The Wealth of Nations: A Further Inquiry into its Nature and Causes

Abstract

A new framework for understanding the wealth of nations is introduced. It focuses on the role of violence, and uses the involved parties’ relative capacity for violence as a unifying variable to explain how the wealth of nations is determined through the Hobbesian war or the Coasian bargain, how the Smithian market emerges from a violent world, and how a market-preserving government is created and preserved. The study reveals a common logic of various institutions. Its findings are consistent with the fact that the world is institutionally diverse and dynamic. They offer a new criterion for sound public policies.