CHAPTER TWO
The Poverty of Economic Theory
WHAT CREATES WEALTH? For the last 450 years, economists have either neglected the question, sought easy answers, or dismissed previous assessments. Nonetheless, we have something to learn from every interpretation.
The first generation of economists, the mercantilists, said, “Wealth is purchasing power.” Their goal was to increase monetary wealth with an accumulation of bullion and a favorable trade balance. Another theory stated that wealth is not created by man, but by nature—that land creates wealth.
Yet another group of theorists related wealth to man. “Wealth,” they said, “is created by human labor.” ...
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