Before we get into the right answer, we should spend some time talking about some popular wrong answers. …

Throughout the late 20th century and into the 21st century, the United States and other countries have attempted to trigger economic growth in poor countries. These attempts have failed.

Easterly discusses three failed panaceas which experts believed would trigger development: investment, population control, and education. Before looking at each once, though, consider the unifying theme here. Developed countries tend to have higher levels of investment, lower birth rates, and more education. From this, experts have tried to infer that if these conditions are replicated in poorer countries, then development will follow.

This strategy has failed. It turns out these factors are more a consequence of growth than a cause.

[Re-reading Wealth of Nations explains it well enough, Jacobsen argues. Without the proper framework of institutions, private property, and the rule of law, wealth cannot be built. And right now, America’s cities are turning into laboratories to test Smith’s teachings. — Ed]