How wealth is created


Unless you realize how wealth is created, you’ll fret about how to distribute it more equally, thinking the only way the poor can become richer is by receiving some of the wealth the rich have. Wealth is not created by industrialization, though it can be helped by this. It is created by specialization and trade. At the GI blog Tim Worstall draws attention to the wealthy trading towns of the Roman period. He cites the discussion on Marginal Revolution about the drop in living standards between Roman times and the 18th Century. The reason is the cutback over the intervening years in specialization and trade. It’s a timely reminder that while the application of potent energy sources to mass production assists this process, wealth was being created in the ancient world long before water and steam mills proliferated. It reinforces our determination to increase the wealth of poorer peoples by making it easier for them to specialize and to trade.