Custodes Futurifor the advancement of humanity

Societal factor, barrier 1 of 6

Extractive institutions

Acemoglu and Robinson (2012) argue nations prosper when institutions are inclusive and decline when they are extractive. Corruption, weak rule of law, and instability belong here.

Evidence

  • Corruption. In the 2025 Corruption Perceptions Index the global average dropped for the first time in more than a decade, to 42 out of 100. 122 of 182 countries (67%) scored below 50, and only 31 have improved their scores since 2012 (Transparency International).
  • Rule of law. Rule of law declined in 68% of 143 countries in 2025, up from 57% the previous year, the eighth straight year in which more countries declined than improved. Freedom of opinion and expression fell in 73% (World Justice Project).
  • Peru's mita. Districts just inside the boundary of a colonial forced mining labor system (1573 to 1812) have about 25% lower household consumption today and about 6 percentage points more child stunting than districts just outside it. Because the boundary was drawn centuries ago, this comparison isolates an extractive institution's effect better than cross-country studies (Dell, 2010).

Proposed and experimental methods

Methods that are proposed, under trial, approved in some places, or tried and then failed. Each shows a stage label and an evidence rating. A stage label shows how far a method has progressed, not whether it works. The stage labels are explained on the societal factor page.

  • Digital payments and e-invoicing to cut leakage from public programs (Large trial, B). Paying benefits electronically and releasing funds only against electronic records is proposed to reduce theft by officials. A randomized rollout of biometric smartcard payments across 157 subdistricts and 19 million people in Andhra Pradesh, India, made employment-scheme payments faster, more predictable, and less corrupt without reducing access, and reduced leakage in both the employment and pension programs (Muralidharan et al., 2016). In a field experiment in Bihar, replacing advance payments with "just-in-time" payments triggered by e-invoices cut program spending by 24% with no fall in employment, reduced fake households in the database, and lowered officials' personal wealth by 10%, and the national scale-up gave a lasting 19% fall in spending, although payments became slower (Banerjee et al., 2020). A later trial in Jharkhand found that biometric identity checks for food rations led about 1.5 to 2 million legitimate beneficiaries to lose access at some point, which shows that stricter verification can exclude eligible people (Muralidharan et al., 2025).
  • Random government audits made public (Approved but not scaled, B). Brazil's anticorruption program randomly selected municipalities for audits of federal funds. Being audited in the past reduced future corruption by 8% and raised the chance of later legal action by 20%, mainly by raising the perceived non-electoral costs of corruption (Avis et al., 2018). This builds on "Antisocial and self-serving traits" in the psychological factors, which covers machine learning to target these audits. Evidence comes from one country's program.
  • Electronic public procurement (In wide use, B). E-procurement moves tendering online, which makes information easier to get and reduces face-to-face contact with officials. Using variation in adoption across regions of India and Indonesia, a study found no evidence of lower prices but found better quality, with better road quality in India and fewer delays in Indonesia, and more contracts won by firms from outside the region (Lewis-Faupel et al., 2016). The design is not randomized.
  • Reversed: International anti-impunity commission in Guatemala, CICIG (Failed or reversed, C). The UN-backed International Commission against Impunity in Guatemala began work in 2007 to investigate criminal networks inside the state. A synthetic-control estimate by the International Crisis Group put its contribution at 2.77 fewer homicides per 100,000 people per year, or more than 4,500 homicides avoided from 2007 to 2017 (International Crisis Group, 2018). After the commission opened an investigation into President Jimmy Morales, his brother, and his son, Morales declined to renew its mandate and it closed on September 3, 2019, with remaining cases passed to a special prosecutor's office (Abbott, 2019). The homicide estimate is a model from an advocacy organization, not peer reviewed.
  • Reversed: Charter cities in Honduras, Próspera (Failed or reversed, B). Charter cities are new zones with their own laws and governance, proposed to escape weak national institutions. Honduras' Congress repealed its law on Zones for Employment and Economic Development (ZEDEs) in 2022, and on September 20, 2024, the Supreme Court declared the ZEDE framework unconstitutional and applied the ruling back to 2013 (Escalante, 2024). The Próspera zone kept operating and its investors filed a $10.775 billion claim against Honduras under the CAFTA-DR trade agreement, which was still pending in September 2026 (Martinez, 2026). No evaluation of the zone's effects on residents was found.

Sources cited on this page

  1. Dell, M. (2010). The persistent effects of Peru's mining mita. Econometrica, 78(6), 1863-1903. DOI B Moderate
  2. Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail. New York: Crown. C Limited
  3. Abbott, J. (2019, September 3). Guatemala's CICIG: UN-backed anti-corruption body shuts its doors. Al Jazeera. link B Moderate
  4. Avis, E., Ferraz, C., & Finan, F. (2018). Do government audits reduce corruption? Estimating the impacts of exposing corrupt politicians. Journal of Political Economy, 126(5), 1912-1964. link B Moderate
  5. Banerjee, A., Duflo, E., Imbert, C., Mathew, S., & Pande, R. (2020). E-governance, accountability, and leakage in public programs: Experimental evidence from a financial management reform in India. American Economic Journal: Applied Economics, 12(4), 39-72. link B Moderate
  6. Escalante, L. (2024, September 28). Honduran government praises repeal of the ZEDE law as investors denounce "lies" and "abuse." Contra Corriente. link B Moderate
  7. Lewis-Faupel, S., Neggers, Y., Olken, B. A., & Pande, R. (2016). Can electronic procurement improve infrastructure provision? Evidence from public works in India and Indonesia. American Economic Journal: Economic Policy, 8(3), 258-283. link B Moderate
  8. Martinez, J. (2026, September 19). [Article on Próspera ZEDE and Honduran sovereignty, title not confirmed]. The Rio Times. link B Moderate
  9. Muralidharan, K., Niehaus, P., & Sukhtankar, S. (2016). Building state capacity: Evidence from biometric smartcards in India. American Economic Review, 106(10), 2895-2929. link B Moderate
  10. Muralidharan, K., Niehaus, P., & Sukhtankar, S. (2025). Identity verification standards in welfare programs: Experimental evidence from India. Review of Economics and Statistics, 107(2), 372-392. link B Moderate

Every source for this factor is listed on the societal factor page.