The primary determinant of a societies productivity is fairness. Where fairness is defined as the degree to which the amount of value a citizen captures correlates with the amount of value they create. Fairness affects productivity in two key ways. Firstly it reduces the proportion of ideas that receive sufficient resources to become reality. This is because someone with an idea will only invest up to the amount of resources they expect to be able to claw back by selling their product. So the lower the proportion of value going to them the less likely they will pursue their idea. The other way fairness affects productivity is by incentivising smart peopleThe lawyer profession is a prime example of this. It attracts highly competent people and busies them in a system that's all but broken, likewise doctors spend most of their time diagnosing a small set of common illnesses which could be identified by someone with far less training towards pursuits that enable them to capture value without necessarily creating it. And this makes it less likely that they will have any high value ideas in the first place. So unfairness affects productivity by both reducing the proportion of good ideas that are viable and reducing the number of ideas. Not to mention the affect it has on peoples happiness.
Unfortunately there isn't much variation in societies around the world so it's hard to prove the importance of fairness with data. Societies really just come in two major types. Free market systems with laws based off the Napoleonic Code, and socialist systems. The later is dwindling in number because they perform so poorly economically. Which is no surprise from a fairness perspective. Within the free market countries, they all nominally work the same way. The only metric we can use to differentiate them by fairness is corruption. And when we do that we see a strong inverse correlation between corruption and productivity. Though let me be clear, when I talk about fairness I mean something much more nuanced than corruption. There are two very important things which aren't counted as corruption but are definitely unfair. We will explore them now.
I'll start with the most obnoxious. In most societies around the world people believe that property is one of the best investments they will ever make. Which is easily disprovenThe definition of a good investment is one that has an above average ROI. But property can't appreciate faster than the rest of the economy forever since if it did it would eventually consume all production and people would starve. But even if this was true calling it an investment is a stretch since no productive activities are taking place. It's really a bet that housing prices will go up. Housing prices are determined by supply and demand. Supply is controlled by the government. Demand is determined by the desirability of the city and the level of competition from other cities. And this demand is magnified by the central bank lending rates. When the government wants prices to go up it lowers lending rates. So effectively the government controls both supply and demand and therefore the price of housing. Apart from one aspect, desirability. And desirability is determined mainly by the economic advantage of living in the city. And this economic advantage comes from uncaptured value. Which is mostly a byproduct of trade. To illuminate this point a bit more I'll borrow a thought experiment from Henry George:
Imagine someone (Adam) has an infinitely large plot of land with no distinct features at all. He is good at carpentry but spends most of his time farming. Now imagine another person comes along. Eve; she meets Adam and after a brief chat he agrees to give her some land. And after seeing how useless Adam is at farming she decides to setup close enough to help him with it. In exchange he builds her a nice house. After a while another person comes along and after seeing how well Adam and Eve work together they join in and add their specialty. This process continues until eventually Adam starts to realize that he can charge people for the privilege of living near him and they will happily pay it. Adam becomes very rich soon after.
At first glance what Adam did seems fair. After all it was his land. But he didn't actually create the value; that's an emergent property of the trade network that formed around him. And by capturing that value instead of allowing it to flow to everyone he is negating the benefits of the trade network. So now as newcomers spawn into the thought experiment it makes no economic difference to them if they join the city or live far away. Furthermore, as people within the city specialize further and innovate the value that they create but aren't able to capture themselves by charging higher prices will go to Adam via yet higher land prices.This is why despite the massive productivity gains of the industrial revolution, working class people don't have a proportionally higher standard of living
Another big source of unfairness is the legal system. Which is a shame because the legal system is literally supposed to be the exact opposite. The unfairness comes from a combination of its inflexibility and complexity. The complexity enables too many unintended consequences and the inflexibility prevents us from stopping people taking advantage of them. As a result it tends to favor larger entities that can afford the better lawyers. And it's far from just a theoretical problem. Me and almost everyone I know has been harmed by this system in very meaningful ways.The only difference between today and the days of the wild west is that now you can't use violence. All the issues that lead to violence are still there but no one uses it because the one thing out legal system does well is prosecute violence Ultimately the legal system consistently fails to punish unfair behavior and sometimes allows itself to be used to create unfairness.