The Destination of Wealth

Abstract

‘Classical’ economists, notably Adam Smith (1979 [1776]), are often depicted as having focused on the origin of wealth. Critics of contemporary economics accuse it of losing this focus, shifting attention to circular flows of income regulated by price. The ‘neoclassical’ approach is accused of lacking a theory of value, ignoring the stock implications of income and expenditure flows (Godley & Lavoie 2007), and artificially separating distribution from production through arbitrary assumptions about production functions and their marginal properties (Eatwell & Milgate 1983). The ‘neo-Keynesian’ approach, even if acknowledged as more than ‘neoclassicism with sticky prices’, is accused of prioritizing problems of short-term stability when the central puzzle should be how to achieve long-term growth. So when reappraisals and reorientations of economics are suggested, they tend to assume this means returning to a focus on the origin of wealth (e.g. Beinhocker 2005, Coyle 2007, Stonier 1983).