Q&A: Economic Orders

Aug 24, 2016 2:14pm

—“Can you please elaborate on this “Once cheap labor stops, and marginal differences in knowledge are exhausted, what remains is a nation’s ability to dynamically reorganize production in real time, and to competitively innovate in real time.”

Are you saying that productivity and innovation are not dependent on a nation’s wealth, size or population, but instead on how it organizes its existing resources to achieve maximum output? Basically, higher social capital = better long term growth and innovation?”—

Yes. Thank you, I don’t think of putting it that way. But for example, Switzerland, Denmark, Sweden, Norway, are small countries with small populations. But they are homogenous germanic peoples with high trust polities. This trust is just like having oil, gold, great farmland, or any other local asset. It’s an economic advantage.

So all resources being equal, the competitive difference between societies would be determined by the absence of corruption and the presence of rule of law.

The conflict generally comes with the tradeoff between military, trade, and credit capacity at scale, and ability to suppress corruption and tailor law, policy, and norms to the needs of local groups.

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