Mass Flourishing and Economic Dynamism

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Core thesis: Nations that experienced mass economic flourishing acquired higher levels of dynamism—the desire and capabilities of the nation’s people to innovate—driven by the rise and spread of certain modern values: individualism, vitalism, and a desire for self-expression.
Definitions:
- Individualism: desire to have some independence and to make one’s own way (distinct from selfishness); historical antecedents include Giovanni Pico della Mirandola, Martin Luther, Ralph Waldo Emerson, and George Eliot.
- Vitalism: the notion of feeling alive by taking initiative and “acting on the world”; linked to the Age of Discovery, Benvenuto Cellini, Cervantes’s Don Quixote, and Henri Bergson.
- Self-expression: gratification from using imagination and creativity to voice thoughts or show talents.
Contrast: Societies dominated by traditional values (conformism, fear of taking risks, service to others, focus on material rather than experiential gains) had scarce dynamism, lower innovation, and less job satisfaction.

Historical pattern:
- Remarkable period of innovation, economic growth, and human progress beginning about 1890; innovation stalled after about 1970.
Indigenous innovation rates (from Dynamism calculations by Raicho Bojilov):
- US: 1.02
- UK: 0.76
- Finland: 0.55
- Germany: 0.42
- Italy: 0.40
- France: 0.32
Cross-country analysis (Gylfi Zoega) across 20 OECD countries:
- Countries with high-strength doses of modern values include the US, Ireland, Australia, Denmark, and to a lesser extent Switzerland, Austria, the UK, Finland, and Italy—these had relatively high rates of indigenous innovation.
- Values found to contribute positively to economic performance (measured by TFP growth, job satisfaction, male labor force participation, and employment): trust; willingness to take the initiative; desire to achieve on the job; teaching children to be independent; acceptance of competition.
- Teaching children to be obedient reduced economic performance.

Cumulative growth of TFP in the US over 20-year periods (Bojilov’s calculations):
- 1919–39: 0.381
- 1950–70: 0.446
- 1970–90: 0.243
- 1990–2010: 0.302
Post-1970 developments:
- Innovation has not ceased (examples: breakthroughs in artificial intelligence and electric vehicles) but many innovations are concentrated in a small region (Silicon Valley).
- Daron Acemoğlu’s recent comment: AI would add no more than 1 percent to US economic output over the next decade.
Economic costs of reduced innovation:
- Near stagnation of wage rates, undermining expectations that wages would rise sufficiently to provide a better standard of living than previous generations.
- Capital investments facing diminishing returns not offset by technical progress; discouraged capital formation.
- As real interest rates fell and asset prices rose from about 1973 to 2019, housing became less affordable for many.
Social costs:
- General Social Survey household data show reported job satisfaction in the United States has been on a downhill slide since 1972.
- Anne Case and Angus Deaton’s Deaths of Despair links an outbreak of despair in America to economic developments.

Principal cause identified: deterioration of modern values that fuel dynamism—rise of a “money culture” (term used by John Dewey) that may weaken a nation’s dynamism.
The article’s normative aim: regaining modern values is necessary to reverse the slowdown in innovation and its rewards and to restore mass flourishing.

Economists and policymakers should design an economy high in dynamism that enables people to experience mass flourishing from the grassroots up.
Research and institutional focus shifts noted:
- Example: Melissa Kearney, director of the Aspen Economic Strategy Group, shifting the organization’s research focus from resilience to strengthening dynamism.
Practical policy directions implied by the analysis:
- Promote and cultivate modern values (individualism, vitalism, self-expression) that encourage initiative, competition, independence, and creativity.
- Counteract distortions that emphasize purely material rewards and a pervasive “money culture.”
- Design economic and social institutions that increase opportunities for ordinary people to innovate, experience nonpecuniary job rewards (achievement, imagination, overcoming challenges), and improve job satisfaction.

IMF F&D Magazine, “Mass Flourishing and Economic Dynamism,” Edmund Phelps, September 2024.

Mass Flourishing and Economic Dynamism
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