Why are some nations rich and other nations poor? What has enabled some nations to escape poverty while others continue to languish?
And if we want to help poor nations prosper, what’s the right recipe?
But even that doesn’t really tell us what causes growth.
In the past, I’ve highlighted the importance of capital formation and shared a remarkable chart showing how workers earn more when the capital stock is larger (which is why we should avoid punitive double taxation of income that is saved and invested).
But that also doesn’t really answer the question. After all, if a larger capital stock was all that mattered, doesn’t that imply that we could get prosperity if government simply mandated more saving and investing?
There’s something else that’s necessary. Something perhaps intangible, but critically important.
Deirdre McCloskey, in a video for Learn Liberty, says that ideas and innovation drive growth.
This is a great video for many reasons, but two points strike me as very important.