The Origin of Wealth

Take a look out your window. No matter where you are, from the biggest industrialized city to the smallest rural village, you are surrounded by economic activity and its results. Twenty-four hours a day, seven days a week, the planet is abuzz with humans designing, organizing, manufacturing, servicing, transporting, communicating, buying, and selli

During the 1970s, as scientists came to know more about the behaviors of complex systems, they became increasingly interested in systems in which the particles were not simple things with fixed behaviors like water molecules, but were things with some intelligence and the capability of adapting to their environment. Water molecules cannot adapt the

Businesses are themselves a form of design. The design of a business encompasses its strategy, organizational structure, management processes, culture, and a host of other factors. Business designs evolve over time through a process of differentiation, selection, and amplification, with the market as the ultimate arbiter of fitness. One of the majo

But why does the fashion industry go through this iterative, and in many ways, wasteful, process? The reason that your shirt was evolved rather than designed is that no one could predict exactly what kind of shirt you would want out of the almost infinite space of possible shirt designs. The old Soviet Union tried this kind of rational prediction i

Nelson notes that while Physical Technologies have clearly had an immense impact on society, the contributions of Social Technologies have been equally important and in fact, the two coevolve with each other.36 During the Industrial Revolution, for example, Richard Arkwright’s invention of the spinning frame (a Physical Technology) in the eighteent

Smith’s view was that the most just mechanism for allocating resources from the point of view of the individual was one that enabled people to pursue their own self-interest and make their own choices. After all, people are usually the best judges of their own happiness. At the same time, the best allocation of resources for society as a whole was

A growing population will increase the total wealth of a society as the amount of available labor grows. But growing wealth on a per-person basis (thus raising individual standards of living) requires increasing productivity, and increasing productivity requires specialization.

There are two fundamental questions that economists have grappled with throughout the history of their field: how wealth is created and how wealth is allocated.19 Smith addressed both in The Wealth of Nations.20 His answer to the first question was simple but powerful: economic value is created when people take raw materials from their environment

Businesses fuse Physical and Social Technologies together and express them into the environment in the form of products and services.