Collaborate or control

The task of eco­nom­ic sci­ence, since Adam Smith, has been to explain the ori­gins of wealth. John Kay observes that the the­o­ry most favoured, even by Smith—that pro­duc­tiv­i­ty is ‘almost’ all that matters—is not by any means the only expla­na­tion for per­son­al wealth. Nor is it, his­tor­i­cal­ly, the most suc­cess­ful expla­na­tion (because the arbiters of suc­cess are the suc­cess­ful).

Two broad eco­nom­ic the­o­ries describe the allo­ca­tion of income and wealth. The pow­er the­o­ry states, broad­ly, that peo­ple get what they grab: from the for­est, the mar­kets, or the shop win­dow. The dis­tri­b­u­tion of income reflects the dis­tri­b­u­tion of pow­er. For most of his­to­ry, this was plain­ly true – the land­lord took what he could from the ten­ant, the baron what he could from the land­lord, and the king what he could from every­one… The alter­na­tive the­o­ry is that what peo­ple earn reflects their mar­gin­al pro­duc­tiv­i­ty – how much they per­son­al­ly add to the val­ue of goods and ser­vices.

Extract from Why the riot­ers should be read­ing Rousseau — FT.com

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