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The Wealth of Nations
The wealth of nations

Chapter 7 focused on the nature of productivity and its impact on the wealth of nations. It asked: why are economies premised on privately owned, self-directed firms, competing among each other more productive than those premised on state-owned, state-directed firms cooperating among each other? Resource-advantage theory contributes to explaining the superior productivity of market-based economies over command economies on four grounds: (1) The evolutionary process of R-A competition motivates productivity-enhancing innovation. (2) The process of R-A competition results in prices of capital goods that tend to reflect opportunity costs and, therefore, make economic calculation efficient in allocating scarce, tangible resources. (3) The process of R-A competition results in firms in market-based economies coming to learn how efficient and ...

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