if you persevere, they become enjoyable, like reading great epics that take you through the histories of many countries around the world.

Mistakes were made in the past when the "experts" alone could not foresee a crisis, and that has taught us a lesson. My hope is for us to make good use of that lesson in building an institution where everyone can participate equally in protecting and enriching society.

—The Asahi Shimbun, Oct. 24

* * *

Vox Populi, Vox Dei is a popular daily column that takes up a wide range of topics, including culture, arts and social trends and developments. Written by veteran Asahi Shimbun writers, the column provides useful perspectives on and insights into contemporary Japan and its culture.

Related News