Tags: Phelps | century | capitalism | innovate

Nobel Laureate Explores Flourishing

By    |   Wednesday, 29 Jan 2014 06:41 AM

The Commonwealth Club of California, which boasts that it is the oldest public affairs forum in the country and its members are "in the know," hosted a presentation by the Nobel Laureate Edmund Phelps, director of the Center on Capitalism and Society at Columbia University, of his book Mass Flourishing: How Grassroots Innovation Created Jobs, Challenges and Change.

Phelps was introduced by the Alan Auerbach, president of the Club and an economics professor at University of California, Berkeley. Auerbach marveled that Phelps had referred to both Aristotle and Lady Gaga in the same book.

Phelps' thesis is that the West, especially the United Kingdom and the United States, and later Germany and France, were centers of innovation from about 1490 until about 1940. In the 19th and first half of the 20th centuries, in particular, what Mark Twain called a "raging, tearing, booming" society created a prosperity that was widely shared. The late economist Joseph Schumpeter credited the success to a wave of discoveries that were applied by entrepreneurs and financiers.

According to Phelps, in those days the economy was "innovating, not just producing and trading." For this to occur, the innovators had to be willing to break away from society norms, sometimes even leave their families to go to a place like California to follow their dreams. Now, he argued, institutions such as corporate governance, financial institutions and modern values are impeding innovation.

The professor's insights into the cultures of socialism and corporatism are compelling. He argued that socialism values stability, equality, and employment over self-expression and creativity. The corporatist culture, as seen in Italy, Germany and France (two fascist countries and a third occupied by one) hated new money and valued the nation over the individual.

Phelps found further that patriotism, lobbying, nepotism and cronyism dominated the world of Mussolini, the first 20th century fascist. He saw the United States as damaged by technology transfers in the late 1990s to countries that lacked the ability to innovate organically.

Phelps faulted the shift away from the urge to innovate and willingness to sacrifice to achieve this to the drive to accumulate wealth, tolerance for insider trading and short-termism marked by adolescent inability to concentrate. These qualities fostered a culture of entitlement and working at home, in order to avoid having to interact with colleagues in a creative workplace. Other markers of this culture are assertion of a right to protect markets and making contributions to politicians who could help accomplish this, in part by establishing evergreen patent rights, rent seeking, public/private partnerships, statism and government aid to dominant companies.

To a conservative, this all sounds pretty terrific. What is a bit disconcerting is the prescription Phelps offered to get the economy back on the track to innovation and job creation and a preference for the Good Life, even the "wild life," made possible by an open economy.

What is disconcerting is that Phelps clings to "Silicon Valley exceptionalism," which already seems to be an outmoded idea. Moreover, he advocates subsidies for low-wage jobs, and ironically, he is working to establish a First National Bank for Innovation, back by government bonds.

(Archived video can be found here.)

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Robert-Feinberg
The Commonwealth Club of California hosted a presentation by the Nobel Laureate Edmund Phelps, director of the Center on Capitalism and Society at Columbia University, of his book Mass Flourishing: How Grassroots Innovation Created Jobs, Challenges and Change.
Phelps,century,capitalism,innovate
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2014-41-29
Wednesday, 29 Jan 2014 06:41 AM
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