This year's Nobel Prize in economics has been awarded to British-Americans Simon Johnson and James Robinson and Turkish-American Daron Acemoglu, whose work and research in economics have been to explain how some countries manage to stay ahead of the curve while others fail to do so.

Their most influential book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, outlines a comprehensive theory that attributes the prosperity of nations to the strength and inclusiveness of their political and economic institutions. According to their research, nations that have developed inclusive institutions allowing broad participation in economic and political activities tend to achieve sustained economic growth.

In contrast, countries with extractive institutions that concentrate power and wealth in the hands of a few elites often experience stagnation or decline.

Their analysis challenges the traditional economic notion that geography or culture alone can explain why some nations are wealthier than others. Instead, they argue that political and economic institutions shape the incentives for innovation, investment, and growth.

The core message of their work underscores the significance of building strong, inclusive institutions that foster participation and equal opportunities. Bangladesh's journey from being one of the poorest nations at its inception in 1971 to becoming one of the fastest-growing economies in Asia is a testament to its resilience.

However, the lack of strong institutions in Bangladesh has manifested in various ways that have hampered its development. One of the conclusions drawn by the Nobel laureates is that authoritarian governments might succeed in the short run through exploitation of natural resources, however, in the long run, democracies flourish because of their institutions' ability to foster innovation.

Despite being democratic on paper, in recent years, Bangladesh has failed to create an environment of innovation stemming from authoritarian bureaucracy, inconsistent and contradictory policy-making as well as policy ambiguity and corruption.

While overemphasising on GDP growth rate may draw a satisfying picture of the country's progress, in the long run, it has no value if not coupled with growth in entrepreneurship and innovation to solve societal problems. Besides, it may also warrant building social capital and ensuring distributive justice.

As the research of Acemoglu, Johnson, and Robinson highlights, these efforts are crucial for long-term prosperity. Strong institutions build trust, reduce uncertainties, and create an environment where businesses can thrive, investments can grow, and societies can prosper with extended comfort at the bottom of the pyramid.

However, things won't change within a fortnight. Institution building might be the key to transparency, anti-corruption, and improved governance.

However, quick reforms aimed to rapidly bear the fruits of institution building proposed by Acemoglu, Johnson and Robinson may not lead to sustainable changes if they are not carefully planned and implemented.

Institution building is a gradual process that involves creating a stable framework where rules, norms and practices are accepted and embedded within society and may also be its changing values.

Rapid, top-down interventions can sometimes lead to unintended consequences that undermine long-term goals. If these actions are not part of a broader, well-thought-out strategy, they may result in temporary compliance or superficial changes that don't last.

Ultimately, the success of institutional reforms depends on building consensus, involving stakeholders, and ensuring that changes are systematically integrated into everyday practices. This process requires patience, consistent effort, and often incremental progress. While rapid actions can signal a commitment to change, they must be backed by long-term strategies that address the root causes of institutional weaknesses to be truly effective.

It also calls for acceptance by the broader stakeholders along with implementation with precision.

Strong, transparent, and accountable institutions can only safeguard transformation and sustainable reform. Too politicised and susceptible to pressure institutions may always work as the last nail in the coffin.

The writer is the chairman of Financial Excellence Ltd