Posit two economies and that begin with exactly the same structure, specifically, the same distribution of preferences, cash, and other assets among the individuals in the population. So for an individual , there is some other individual , with exactly the same preferences, cash supply, and other assets. As a consequence, and are identical for economic purposes. Therefore, if we begin at time , where economies and are equal, and assume deterministic progression, economies and will proceed through exactly the same sets of transactions over time.

Now assume that the pace at which this happens as a function of time for economy is much faster than that of economy . It follows that the income generated during any period of time by economy will be greater than that of economy . That is, the GDP of economy categorically exceeds that of economy , simply because it progresses faster through what is nonetheless an identical sequence of states and transactions. All other things being equal, it follows that economies that have a higher rate of transaction over time will have higher GDP, than those that have a lower rate of transaction over time.

Now posit that and are identical, except that in economy , savings are held in real assets (e.g., land), whereas in economy , savings are held in financial assets (e.g., bank deposits). Assume again they begin completely identical, and so it must be the case that there are no savings outside of cash in both economies. Again consider the economies as a function of time. All of economy ‘s savings will go to real assets, and therefore, the cash associated with those purchases simply moves on to the seller, in exchange for the asset. This produces no net change in GDP, but it can improve utility, assuming voluntary transactions (i.e., the seller wants cash, the buyer wants an asset). In contrast, in economy , savings will go to financial assets (including e.g., bank deposits).

If the bank deposits are backed by fractional reserves, then every dollar deposited will in turn generate a multiple of the number of dollars actually deposited. So in that case, the money supply increases, which should increase GDP as that new money is paid out into the economy. If instead the cash goes to equity in a company, then the company is seeking to raise capital for investment. It follows that new income generating assets will be produced by the company (assuming it is successful) using that capital, thereby increasing GDP. In contrast, simply purchasing an existing asset for cash does not produce any new income, even if that asset already generates income (e.g., through rents on land). It follows that, all other things being equal, economies that have savings in financial assets will have higher GDP than economies that have savings in real assets.

Abstracting, we see that if savings are deposited in banks with fractional reserves, that then lend in the form of debt, the money supply increases. If instead, savings are contributed to companies in exchange for equity, then the supply of income producing assets increases. In both cases, GDP should increase. In contrast, the purchase of an existing real asset cannot increase GDP. This could explain the wealth disparities between economies with comparable populations, specifically, the prevalence of financial assets. Moreover, financial assets require law and order, whereas real assets can be defended by individuals. It follows that a reliable legal system is required in order to maximize the GDP of an economy. Therefore, we should find that countries with more reliable legal systems are generally wealthier than those with less reliable legal systems.