The 2024 Nobel Prize for Economic Sciences recognizes that societal institutions matter for a country’s prosperity. “Societies with a poor rule of law and institutions that exploit the population do not generate growth[1] or change for the better” says the Swedish Academy of Sciences. The prize commends this year’s laureates’ insights into how institutions influence prosperity, and their demonstration that “work to support democracy and inclusive institutions is an important way forward in the promotion of economic development.”[2]
Human Rights Economics emphasizes the importance of institutions, drawing attention to the importance of recognizing a broadly-defined range of institutions and centering the close relationship between institutions and power.
At their essence, human rights are about limits on power and checks against abuse of power. At their origins they focused on State power, but now pay strong attention to private actors’ disproportionate power. In their work, Daron Acemoglu and James Robinson, two of this year’s three Nobel laureates, have recognized that the choice and functioning of institutions reflects the distribution of political power: even a democratic regime may choose economic institutions that favour an elite.[2]
It is well known that power pervades economic relations, yet economics has tended to shy away from discussing power and power relations. Economics as generally practiced seeks to limit some forms of power, such as monopolies or extreme cases of exploitation, but from a human rights perspective this is not enough. These interventions are insufficient in scope and number as well as in their tendency to ignore many political, legal and cultural institutions and loci of power relations.
Feminist economists and others have highlighted how unequal power originates in existing social norms, conventions and practices, manifests itself in ways such as unequal access to resources or unequal bargaining power, and is reproduced within social, political and economic spheres, which in turn influences institutions, allocation of resources and other areas of human rights concern. A human rights approach explicitly engages with these often hidden power relations.
In facilitating a broad institutional perspective, a human rights-based approach also repositions the market as just one societal institution among many. This contrasts with mainstream economics’ general assumption that the market will establish the correct balance of power, assumption which is problematic as relying on the market ignores the rules, structures and norms of other important institutions such as the state, laws, international organizations or communities.[3]
Human Rights Economics describes how the institutions and processes that shape policies should conform to human rights standards. Its focus on process as well as outcomes shines the light on inequalities of power in economic policy-making. The attention it pays to less powerful groups points to ways that inclusive economic and political institutions can play an important role in achieving desirable economic outcomes. The key human rights concept of accountability comes with mechanisms that can and should be used to insist on broader participation in economic and political institutions.
The Nobel laureates recognize that “the masses” (sic) do have opportunities to exercise power by mobilising and threatening the ruling elite, as part of their model for explaining how political institutions are formed and changed. Human rights advocates have been at the forefront of major political changes in all regions of the world and now have it in their power to bring this experience to bear in favour of needed economic systems change. Applying human rights’ transparency, substantive equality and due process obligations can expose and meaningfully challenge the role of powerful interest groups in shaping key economic institutions to their interests. Human rights offers a range of procedural tools for interrogating the composition and functioning of economic institutions and processes.
Human rights economics does not agree that growth is essential for change for the better. It also thinks that any commendation of political and economic institutions introduced during colonialisation needs to be strongly nuanced (understatement). These reservations notwithstanding, it welcomes the Nobel Committee’s 2024 choice for drawing attention to the interlinked questions of institutions, power, rule of law and how to achieve change for prosperity.
[1] Human rights economics wholeheartedly embraces the idea of change for the better, but questions whether growth should be an objective or a measure of prosperity.
[2] Royal Swedish Academy of Sciences (2024) They provided an explanation for why some countries are rich and others poor.
[3] Daron Acemoglu and James Robinson (2008) Persistence of Power, Elites, and Institutions, 98 American Economic Review.
[4] Margot Salomon & Colin Arnott (2014) Better Development Decision-making: Applying International Human Rights Law to Neoclassical Economics, 32 Nordic Journal of Human Rights
0 Comments