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Mass Flourishing: How It Was Won, Then Largely Lost

August 19, 2013
by Guest author

Phelps Mass FlourishingToday we publish the first of two articles by Edmund Phelps, 2006 Nobel Laureate in Economics, Director of the Center on Capitalism and Society at Columbia University, and Dean of the New Huadu Business School at Minjiang University. Professor Phelps’ new book, Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change, is published this month by Princeton University Press.

The epic story of the West is the development in the 19th century of a mass prosperity the world had never seen and its near-disappearance in one nation after another in the 20th. Mass Flourishing is a history linking this story to the rise and fall of homegrown innovation. It is also a text on the nature and sources of prosperity. It has two components. The material part is growth of productivity and wages. The non-material part is flourishing – successful exercise of creativity and talents. To flourish people have to engage a world of challenges and opportunities. The economy’s dynamism and the resulting experience of business life are central to our wellbeing.

Mass prosperity came with the mass innovation that sprung up in 1815 in Britain, soon after in America and later in Germany and France. It brought sustained growth to these nations – also to nations with entrepreneurs willing and able to copy the innovations. It also brought flourishing to large and increasing numbers of people – mass flourishing. There were experiential benefits: routine work, dull and lonely, gave way to careers that took twists and turns and jobs that were rewarding. There were also developmental benefits: As people used their imagination to create new things and their ingenuity to meet challenges, they found self-expression, self-realization and personal growth in the process.

What brought mass innovation to a nation was not scientific advances, its own or others’, but economic dynamism: the desire and the space to innovate. The nation had to cultivate the right drives, build the needed institutions and not throw up barriers. High dynamism brought a high rate of innovation under decent market conditions, and, barring a string of bad luck, the ideas it conceived and tried out. America enjoyed the richest flow of innovations in part because working people in all kinds of jobs were conceiving and pursuing new ideas – grassroots dynamism. From the 1830s to the early 1960s Americans were in a frenzy of creating, tinkering, exploring and testing – gripped by a “rage for the new” in Lincoln’s phrase.

The impetus for high dynamism, my book argues, was the modern values arising in Jacques Barzun’s Modern Era – roughly from 1490 to 1940 – particularly the values we associate with individualism and vitalism. They include thinking for oneself, working for oneself, competing with others, overcoming obstacles, experimenting and making a mark. The courage to express one’s self by creating or exploring the unknown and the gumption to stand apart from community, family and friends are also modern values. Many of them have known authors: Pico, Luther, Montaigne, Voltaire, Hegel, Kierkegaard, Nietzsche and Bergson. Hegel speaks of “acting on the world” and Bergson of “becoming.”

The thesis is that these values stirred a desire to flourish; they shaped a modern conception of the life to aim for – the good life. A prevalence of these values in a nation tends to generate an economy that offers work gratifying those desires – an economy that delivers flourishing.

The thesis can be tested. A measure of a nation’s flourishing is the reported job satisfaction in household surveys. Interviewee responses to questions about what they look for in a job suggest a measure of the prevalence of modern values. If the thesis is right, we should expect that a people embracing modern values will forge careers and seek jobs that are interesting, involve initiative, offer change and present challenges such as competition. The book reports the finding that nations scoring high in these modern attitudes do tend to score high in job satisfaction. They build economies with the dynamism to deliver the jobs that satisfy them.

This finding suggests that people get the institutions that enable the careers and jobs they want, to a degree, at any rate, and getting them may take a long time. Institutions and government have a role, even if they explain little when attitudes are taken into account. Modern values, if strong, ensure there will be a popular demand for the individual rights that make it possible to innovate and to earn a living in innovative ventures. It might be thought that modern values are not a necessary condition for high dynamism. It is true that some of Britain’s freedoms pre-date the Modern Era, for example, the rights proclaimed in the Magna Carta of 1215. But that document was more a symbol than a binding constraint on the ruler until the late 1600s, when it came into play as a foundational document on rights.

In the high noon of the Modern Era, some nations where values were prevailingly modern went from mercantile economies to modern economies – the first economies of dynamism. They helped large and growing numbers pursue the good life.

Useful links

Edmund Phelps interviewed by CNBC

OECD work on innovation

3 Responses
  1. Andrew West permalink
    August 22, 2013

    I think it’s beneficial to have this conversation, but I think we need to be fair about some of the words that are being used and misused. If we limit our historical analysis to the last 3 decades a few things have happened:

    1. the word “entrepreneur” has been diluted to almost meaningless status. 30 years ago an entrepreneur (French for “undertaker”) saw an opportunity because of an existing demand that wasn’t being met. That entrepreneur would then “invent” a solution. It wasn’t innovation, it was invention. Today, any startup is considered entrepreneurial when they are simply innovating (incremental) and generally speaking they don’t create any NEW jobs, they simply replace jobs lost by the losing competitor. It gets worse – buy a franchise and you’re an entrepreneur. Many of the activities we refer to as entrepreneurial are simply small business and they too, will displace jobs, not create any. Competition determines that.

    2. Job creation is not something the government or business does, only DEMAND can create a job – A) aggregate demand, B) unmet demand or C) lost demand. Aggregate demand takes care of itself. Unmet demand should be our collective target and lost demand may lost forever (electronics).

    3. Innovation is primarily handled by committees or groups. It is generally risk averse and simply seeks an small advantage of another product or service. Certainly corporations lead in this regard. In 30 years we’ve settled for innovation and forgot about invention. Invention allowed America to change industries and capture unmet demand. Generally speaking invention comes from inventors, a group we mock on reality shows and fail miserably at giving them assistance. Their ideas and solutions are “too big” and dismissed without any fair, objective review. Part of this stems from our becoming a society of “experts” carving out our own special area. Gone are the generalists that are unafraid to take on entire industries or propose significant (and valuable) changes.

    We have several industries in America that are remarkably inefficient – healthcare, education, agriculture, construction and even charitable giving, yet we don’t seek to change those industries, we tolerate the status quo.

    If America is to become productive and economically sustainable we MUST focus on those people who believe they can satisfy unmet demand with invention, not incremental innovation.

    America is getting smaller because our ambition and thinking is smaller. If our government wanted to make a bigger difference, how about offering prize money to those that create economically viable solutions to our greatest problems? If they weren’t solved we wouldn’t waste our money, but entrepreneurs (as we’ve seen with X Prizes) will embrace the challenge and seek to invent valuable solutions.

    Solutioneur@gmail.com

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  1. Mass Flourishing: How It Was Won, Then Largely Lost | Vision 2050
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