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