There are a number of theories about this but think about a simple village where you have a number of families tending the land. All the land is fully utilised, there is no unemployment and when they aren't working the land they are doing domestic chores, raising children, etc. They produce enough to get by and so there is no wealth accumulation as such.
How could such an economy grow?
I put this to an undergraduate Economics class at UWE, Bristol and here were their ideas:
- Division of Labour and Specialisation -using the ideas of the economist Adam Smith, look at how they could divide up tasks and get individuals to specialise - perhaps one would be an expert at ploughing, another at digging, another at chopping, another at carrying. This should result in efficiencies leading to greater output from the same amount of land.
- Education - training and development of individuals will hopefully make them more productive which should lead to greater output.
- Technology - developments in how land is sown or fertilised and developments of the plough could increase output.
- Immigration - new immigrants may find it hard to find work as there is no extra income to pay them, however, if new immigrants have skills lacking in the community then this may help them - a new immigrant may have new knowledge or working practices which can benefit everyone in terms of increasing ouput.
- Expansion - perhaps the town can expand outwards from its borders and utilise new natural resources.
- Trade - the town could find other towns and perhaps trade with them - these other towns may have products which they are particularly good at producing and mutual trade may benefit both places.