Thoughts on Edmund Phelps and Mass Flourishing

Edmund Phelps. Creative Commons license.

In these essays I have used various turns of phrase to describe success in dealing with the permanent problem. Following Keynes, I refer frequently to the quest to “live wisely and agreeably and well.” I’ve also written about reaching “the next level of social development,” one characterized by high levels of dynamism and inclusion. And I’ve used the terms “widespread flourishing” and “mass flourishing”; in particular, I’ve described our current malaise as “the messy and uncertain transition from mass prosperity to mass flourishing.”

The term “mass flourishing,” as it happens, has an interesting back story that I have been remiss in not relating. It was coined by the Nobel Prize-winning economist Edmund Phelps in his 2013 book Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change. In that book and the subsequent co-authored work Dynamism: The Values That Drive Innovation, Job Satisfaction, and Economic Growth, Phelps explores what constitutes the good life — and, by extension, “the good economy.” He focuses on the innovation process of modern capitalism, not just for the transformational material benefits it has brought, but most importantly for its nonmaterial rewards. “At its core,” he writes, “was a ‘vast imaginarium’ — a space for conceiving, creating, marketing, and perhaps adopting the new.” In this imaginarium, millions of ordinary people are given opportunities for “experiencing exploration or creation” through “work that is interesting, challenging, and adventurous.” Through enabling this “grassroots innovation,” modern capitalism has made “mass flourishing” possible.

According to Phelps, however, things have taken a wrong turn. Over the course of recent decades, the “modern values” of individualism, vitalism, and self-expression that powered capitalist dynamism have ceded ground to resurgent “traditional values” that prioritize community, solidarity, and stability. In political economy, we see this shift in values play out in the rise of what Phelps calls “corporatism” — institutions and policies that place “community and state over the individual and protection against falling behind over going ahead.”

From this brief summary it should be apparent that there are important similarities between Phelps’s work on mass flourishing and my own writing about the permanent problem. For one thing, we both agree that the ultimate criterion for judging social systems is nonmaterial — namely, the extent to which ordinary people are afforded good opportunities for interesting, challenging, and fulfilling lives. It is especially noteworthy that Phelps, an economist, is able to rise above his profession’s materialist focus to see the broader picture. Phelps made his reputation through brilliant work within that conventional focus — specifically, his development (with Milton Friedman) of the concept of the natural rate of unemployment back in the 1960s, in recognition of which he was awarded the Nobel Prize in 2006. In recent years, though, he has pushed past the profession’s normal boundaries to link economic life to life’s biggest questions. It's been an impressive final act: Mass Flourishing was published just after Phelps turned 80, Dynamism was released when he was 86, and at 90 today he is still going strong (he just published his memoirs, My Journeys in Economic Theory, last year — check out this interview with my Niskanen colleague Geoff Kabaservice.) Quite the model of individual flourishing, to be sure.

Furthermore, I agree with Phelps that we took a wrong turn somewhere in the 60s and 70s — and that capitalism’s dynamism and inclusion have suffered as a result. (With respect to inclusion, it should be pointed out that, before embarking on his current project, Phelps worked on the problem of declining work incentives for less educated workers and argued for a system of wage subsidies to encourage greater labor market participation.) I’ll admit that when I first read Mass Flourishing a decade or so ago, I was unpersuaded by Phelps’s case. At that time, I thought Phelps had things backwards — that the 70s were when the breakdown of the New Deal economic order paved the way for a much more market-oriented, much more entrepreneurial, and consequently much more dynamic economy. But as the productivity growth slump in the wake of the Great Recession dragged on and on, I came to see that low productivity was the norm in this new era, and that the torrid 90s boom had been the exception. And after the 2016 election and all that has followed since, I came around to Phelps’s broader conclusion that we were on the wrong side of a momentous shift in values. This blog has been dedicated to getting to the bottom of what has gone wrong.

Phelps deserves commendation for the light he has shed on our contemporary predicament. For an economist to push so far past the surface phenomena that absorb the profession’s attention and explore the underlying forces that shape them is both unusual and commendable. By combining his mastery of the technicalities with a broad humanistic sensibility, he has worked to reconnect the study of economic life with matters of ultimate significance. In light of our current position in history, with the demands of the permanent problem now elevated relative to the now fading economic problem, we would be well served if future economists work to pursue the research agenda that Phelps has initiated.

At this point, though, I must make clear that Phelps’s understanding of the permanent problem, and what success in grappling with it looks like, differs in key respects from my own. First of all, I believe that his conception of human flourishing is too narrow, too focused on the active virtues associated with technological and economic innovation, and that this leads both to flawed assessments of capitalism’s relative strengths and weaknesses and to flawed prescriptions for progress. Furthermore, Phelps’s conception of the “modern values” that underlie flourishing is overbroad, celebrating the shift toward “self-expression values” across the board despite the fact that excesses associated with that shift have proved inconsistent with and even deeply inimical to human flourishing. In my view, then, Phelps’s distinction between “traditional” and “modern” values fails: a proper foundation for human flourishing requires not the ongoing displacement of the former by the latter, but a workable balance between the two.

Phelps’s conception of human flourishing, like mine, looks to Aristotle for inspiration. And, like me, he quotes John Rawls’s pithy distillation of the “Aristotelian principle” in A Theory of Justice: “Other things equal, human beings enjoy the exercise of their realized capacities (their innate or trained abilities), and this enjoyment increases the more the capacity is realized, or the greater its complexity.” But then Phelps makes a wrong move, I believe, by unduly narrowing the scope of those capacities whose development and exercise leads to the good life. Specifically, he focuses almost exclusively on those capacities relevant to innovation — the capacities for discovery, exploration, creativity, and experiencing the thrill of the new.

This is a severely truncated vision of the good life. In my essay “Thoughts on Flourishing,” I identify three broad sources of fulfillment: projects, experiences, and relationships. In all three domains, people thrive and find fulfillment through the effortful development and exercise of talents and skills. Any project, from learning to play guitar to starting a business to writing a Substack essay, requires investments of hard work that pay off in the flow of deep engagement and the satisfactions of accomplishment. But relationships, likewise, require hard work to nurture and maintain; over time, the rewards of deepening friendship and romantic intimacy usually count among a person’s most treasured blessings. And the quality of one’s experiences — of a concert, or a museum, or a gourmet meal, or a night sky — will depend on the extent to which one has cultivated the expertise and discernment to appreciate them.

Phelps ascribes overwhelming importance to projects, especially productive projects in the economic realm, although he also recognizes the dependence of innovation on “venturesome consumers” (in Amar Bhidé’s turn of phrase) who are always eager for new experiences. Completely missing from Phelps’s picture, though, is the whole domain of personal relationships, from friends and colleagues to family and other loved ones. As I discussed in my essay on flourishing, people vary widely in the specific mix of projects, experiences, and relationships that is most conducive to their individual wellbeing. But it is well established that, for most people, the most important element of a well-lived life is strong connections to other people. Consider the findings of the Harvard Study of Adult Development, launched in 1938 and still going. As Robert Waldinger and Marc Schulz, the study’s current director and associate director, sum things up: “It’s the longest in-depth longitudinal study on human life ever done, and it’s brought us to a simple and profound conclusion: Good relationships lead to health and happiness. The trick is that those relationships must be nurtured.”

Meanwhile, for Phelps, only a relatively narrow range of projects and experiences serve as pathways to flourishing — those involving discovery, novel creation, or appreciation of the new. Yet clearly this only scratches the surface of activities that bring fulfillment: developing artisanal excellence, or scholarly erudition, or connoisseurship of one kind or another, can surely be richly rewarding even if one is merely maintaining a tradition rather than seeking innovation.

Phelps’s narrowness of focus does guide him toward a vitally important point: that modern capitalism and its incessant churn of creative destruction have brought not just material plenty, but unprecedented spiritual riches as well. That spiritual windfall results from the mass mobilization of talents and effort in pursuit of ongoing material betterment and the widely distributed access to interesting, challenging, and rewarding work that ensues. Capitalism has made possible, for the first time in human history, widespread flourishing in which, not just a tiny elite, but millions of ordinary people have been enlisted in projects that developed and exercised their capacities to an extent that the tradition-bound routines of peasant life could never remotely rival. Although capitalism has long been derided for its vulgar materialism, the fact is that economic life is, at its root, an intellectual challenge — in Hayek’s phrase, a “discovery procedure.” “The distinctive experiences of the modern economy,” writes Phelps, “come from its distinctive activity of creating, developing, marketing, and testing new ideas.” And the result, according to Phelps, has been a transformational democratization of the active virtues:

In this way, the modern economies brought to a society something of the “heroic spirit” that Smith hoped to see, such as standing out from the crowd and rising to a challenge. These economies also brought to ordinary people of varying talents a kind of flourishing – the experience of engagement, personal growth, and fulfillment. Even people with few and modest talents – barely enough talent to get a job – were given the experience of using their minds: to seize an opportunity, solve a problem, and thinking of a new way or a new thing. In short, dynamism’s spark created modern life.

I can’t resist noting that I made this same basic point in the first big-think piece I ever got published – more than two decades before Mass Flourishing came out. In an essay for Reason written in the aftermath of the Soviet Union’s collapse, observing all the heroic acts and inspirational moments that made possible the fall of communism, I then asked: will the arrival of capitalism leave room for heroism and inspiration? Here’s a snippet from my answer:

Although obsessive materialism and crass commercialism are undeniably a part of modern capitalism, they do not constitute its whole. To condemn commercial society as nothing but an empty rush for things is to engage in caricature and distortion. There is much more to capitalism than things: Capitalism is also about creativity, ingenuity, dedication, and perseverance; it is about teamwork and competition; it is about the fulfillment gained from working hard to do a job well; it is about pursuing your dreams, however humble or grand. Commercial life, at its best, generates spiritual as well as material abundance.

I wrote those words over half my lifetime ago, but I still agreed with them unreservedly when Mass Flourishing was published. Since then, my reservations have grown considerably. I still think it’s true as far as it goes — but other important aspects of the truth are missed in the process.

It’s true that capitalism does enable “mass flourishing” in the sense of “mass” as distinguished from “elite.” As opposed to the agrarian age, when more than 90 percent of people were locked in subsistence agriculture in the ever-present shadow of privation, capitalism and the growth it has unleashed have afforded unprecedentedly wide opportunities to ordinary people to develop and exercise capacities and experience the psychic as well as material rewards of doing so.

But on this blog, when I’ve used the phrase “mass flourishing,” I’ve meant it in the same sense that I use “mass affluence”: mass as nearly universal, as the norm rather than the exception. And it’s quite clear that, using that sense of the term, capitalism doesn’t usher in mass flourishing and never has. Even today, when working conditions are much better than they were in the past, most jobs are not “interesting and challenging and adventurous.” In most jobs, the tasks are generally tedious, and workers lack the autonomy that can enliven even tedious tasks with a sense of agency and mastery. Most workers have no viable career path that develops their capacities for planning and executing over a lifetime; most workers simply tread water and drift from job to job. And while work in the past was dirty and dangerous compared to today, at least industrial-era workers enjoyed rapidly rising incomes and living standards, as well as the status that came from the universally acknowledged importance of factory work. Work today is less physically taxing, but for many it is also less spiritually rewarding.

I had always recognized that the spiritual rewards for most workers were meager at best, but I took solace in the fact that things were getting better. In Human Capitalism, I argued that the rising complexity of advanced economies was leading to (following Frank Knight) the “cephalization” of economic life: just as animals with more complex behaviors tend to have larger brain-to-body ratios, as capitalism develops and grows more complex, it requires a higher percentage of workers engaged in the brain work of planning, managing, and coordinating production. On this score, the percentage of managerial and professional workers has risen from around 10 percent of the workforce in 1900 to 35 percent today. And there has been a huge jump over this period in the percentage of people attending and completing college as the demand for developing intellectual capacities has risen.

This progress is real, and it should be celebrated. Grading on the curve of other times and other places, in advanced economies today a higher percentage of people are afforded good opportunities to develop their capacities and flourish than ever in human history. But looking ahead, I no longer am persuaded that we remain on the path of ongoing progress. Rather, it feels to me like we’re trapped in what I’ve called a “middle flourishing trap,” akin to the middle-income trap that snares less developed economies that succeed in escaping poverty only for growth to stall. We’ve achieved more widespread flourishing than any previous social system has ever managed, but the institutions that have got us this far do not appear capable of pushing us onward to new heights.

I don’t believe we are evolving toward a labor market in which most jobs are interesting, challenging, and adventurous — first, because there are many necessary and boring tasks that will prove difficult to automate; second, because most people lack the combination of cognitive and noncognitive skills needed to do such jobs well. The idea that one day we will live in a world where most workers are engaged in “grassroots innovation” strikes me as utterly fanciful. In the early days of industrialization, the low-hanging fruit of technological progress was accessible by artisans and tinkerers without formal education; now, however, with all that low-hanging fruit already plucked, it is generally the case that only highly specialized workers with extensive formal training are in a position to contribute meaningfully to technological progress. Innovation is increasingly an elite, not a mass endeavor.

And the cephalization of economic life under capitalism may have reached its peak. The share of American workers with college degrees continues to inch upwards, but perhaps not for much longer. The percentage of 18- to 24-year-olds in college peaked in 2011 and has fallen off since, the share of jobs requiring a college degree is down, and the percentage of adults who see a college education as “very important” has dropped considerably. Meanwhile, there is evidence that, after a century of steadily rising, raw IQ scores are starting to fall.

Accordingly, rather than hoping that the postindustrial labor market will somehow transform over time into a silk purse, I have come to believe that a move toward “economic independence” — a partial demobilization from the labor market that brings work back into the home — offers the best prospects for continued progress toward truly mass flourishing. In the near term, we should encourage working from home and home-based businesses to close the distance between work and the rest of life. Over the longer term, we should strive toward a future in which we are so rich that most people don’t need to spend much of their lives working for pay, and can instead pursue productive projects outside of the cash nexus — on their own or in tightknit communities of friends and family. Such a future depends on the emergence and spread of a “producerist” DIY counterculture in which adherents place a high value on technical competence and local self-sufficiency.

These views about where to go from here are diametrically opposed to Phelps’s. Although I favor wage subsidies for less-skilled workers as a short-term palliative, I do not believe they can transform the labor market into an favorable arena for mass flourishing. On the contrary, I worry that wage subsidies could end up locking large chunks of our fellow citizens in low-value, dead-end work. Phelps, meanwhile, cannot contain his disdain for the very concept of “work-life balance”: “A flourishing life in the world of work can come only from an emotional commitment that leads to deep involvement in the work — it cannot be had on the cheap.” And he regards the rising popularity of working from home as a regrettable move in the wrong direction. For my part, I think that a rejuvenation of domestic production supported by a producerist ethos would do more to revive the tinkering spirit of “grassroots innovation” than any attempt to prop up the labor market with subsidies.

Phelps and I agree that social systems should be judged by their conduciveness to mass flourishing, but our differing conceptions of what mass flourishing means lead us in very different directions for programs of institutional reform. We also agree that a shift in values over the past half-century has moved us farther away from widespread enjoyment of the good life. But because we differ in our understanding of the values most conducive to mass flourishing, we likewise disagree in our critiques of contemporary culture. In Phelps’s view, the central conflict is between “traditional” values of community and stability and “modern” values of self-expression and creativity. A recrudescence of the former, Phelps argues, has sapped advanced economies of much of their former dynamism.

I agree that a craving for stability and control — what I’ve referred to as “loss aversion” — has undermined dynamism in a host of different ways. We’ve seen this loss aversion in the rise of NIMBYism and the permitting “vetocracy,” in the irrational fear of nuclear power, and in a paralyzing “safetyism” more generally. I find it a bit peculiar to characterize this cultural shift as a reassertion of traditional values, since this is a novel cultural turn responding to utterly unprecedented conditions of material affluence. Yet Virginia Postrel posited a similar conflict between “dynamism” and “stasism” in The Future and Its Enemies, and it is quite true that people who imagine themselves to be impeccably progressive and forward-thinking can adopt positions that in practice are highly conservative or reactionary.

But there are other important contributors to capitalism’s deepening crises of dynamism and inclusion that are overtly anti-traditional. Excesses associated with the cultural turn toward self-expression values — hostility to authority in all its forms, including science and liberal democracy; an increasing preference for the virtual over the real; and a steady retreat from the frictions and vulnerabilities of personal relationships — show clearly that there are other obstacles to mass flourishing besides the dead hand of the past. Indeed, as I have been writing about of late, among the gravest threats to humanity’s long-term future today is the global fertility collapse and the specter of dramatic population declines. Without a revitalization of the most traditional of values — the commitment to be fruitful and multiply — stagnation on a shrinking planet may well be our fate.

Phelps’s simplistic schema of traditional versus modern values thus fails to capture the actual cultural conflicts whose outcome will determine our future. Because flourishing, as it turns out, has both progressive and perennial elements. The progressive elements — exploration, discovery, creativity — are essential for humanity’s collective flourishing, but for most people they play a more modest role in shaping their own individual lives. For most people, it is the perennial elements of human flourishing — love, friendship, community, belonging, a sense of purpose, pride in workmanship — that bulk most prominently in a well-lived life. To achieve a society characterized by mass flourishing, we do not move from one pole of traditional values to the other, modern pole. Rather, a flourishing society rests on a moral foundation that balances traditional and modern values. Flourishing requires not only high-flying wings, but deep-seated roots as well.