This is the penultimate post in our series on human flourishing and the spheres of transformation, with the last post defining human flourishing and the one before that showing how you can embrace the four spheres of transformation – again, health & wellbeing, wealth & prosperity, knowledge & wisdom, and purpose & meaning.
This section in what will be Chapter 2 of the book goes through the history of the concept of human flourishing in economics, showing how capitalism – or, more properly, innovism – has been the greatest boon for flourishing in the history of humanity. The ills of capitalism, on the other hand, arise from businesses not truly understanding flourishing. The last paragraph sets up the final post in this series on the true purpose of business.
Joe
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Flourishing and Economics
Thus, human flourishing is very, very much a concern in economics – as it has long been. This train of thought goes back at least as far as Adam Smith (although he was as much a philosopher as an economic thinker). Smith correctly concluded that societies, economies, and people all flourish when each individual “intends only his own gain, . . . led by an invisible hand to promote an end which was no part of his intention.”[i] Many caricature the invisible hand as greed anthropomorphized, but in fact Smith “recognized that if commerce is to promote human flourishing, it must be guided not just by unbridled self-interest but by values and a moral imagination.”[ii] It was in fact Smith’s “vision of human flourishing” that “is itself the grounds for his defense of economic liberty.”[iii]
Proper economic principles in general, and capitalism in particular, lead to extensive societal flourishing
David Phelps, 2006 Nobel Laureate in economics and director of the Center on Capitalism and Society at Columbia University, provides a guide for how proper economic principles in general, and capitalism in particular, lead to extensive societal flourishing his book Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change. In seeking “a new perspective” on the “prosperity of nations”, Phelps writes:
Flourishing is the heart of prospering – engagement, meeting challenges, self-expression, and personal growth. Receiving income may lead to flourishing but is not itself a form of flourishing. A person’s flourishing comes from the experience of the new: new situations, new problems, new insights, and new ideas to develop and share. Similarly, prosperity on a national scale – mass flourishing – comes from broad involvement of people in the processes of innovation: the conception, development, and spread of new methods and products – indigenous innovation down to the grassroots.[iv]
Phelps concludes his book by saying that “the modern economy answers a widespread desire for the good life” and “perfectly illustrated the Aristotelian perspective on the highest good”,[v] that of human flourishing. Moreover:
The advent of modern economies was a godsend for the fortunate nations to which they came. From the mid-1800s to the mid-1900s, the first modern economies – all of them more-or-less modern capitalist – were marvels of the Western world: They brought economic dynamism, a phenomenon never before seen or imagined, and they brought broad inclusion, which pre-modern capitalism had only begun to do. The new economic system got its dynamism and its inclusion by enlisting the imagination and energy of participants from the grassroots on up. The innovation they caused could not have been so extraordinary had it not engaged the mind and seized the imagination of participants down to craftsmen, day laborers, farmers, traders, and factory workers.[vi]
Capitalism is the worst form of economy except for all the others
It’s become de rigueur in many circles to decry capitalism for its inequality and social injustice – and it most certainly has its ills, as Phelps recognizes. But to apply Winston Churchill’s wisdom about democracies, capitalism is the worst form of economy except for all the others. And, I’ll add, the greatest force for human flourishing in the modern world. This is more easily understood by recognizing that the astronomical increase in material affluence and human flourishing since the Industrial Revolution wasn’t caused by capitalism per se but rather by what economist Deirdre McCloskey calls innovism – not investment in capital but investment in knowledge and innovation.[vii] Among many others to make this point, economist Thomas Sowell put it well: “The cavemen had the same natural resources at their disposal as we have today, and the difference between their standard of living and ours is a difference between the knowledge they could bring to bear on those resources and the knowledge used today.”[viii]