How We Create the Wealth of Nations
Chapter 6: Analytical Framework
This chapter illustrates the rough analytical framework we use to answer the question: how do different types of innovation create wealth? By the word ‘framework’ we do not imply anything of great precision. It is simply a simply a collection of inter-connected categories describing areas or activities in the economy and society, plus two concepts of wealth. The categories are: business, marketplace, socio-economic environment, natural environment, science, art, education, health and consumption, and the two concepts of wealth are M-wealth and R-wealth. The framework is a more detailed development of that in Swann (2009a, Chapter 19), and some readers may find it helpful to read that in addition to this chapter. I would also recommend that they read the very interesting paper by Engelbrecht (2014) based on a similar framework. As we shall see, the framework used differs according to which type of innovation we are discussing (business innovation or common innovation) and which perspective we are taking (the view of business or the view of society at large). The model we use to analyse the business view of how business innovation creates M-wealth is much simpler than the model required to understand the role of common innovation in creating R-wealth.
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