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The Origin of Wealth
By Eric D. Beinhocker
Harvard Business School Press
First edition (June 1, 2006)
ISBN: 157851777X
Rating – 5 stars
June 27, 2006
A Radical Economic Restatement
Wealth creation is central to any understanding of
economics. What is it? How is it created? How is it increased? These
questions are essential to most of us. They dominate our daily working lives.
They dominate our political lives.
In “The Origin of Wealth” Eric D. Beinhocker argues wealth
creation is the product of a “simple, but profoundly powerful” three step
process:
1. Differentiate.
2. Select.
3. Amplify.
The same process that drives the order and complexity of
life, the author says, drives the order and complexity of the economy.
Borrowing from Darwin’s theory of natural selection – which incidentally was
borrowed from the economist Richard Malthus – the senior advisor to McKinsey &
Company argues the economy evolves. It is a “design without a designer.”
If the economy is a complex, adaptive system, the author
argues, there are four implications:
1. Equilibrium, and with it much of the economic
thinking that has dominated the past century, is out.
2. A new tool set with its own techniques and
theories are available to explain economic phenomena.
3. Wealth is a product of evolutionary processes.
4. Changes in economic thought foreshadow tremors.
Adam Smith begat free trade. Karl Marx begat revolutions and socialism.
Neo-classical economics begat the rise of global capitalism.
Whether you are an investor, business or political leader,
this well-written, readable book offers a thought-provoking tour of the latest
in economic thinking. If the author is right, we are standing on the threshold
of an economic revolution. Eric D. Beinhocker’s book provides insight into how
this changing view of wealth creation will change business strategy, finance,
politics and policy.
Time spent reading and understanding its implications will
be well-spent.
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