Economic Action as Imperfect Cooperation
Chapter 2: Production: the benefit of working together
Chapter 1 argued that the affluence that many people enjoy today is a consequence of the interdependence that we also observe in modern society. But how does this happen? As Adam Smith taught us, increased productivity of labor is a necessary condition for the affluence we enjoy, so we need a theory of production that will explain how interdependence leads to increases in the productivity of labor. However, the predominant economics of the twentieth century did not provide the explanatory theory of production that we need. For that we have to go back to the economists of the 1700s and to some unorthodox economists, the Austrian School of thought. Accordingly, this chapter will focus mainly on production, and will return to the earlier schools of thought for the insights they offer.
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