The city of Nogales straddles the US-Mexican border. The fence that runs down the middle of it demarcates two different countries – and two starkly different levels of economic development.

On the north side, Nogales in Arizona is a typical American city whose people enjoy a high life expectancy, good access to schools and healthcare, sound infrastructure and a reasonably well functioning government.

South of the fence, life in Mexican Nogales is rather different. Average income is a third of that on the U.S. side. Life expectancy is lower, the town’s infrastructure is crumbling, crime is a big problem, and local politicians are corrupt and unresponsive.

The gap between American and Mexican Nogales is a miniature version of the huge gaps that we see all around the world: between European and African countries or between high performing Asian economies such as South Korea and those such as India where poverty persists.

One way of explaining the difference in living standards between, say, Oslo and rural Bihar is to claim that it must have something to do with the most immediately obvious differences between the two places.

An Indian village is a place of dust and heat; Oslo a place of freezing temperatures and short days. Temperate countries like Norway or France thrive because they have fewer deadly diseases and more productive soils.

But in Why Nations Fail: The Origins of Power, Prosperity and Poverty, Daron Acemoglu and James A. Robinson demonstrate that there’s little real connection between climate and economic development.

For example, at the time of the conquest of South America in the 15th and 16th centuries, South America contained richer and more advanced civilizations than North America. But over the next few centuries there was a reversal of fortunes in which the North pulled far ahead of the South.

Such a rapid turnaround could not have been caused by physical or climatic changes. As for differences in culture, this is also a questionable explanation. If “Christian” or “European” values are the prerequisite for economic development, as many have claimed, how do you explain the success of Japan or South Korea?

Acemoglu and Robinson argue that economic success nearly always comes in the wake of reform of political or societal institutions, including the right to own property.