Don Boudreaux reviews Edmund Phelps’s “Mass Flourishing” at Cafe Hayek
Piketty tells of a one-dimensional, dreary, and mechanical world in which wealth grows independently of human volition and where each person is fixated on the amount of money in other people’s paychecks and bank accounts. In a contrast that could not be more stark, Phelps—the 2006 winner of the Nobel Prize in Economics— describes a world rich with varied motivations and bursting with the potential for creativity and the promise for all people of lives that are not only materially prosperous but mentally and emotionally satisfying.
In Piketty’s dystopia, a relatively small number of oligarchs—some lucky, others predatory—grab disproportionately large chunks of society’s capital. Little is left for the unimaginative masses save their growing and justifiable envy, in which they stew while hoping that governments muster the gumption to use massive taxation to confiscate and “redistribute”—or at least destroy—the oligarchs’ riches. In Phelps’s world, modern values liberate men and women from traditional superstitions and prejudices. With creative and optimistic minds, with markets and trade kept open, with property rights kept secure, and with governments’ fiscal affairs kept prudent, free, modern people unleash their innovative powers to create mass flourishing.
Unlike in Piketty’s world, the modern denizens of Phelps’s world not only are not consumed by envy but seem to be untouched by it. Also unlike for Piketty, for Phelps capital (or prosperity) is not a glob of stuff that springs forth from forces exogenous either to the kinds of human choices studied in basic microeconomics classes or to the kinds of institutions analyzed there.