Book Review: The Flourishing Society by Arora
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Bibliographic details
- Authors: VIVEK ARORA
- Published: December 1, 2023
Overview
- Reviewer: VIVEK ARORA, deputy director in the IMF’s Middle East and Central Asia Department.
- Publication: F&D Magazine, December 2023.
- Subject: Edmund Phelps’s new book chronicling his intellectual journeys and presenting a recent theory of broad human “flourishing.”
- Book cited within the review: My Journeys in Economic Theory, Edmund Phelps, Columbia University Press, New York, NY, 2023, 248 pp., $27.95.
- Note: “Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.”
Core concepts and findings from Phelps as presented in the review
- Phelps’s established contributions recalled by the reviewer:
- The “golden rule” of saving.
- Micro-foundations of wage and employment theory.
- Structural theories of unemployment.
- Phelps’s current central concept: broad human “flourishing.”
- Flourishing extends beyond monetary/material prosperity to include job satisfaction, rewarding work, and the wider notion of a good life envisioned by 19th and 20th century philosophers and economists.
- Indigenous innovation (key mechanism in Phelps’s theory):
- Defined as innovation coming from the ingenuity of ordinary people in daily work.
- Contrasted with older traditions of innovation as exogenous or driven solely by famed inventors or entrepreneurs (e.g., Robert Solow or Joseph Schumpeter).
- Phelps’s thesis: presence of certain “modern” values—individualism, vitality, self-expression—drives indigenous innovation, which in turn drives productivity, growth, and flourishing.
- Interpretation of recent trends:
- Erosion of modern values in advanced economies across recent decades is argued to have contributed to relative stagnation of productivity and real wages.
- Policy task: help society regain these values to spark new dynamism and innovation while addressing climate change, digitalization, and the plight of low-income earners.
Policy implications and caveats highlighted in the review
- Policy implication:
- Economic policy should aim to restore or reinforce modern values that foster indigenous innovation to promote productivity, growth, and flourishing.
- This effort must be undertaken concurrently with managing challenges such as climate change, digitalization, and low-income hardship.
- Caveats and competing observations:
- The goal of flourishing and job satisfaction may seem more applicable to richer societies than to those where many people struggle to make a living.
- Phelps acknowledges his theory of flourishing is not yet fully articulated in a formal model that can be tested.
- Counterarguments emphasize the role of incentives and institutional reforms in transforming economic performance:
- Examples cited: experiences in Asia, including China in recent decades, and in Eastern Europe after the Cold War.
- High productivity of immigrants in adopted countries is noted as testament to the influence of economic environment and incentives.
- Other economists (for example, Angus Deaton) share the broader view that economics should take a wider view of human welfare than just marketplace performance.
Assessment and concluding evaluation
- The reviewer’s judgment:
- Phelps’s book is described as profound, far-reaching, and novel.
- The work combines analytical depth with a humane focus, aiming to describe the lives of actual human beings rather than abstract “economic agents.”
- The reader is expected to emerge with a broader vision of economics and its possibilities.
Source: IMF F&D Magazine book review, December 2023; review by VIVEK ARORA.
Content in this bundle
- The Flourishing Society