This paper presents an explanation of how the dynamic but uncertain process of economic development and growth occurs. It shows that economic development leads to structural change, an enhancement of capabilities and path dependence in the economy. It examines three different approaches to understanding the performance of the New Zealand economy and shows that performance of the New Zealand economy is consistent with its structure and sophistication. It suggests areas where policy might be developed to enhance New Zealand’s economic performance, and argues that both improvements in framework policies and enhancement of facilitative policies will be required to improve New Zealand’s economic performance. However, the development of specific policies is left for later work.