## The Flourishing Society — My Journeys in Economic Theory (book review)

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**Canonical URL:** [The Flourishing Society — My Journeys in Economic Theory (book review)](https://www.imf.org/-/media/files/publications/fandd/article/2023/december/books-arora.pdf)

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### Core intellectual trajectory and key contributions
- Early foundations recalled from graduate school:
  - “golden rule” of saving
  - micro-foundations of wage and employment theory
  - structural theories of unemployment
- Phelps’ characterization of these earlier contributions:
  - Views them as important but “[not requiring] ... a great deal of theoretical imagination” nor being “radical steps in economic theory.”
- Phelps’ later and central contribution: the theory of broad human “flourishing”
  - Flourishing extends beyond monetary/material prosperity to include job satisfaction, rewarding work, and a wider notion of a good life.
  - Rooted in influences from other disciplines and arts (art, opera, literature) and interactions with leading economists.

### Indigenous innovation — definition and mechanism
- Indigenous innovation contrasted with older innovation traditions (Robert Solow, Joseph Schumpeter):
  - Not exogenous, not imported, not solely the preserve of famed inventors or entrepreneurs.
  - Arises from the ingenuity of ordinary people in daily work.
- Key thesis:
  - Presence of certain “modern” values — individualism, vitality, self-expression — tends to drive indigenous innovation.
  - Indigenous innovation then drives productivity, growth, and flourishing.

### Diagnosis of recent trends and policy implications
- Phelps’ diagnosis:
  - The erosion of modern values in advanced economies across recent decades has contributed to the relative stagnation of productivity and real wages.
- Policy task articulated:
  - Help society regain these modern values to spark a new wave of dynamism and innovation.
  - Must be pursued while confronting major challenges including:
    - climate change
    - digitalization
    - the plight of low-income earners

### Caveats, limits, and counterarguments highlighted by the reviewer
- Applicability concern:
  - The goal of flourishing and job satisfaction may be seen as more applicable to richer societies than to those where many people struggle simply to make a living.
- Formalization gap:
  - Phelps acknowledges his theory of flourishing is not yet fully articulated in a formal model that can be tested.
- Culture versus incentives debate:
  - The contention that dynamism is driven by culture and values (not simply incentives) must account for episodes where changes in incentives transformed performance:
    - Experiences in Asia, including China in recent decades
    - Experiences in Eastern Europe after the Cold War
  - The often high productivity of immigrants in adopted countries is cited as evidence of the influence of the economic environment on people’s fortunes.

### Assessment and tone
- The book is described as:
  - Profound, far-reaching, and novel
  - Combining analytical depth with a concern for describing human beings rather than “economic agents”
- Reader takeaway:
  - The reader is guaranteed to emerge with a broader vision of economics and its possibilities.

*Source: books-arora (PDF)*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2023/december/books-arora.pdf_