Today 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.
Edmund Phelps interviewed by CNBC