tv Book Discussion on Mass Flourishing CSPAN December 30, 2013 4:00am-5:11am EST
edmund phelps. he was the 2006 nobel laureate in economics and is the author of many books including a new one called "mass flourishing: how grassroots innovation created jobs, challenge, and change." this book examines modern economics and what makes nation's prosper. and why the sources of that prosperity are under threat today. net phelps teaches economics and is the director of the center on capitalism and society at columbia university. he has lost at the sources of economic growth in the causes of unemployment. on announcing his nobel prize, the committee specifically said his task breaking work on economics between inflation and unemployment and on the well being of current versus future generations. he is also known for the threat of this approach to economics drawing as does in this book on
important contributions from philosophy, literature and the arts. i must say that few other economists can comfortably cite aristotle and lady gaga in the same chapter. dr. phelps was born near chicago, grew up in suburban new york and later studied at amherst and yale. he's the recipient in addition to the nobel prize of many international awards and honorary degrees. please welcome our guest. [applause] >> thank you very much, professor. pleasure to be here to speak to you about my book, "mass flourishing." the book is about the modern economies as i call them that arose in a few nations in the 19th century. britain and america are at 1820, later germany and france.
economies the remained well functioning through the middle of the 20th century. they were a marvel of the world. i wonder was not so much a high wages and wealth. there was rampant prosperity, material and non-material. mark twain spoke of the drive and push and rush and struggle of the regime, caring, booming 19th century. one kind of prosperity was classical. modern economies were achieving growth of economic knowledge, that's growth of productivity. wage rates and working conditions were constantly improving throughout the economy. a worker could just ride the rising tide, and non-modern economies through trade and technological transfers could tap into that prosperity in order to catch up.
another kind of prosperity was modern, and of key importance. there were gains in one's earning power from one's new insights and skills, and gains in one satisfaction from the experiences in one's work. these gains, material and non-material, our rewards of initiating and creating. they represent prospering. non-modern nations could not cap into that prosper. never before have prospering been within reach of large and increasing numbers. before the first modern economies, economic knowledge, productivity, was virtually stagnant even in economies that
were the dual new mercantile capitalism such as spain and holland. the concept of job satisfaction was unknown. for me, the lone shepherd, isolated, symbolizes that system. the new mass prospering was brought by mass innovating. though the historians brought only resources, insufficiencies and returned scale. in the stream of new methods and products, some found adoption by consumers or producers, changing the complexion of the economy. when britain and america especially, there was a well for of information, large and small, not just headline innovations. abraham lincoln said of america that there was a perfect rage for the new. a rage that was right among
makers of products i would judge as well as users, which lincoln was mostly talking about. widget ideas for innovation come from? the german historical school and the young austrian believed innovations originated from a succession of discoveries by scientists and engineers who were misogynist to the economy and the commercial applications of these discoveries by entrepreneurs. but the modern economy possessed the own dynamism, the desire, capacity and scope to innovate. this led to an outpouring of imagining, tinkering, testing and trying out. these economies were capable of indigenous innovation, not just
the exogenous innovation. the system of dynamism was more effective the more open it was to contributors down to the grassroots. and the modern economies were rather open to the grassroots. human resources of initiative and imagination were being devoted to innovating, not just producing and trading. dynamism ran high through the middle of the 20th century. no wonder that was mass prosperity. note the economy before drew on the imagination of such a wide range of the nation's minds. this dynamism required entrepreneurs and financiers, just as the sporadic innovations of an exogenous sort in the mercantile period did.
their judgment and expertise was needed, yet dynamism required further required innovators. innovators with the vision to dream up new products that might and out. yet, the idea that business activity in a free market can always be depended upon to possess the dynamism for indigenous innovation is a mistake. the right stuff is required. innovators often have to buck conventional system, or to break away from traditional ties to family and friends. innovating also requires a social and political climate that is receptive to innovation, despite the disruptions they are apt to cause. was the modern economy desirable? modern economy yielded a sustained rise of material
benefits, including rise in productivity and wages. decreasing disease, decreasing poverty, and increasing inclusion. in the worst factories, workers had at least -- [inaudible] the more radical impact of the new economies was nonmaterial. they changed their nature of life and work where they took root. they were experiential rewards from working on new problems, gathering insights, imagining and creating novel things, testing them in the workplace and trying them out in the marketplace. there were existential rewards of self-discovery and personal growth from journeying into the unknown. the adventurous and exploratory stood of the modern economies, emerging in the 20th century city, cities, was reflected in also in the arts of the period.
of course this transformation depended on the development of institutions that enable the dynamism, including various legal rights, laws governing corporations and financial institutions. the real crux though and one not giving enough weight until now is the rise of modern values, the spread of modern attitudes and beliefs. these modern values can be roughly grouped under the headings of individualism, thinking for oneself, working for oneself, willing to break from one's group. vitalism, relishing challenges, overcoming articles, satisfying curiosity, competing, taking the initiatives, acting on the world. and finally self-expression. imagining and creating, demonstrating an insight by testing it, voyaging into the
unknown and hopes of making a mark. the basic thesis of the book is these modern values finally achieve the critical mass necessary to what the desires in individuals to innovate. this burkett of those required to innovate and boost the willingness of society to give wide scope of innovation. the book documents the modern values from the onset of the modern era to its winding down, roughly from 1490-1940. individualism begin with the humanism of the late renaissance, vitalism with the quests of the baroque era him and the curiosity of the enlightenment, and self-expression with the romantic period.
this cultural heritage belongs to the world, serving to all of the western nations, it is implicit in the book that some of the nations did not fully assimilate into their life. into the values that on. ultimately, severe reactions to the modern economies set in in some countries. the fluctuations and disparities of income, and even in prospects, typical of modern economies and the endemic unemployment led to socialists, some nations move part of the way to a socialist economy. seeing more state ownership as a step towards stability, equality and better employment. generally speaking a socialist spoke of greater development of equal capacity to produce, but
showed no consideration or awareness of the deeper goals of individuals, the nonmaterial rewards deriving from a life of self-expression such as exploration and creativity. socialists neglected to provide for innovation. the social upheaval rock-bottom on in economies led in the 1920s and '30s to a corporatist reaction invoking some traditional values found as far back as the middle ages and even in mercantile capitalism. the corporatist critique in italy, germany and france drew upon a set of traditional values. corporatists held new enterprises invading towns, and hated new money upsetting
traditional ways, wealth and status. so they hated the lack of societies control over the modern economy. the essence of the thought, i believe, was a revolt against individualism and self-expression. for them, what mattered was the good of the nation, not the individual and the government has to decide what is good for the nation. the classic corporatist economy retained private ownership but rests little control to the owners. to place competition in the market with the apartheid -- tripartite system with labor unions, both with little power, and the state. corporate institutions and policies aimed at social protection and solidarity. these economies were conspicuous with their patronage and lobbying, not to mention
cronyism and nepotism. mussolini, a leading corporatist, promised higher productivity through innovation without actually arranging it. corporatists and socialists have continued to this day to claim that their systems boost economic performance, at least on their measures of good performance. the data from 1980s and 1990s do not support those claims. indeed the more socialist economy did not excel unemployment in the '80s and '90s. the more corporatist economies did not excel a growth. those economies have proved so woefully lacking in innovation, indigenous or even exogenous, think they've been unable to realize their own goals. my book tests the thesis that
highly prospering nations require high dynamism, and for that pair has to be high in modern values. to simplify the investigation, the book attests whether to be highly prospering, nations have to be high in modern values. that is done by using the prevalence of several attitudes reported in household surveys, preference for jobs that are interesting that involve initiatives that offer change and present challenges such as competition, to represent the prevalence of modern values. and using the prevalence of reported jobs, job satisfaction as a measure of the prevalence of prospering. among 18 countries in the oecd,
the six countries where job satisfaction was widespread were all above average in modern values. the more prevalent modern values are, more prevalent the job satisfaction is. by the way, the same thing is true of life satisfaction. also the countries where traditional values are more prevalent 10 to report very low job satisfaction. to return to the books narrative come in the postwar years, germany and france enjoyed rapid growth again, and italy found new growth. but it was mostly through technological transfers. there was mounting evidence of less dynamism. in britain and germany, later france, the loss of indigenous innovation appears to have been
considerable, though concealed by continuing technology transferred from america as long as the supply lasted. this is about the late 1990s. in america, the growth rate of productivity net of the part a tribute to the growth of capital to worker, that fell in the early 1970s rather abruptly to about one half of what it had been consistently in the period 1922-1972. and he remained there ever since. with the exception of the use of the internet build out in 1996 1996-2004. what has happened is that innovation has narrowed, diminishing in most established industries, rising in some. predictably, the declines of innovation were followed by a major ballooning of unemployment in all four of the nations in the discussion.
what are the root cause of all that? the book lays much of these declines, not all, -- these declines have dynamism, today rise of traditional and anti-modern or antibusiness values since prewar times. when dynamism was still strong. let me talk about america. there has been a spread of the much discussed money culture. fewer people prefer years of austerity trying to innovate with a doubtful tale, only the nonmaterial board, to working in jobs that are paying very well. in many people, the desire to make money has grown into what is usually called -- a survey of
financial people found that about half of the respondents would engage in insider trading if there is no risk of being caught. this widespread desperation for money must lead to a lot of self dealings by managers in large firms, mutual funds and banks. in america at least there is a much common rise of an adolescent culture. low on concentration and self-discipline. relatedly, it's striking the valuation of achievement, witness the denigration of greater figures. tighter traditional values time many a young person to their families circle of friends over communities. few say anymore go west, young man, go west. a new culture of entitlement
brings pressure on companies to allow employees to meet family needs by working at home your which makes innovation a little bit more difficult. a precept of the new corporatism, the right for social protection from the market, has led to pervasive patronage from politicians to the public, and campaign contributions from corporations and labor unions to the politicians. went established, corporations are protected through special interest legislation such as the evergreen in of old patents, they become less interested in innovation than in rent seeking your aunt after the corporations have got their carveout and the special interest tax deductions, outsiders with potentially
innovative ideas are unable to enter. they cannot innovate, and the insiders can drop their defense of innovation. they don't need to innovate anymore. because they are no longer under threat of industry. the nexus between private and public and education, medical care and pharmaceuticals is impeding innovation in those industries. the state, the idea of the state is need to set important directions for the economy leaves to government playing a larger role in the nation's attempts at innovating, and the ordinary people doing grassroots innovation a small role. and it is the latter people, people doing grassroots innovation, who have the vantage of being up front and having a sense of where to go. yet another of new corporatist precepts, almost move in
lockstep. invites a government in aiding laggard companies, removing companies incentives to try to pull themselves up and to avoid falling behind to begin with. america has strayed pretty far from the pioneer spirit captured by willa cather in the movie shane. and the new values, much of the modern economies dynamism. notches cause of -- notches cause the loss of efficiency which is the focus. the conclusion from this is clear. modern values if they are predominant sparked the engine of human imagination that drives innovation that is central to the modern economy. in contrast, some traditional our anti-modern values directly inhibit attempts to innovate, and some traditional values come if they prevailed over modern
values, foster elements of a corporatist economy that impede or even block innovation. well, what sort of an economy on we attain for now? what is the goods ?-que?-que x censors people have suggested we should say goodbye to growth. well, that the aggrieved that it is especially the nonmaterial rewards that were the great gifts with modern economies. but now prominent economists and commentators are proposing to say goodbye to dynamism and prospering. they are abdicating a focus on the quality of life, and many these like sports stadiums, comforts like clean sheets and security. a well-known report from the oecd views wealth and leisure as the highest goods. my book argues to be a good
economy must be structured to offer participants prospects of the good life. it would be an injustice to deprive people of prospects of the good life. further, the book sees the booklet as a conception developed across six centuries in the modern era by a succession of philosophers and humanists. and by of exploration and discovery. the modern concession, the rise -- [inaudible] philosophers use the word flourishing to characterize this sort of life. it's apparent that prospering became -- is a splendid example of the philosophers flourishing. moreover, ordinary people have no other source of this
flourishing. where are they going to go except to embrace the challenges and opportunities of the business world? so the modern economies were offering the good life to a large number of participants all the way to the grassroots. and economy both good and just most he geared to those with the poorest prospects of the good life, with the poorest prospects of a good life, the greatest prospects possible. and if some people are not oriented for the conception of the good life, a jealous to society will allow them to operate their own sorts of economies. this ranks i guess with deceptive. both the left and the right and the corporatists overlook the world of creation with its imagining inventions come and the resulting personal growth in favor of materialistic criteria
such as leisure and wealth. but their quality of life is no substitute for the good life. the good life is a wild ride through an economy with an open future, and becoming offering an imagined rewards, a life of kierkegaard industry, nietzsche and challenge and brookstone in the coming. that i submit is what we must hope to regain. let me just make one tiny suggestion. i would say that it would be necessary to broaden the whole economy, the spirit of grassroots innovation that rose especially in california in garages, music business, the film industry and in several sparkling companies. and nation must aim for a more just but tory economy for a sort
of grassroots revolution. thank you very much. [applause] >> and thank you very much. this is the commonwealth club of california program, and our guest is edmund phelps, nobel prize-winning economist and author of a new book called "mass flourishing: how grassroots innovation created jobs, challenge, and change." i'm alan auerbach, your moderator. you can your commonwealth club programs on the radio and also see the other programs online at -- as we wait for question to come from the audience and let me ask a couple myself that were profitable by reading your book and also by listening to you. to pick up on something you touched on at the very end of her talk, for many of us who live near san francisco and
silicon valley, it's hard to believe that american innovation has slowed them. down. it certainly isn't evident from life around here. you are suggesting that what's been happening in california has spread. and i wonder if you can tell us what lessons from the innovation we are expense in the bay area and california more generally, what lessons we can learn for the rest of the country? >> right. well, for one thing, most of these operations that have been so successful in california were young, small, though they grew rapidly and became big, moderately big in a short time. well, in the heartland, it seems to me, that if you haven't seen
all the startups, you haven't seen all the garage innovators, the heartland seems to be more under a blanket or under the control of big established corporations. and as i was saying in my talk, those big established corporations have been a political power to elicit from the government a lot of protections which has made it harder for startups to enter the industry, and give the established companies some competition. so maybe, you know, maybe
there's something in the water in california that explains. maybe california is just the place where it's sunny, warm, and why not start rather than somewhere else? but there is a terrific gung ho spirit in so many of the enterprises in california, and, of course, steve jobs is the patron saint of all that. >> one of the issues i was thinking but as i was reading your book, and it was prompted again by your comments when you were indicating that one of the problems of corporatism is the protection of failing enterprises. and you also in your book talk more generally about the safety net and incentives. on the other hand, you also acknowledge the increase in the quality. and i'm wondering how you square
on the one hand, you suggest come here indicate concern about the scope of the social safety net, which i guess applies to individuals as well as the companies, and the indicate that taxes on onto no activity may stifle innovation. so how do you deal with increasing inequality? >> well, i suppose with to a more instruments we can name -- we can aim at both targets. we can do things to open up the economy for startups, give aid and encouragement to startups while, with other instruments. let's say fiscal instruments. we could address increases in
equality. some time in memorial i think, governments have used different instruments for different goals. the one part of the government is promoting a at the expense of the and another part is promoting be at the expense of a. but under certain conditions, it works out okay and there's a net increase in both a and b. we don't require every department of government to be aiming for the same thing. so i'm afraid that's a rather abstract answer to your questi question.
>> it's a difficult problem. one problem you say when you talk about the money culture and behavior of managers and financiers, a problem you see is come in the behavior of managers is shortsightedness, not just business executives themselves but also investment managers. the mutual funds that are investing in companies. you characterize them by looking for quick profits rather than the longer-term payoffs that could result from important innovation. how would you address this problem? either government policies? it seems to be some sort of a cultural shift but is there something the government could do to arrest this? >> i don't know, alan. i don't have much expertise in the financial area.
but i feel pretty sure that if a bunch of experts were to sit down, they could make some changes in corporate governance, give a bigger voice for share owners who might be quite interested in the future health of the company more than the health next quarter. and there surely are, surely there are lots of things that could be done to restructure mutual funds. and, of course, i do think the entire on angel sector has to be taken a hard, we have to take a hard look at the financial
sector because somehow the to and fro, there's not much lending to small businesses anymore to startups. there was a time when i think, i do want to romanticize it too much, but when small banks were not just linking for home purchases, they were also lending a new young company in the town. now i think the new young company is giving any support at all from the financial sector. it's only the rich uncle, the angel investor that might step in. spent and that brings me to a related question about the financial sector. when you are talking about corporatism, one of the concerns you have is the increasing involvement of government in the
u.s. economy as an impediment to innovation and mass flourishing. but if we think about our very recent, very costly recession, many people to get that in large part to excessive regulation, particularly of the initial markets. so how do we determine the right balance? how do we determine the proper role for government, particularly in areas like the financial sector? where, on the one hand, we see problems such as lack of capital to smaller businesses, but we also see excess and there's certainly been a move towards increasing regulation in this area in the last few years. is that consistent with your view of what we need for innovation in mass flourishing? how do we do that? >> well, first of all, i tried
30 hard in the book not to appear to be taking the position that any and every cutback in government expenditure is desirable. i never thought that. what i'm arguing against is that kind of insidious nexus or link between special interest groups and the politicians, but with all the politicians of knocking themselves out to think of ways to help special constituencies in return for campaign support. so it's the character of the
spending that i think is so disastrous. because it creates a climate in which the business managers are led to think more about how to get a better deal out of washington, how to get a carveout or get some special interest tax deduction out of washington, which takes a lot of time and thought, but then that comes out of the time and thought that my been given to innovation. it just poisons the whole business atmosphere, it seems to me. so it's not that i want to see dealt with, and i -- elsewhere
in the book, i certainly put in a good word for subsidies in order to get more disadvantaged people into the business sector to have some experience of the business sector so they can contribute as potentially innovative people, and also so that they are better role models for their children, so their children have some role model that would help them to see what business is and what there might be in business for them. and i even suggested, done some work with leo tillman that the federal government might want to start up sort of a first national bank of innovation that would go out and, bank would go
out and borrow, which issue government-backed bonds, pain very low interest, and the bank with its many branches, would lend to start up companies to help them get on with their attempts to bring their innovative products to market. that idea is based on the farm credit system. we already have in the federal government a bank like that to help farmers with decisions about seeds and fertilizers and all that. so why do we carry out the same idea with innovation? so i'm not an antigovernment guy. i'm not even arguing for a net decrease of spending. but i am certainly arguing for a contraction of all this
corporatist spending which has such an insidious effect upon the economic spirit. >> speaking about areas of government spending where you might see benefits, utah in the book about the role of education as creating innovation. you also suggest that today's speaking, likes the attention spanned to study the classic. passion we reform our educational system saw on the one that it provides a perspective that students need to innovate while also ensuring that they have the basic skills required to innovate? >> well, i can't answer all of that. you wouldn't want to listen to me if i could, but i've been saying with a little twinkle in
the eye ideas that i would like to see the classics brought back to high school education, and maybe middle year, middle school as well. when i was growing up, i read a lot of adventure stories, and then in high school we certainly read shakespeare and other works of the imagination. and i think these are disappearing from curriculums in public schools in this country. and somebody told me that julius caesar cannot be made required reading by the new york state regents because they found that
many students cannot get through it. though it's not a particularly long or difficult life. so i think the government is going to have -- i know there are all sorts of constitutional issues about the federal government and education, but i think the federal government is really going to have to spend a lot more, and use some added spending to address the problem of renewing the sense of adventure and exploration and discovery in the schooling process. >> well, it's now time for our audience question period, and we've been picking the leading a questions. so let me begin. the are a couple of questions you're either with, asking what
that their reach and adding large numbers now. this will go on and intensified up until about 2020. so we are losing old folks such as myself from the economy. does that have any consequences for dynamism in the administration? i suppose when you lose a large number of people, they're some loss there. we don't need to debate whether that losses bigger than if young people these the labor force. perhaps there's some age at which a person is most valuable and would be most costly to
lose. but it's not age 21 and it's not age 80. i don't think that the slowdown of information that i mentioned in my talk was the result of anything demographic going on into 1970s. that was way before -- the exodus from the labor force. flow of immigrants. i don't think there's any doubt that immigrants have been a powerful force for emigration in the country from the beginning.
of course at some point everybody in the country with the democrat. but i think it would eat good for emigration a lot of the technical people greased the wheels of the innovation project were a lot common. at the same time, additionally i would say one of the things about immigrants as they usually arrive without a lot of wealth in hand. so they're very motivated while people who have been here for generations have a lot of wealth. and people with a lot of love
they beat don't want -- they want to sit back and enjoy it rather than take the big chances in innovation. >> here's a question to put you on the spot. is there a national organization or politician that you view as a strong proponent for dynamism and opposition to corporatism and socialism? >> gosh, what an interesting question. i can't think of one. if i am right, he's got to be a lesson in that. it just shows how endemic is being asked.
i know that some of you might think of i.t. he has been a kind of opposition for us. but it seems to me the tea party people are not talking about corporatism. they're certainly not proposing creative new government programs to get dynamism going again is she simply want to cut spending. i don't think they are providing any ammunition for my position. >> here is one about the labor force. do you believe american workers today have less of a work athletic than they did in the
past? most indicators suggest that we are working harder and longer than our parent. >> well, i find that a hard, complicated question. i do think that there is this money culture that's just doing it for the money, which tends to crowd out doing things for the excitement of it. i do think that's very bad and probably infects the labor force across the board for ordinary workers to management. i'm surprised -- yeah, i guess
it is true -- i don't know. >> we probably want to not talk about the last few years given the seriousness of the recession. i think prior to that it was not. illustrate the u.s. workweek is longer than the workweek of most other countries can >> that's true. >> that i don't think that tells us very much about what may have happened to attitudes towards innovation. people might be working long hours in law firms and hospitals and i think we have increasing higher proportion of the labor force in those long work day, workweek industries.
so maybe that's what we're looking. >> here's a question that relates again to the issue of the income distribution. it seems like a lot of the jobs we are creating a low-wage service jobs. the kind of jobs that probably you would suggest don't feel the same kind of job satisfaction and challenges the easiest part of the dynamic economy. where those jobs coming from? >> the good ones? how are we going to get good ones? >> locomotive got to crank up the innovation again. and crank up the dynamism that underlies that. i think -- you know, i said a few things in my talk about that
maybe we could somehow imitate california in many ways. but i think, you know, we just got to have a national conversation about what we want our economy to do, which of course will depend upon what sort of working lives we want to lead. that belief and of course to a national conversation of what we want the government to do. even if some clever little thing thing -- i still feel kind of silly mentioning it because what to do is 100 different things i think and know one or two or
three or 10 things is going to turn it around in a big way. >> on the issue about the government government can do, particularly in dealing with corporatism, which he described as one of the problems we have, is there a role for policies? should we have a shift in our pursuit of antitrust measures? should the justice department be more aggressive in their particular focus they should take a >> gee, i would certainly think so. i am not industrial context, so i yield to them on this question. it seems to me that we have some big corporations out there with a lot of folic out elastic power
and, as i mentioned in my talk, corporations have all sorts of weapons the congress has given them to give them advantages over new insurance and scare off your interests. so one of the things we might well do is break up some of those big corporations. for each corporation, for each piece of an old corporation would be like a new day with new opportunities, new thinking required, new thinking invaded.
it would be like instant start a. the québec corporation chopped up into 10 pieces. you would have right away 10 startups with all the flexibility and kind of a sense of the new chance. >> here's a question about a big problem and how increasing innovation might help. how do we increase the kind of innovation needed to solve things like global warming? is this the kind of thing that would come about naturally as a result of greater dynamism in this area?
>> well, i've yanked the american innovation especially when it was strong and it is very strong up until 1940 and produced on up until the early 1960s. at innovation, you know, created a lot of to check meeks, many of which were help pull in dealing with pollution and environmental problems. that is still quickly for which there is a positive fallout from expanded the rate of innovation in the american economy. and if some new innovations had the reverse effect, or i can go
when an offset tax in such a way as to make their product more expensive. i am thinking of cracking. friday and is a wonderful innovation that is leading the oil back the picture. i thought we didn't want to be using so much boil anymore. but i don't think we should condemn them. i think we should be taking more seriously the idea of taxing things that inflict damage on
the environment the really scandalous for political reasons the congress can't get around doing not. i seldom say a very good word about europe. europe has been great about charging prices for fuel keep down the consumption. >> there's a question here and i have one of my own related to this question at the national comparison. you express concern about the american economy, although you have very nice things to say about an earlier era. these strengths even out in the american economy are missing elsewhere. western europe aside from what you're just talking about, china. what nation would you hold up as a model of innovation and how
denmark is a relatively innovative place. but i don't think that denmark has any kind of secret with which would help us a lot. justin denmark, posters of things companies do. maybe the question is pushing me to say something about china. i've been going to china quite a lot in the last four years. turned out to be a rapidly growing things. when i first started going, i thought these chinese just cut the american technologies looking at that transfer. they have some problems about innovating.
they have some problems about being different from breaking the mold or standing apart and all of that. so i assume they're indigenous innovation is zero. now i'd think a good estimate of the rate of exogenous -- the rate of indigenous innovation in china would be something on the order to save their indigenous innovation alone causes the gdp per man hour to be growing at about 2%. it is growing at 7%, that's because other stuff is coming along at transfers from the u.s. and also to analogies installed near the coast are not refusing
the interior. so there's a big boost in growth they are. so zero is wrong. maybe 2% is about right. that's actually little more than what the u.s. is doing right now. i think the rate of growth of output per man hour, that has to be attributed to indigenous innovation in the u.s. is morally 1%. so although both one and two are small numbers, china is doing twice as well as the u.s. can we learn from the chinese? i don't know. actually have learned some things from them. i'm sure there are plenty of things in the u.s.
>> we've reached the point in our program or there's only one more brief question. not to put you on the spot again. >> right now, we seem to have the problem of spending another things were doing. we don't seem to be accomplishing very much. you've already alluded to that. there are a law does in dishes things he would have us do in the u.s. a lot of it will start in two. how to get it to have input >> well, i guess we have to stop doing that things of making services available for doing work that could being.
>> i don't offhand see very many good things we've done. i think we can say to cheers for medicare initiative was in many respects a good idea to systematize the medical care so i'm not going to have any more crazy systems we had before. on the other hand, it's not at all that that system is going to
perform well and maybe i'll have to go back to surgery again. otherwise, i don't see much -- i haven't seen much of what i would call progress. i haven't seen progress and certainly haven't seen progress in dealing with innovation. instead, what we've seen is a lot of propping up. a lot of social protection. a lot of special favors. this is predominantly bad. we've got to start doing not. >> well, i'm not sober note, i want to offer our thanks to dr. edmund phelps and author of a new book called "mass flourishing: how grassroots