Economic forces play a major role in the outbreak and perpetuation of violence, but they also hold the key for positive change. We will investigate a series of misconceptions about how economics has been used to foster peace. In place of these misconceptions, we will draw on rich historical anecdotes and cutting-edge academic evidence to outline the 'peace formula' - a set of key policies that are crucial ingredients for curbing armed conflict and achieving transition to lasting peace and prosperity. These policies include providing jobs (work), democratic participation (voice), and guaranteeing the security and basic functions of the state (warranties). Investigating specific political institutions and economic policies, we will explore how 'smart idealism' can help us get the incentives of our leaders right. The stakes could hardly be higher.