Mental Freedom and Growth: Dignity and Stigma in a Schumpeterian Economy
Year: 2026
Type: preprint
Abstract: New knowledge comes not only from research labs but from anyone who departs from custom: Schumpeter's entrepreneur who carries out new combinations, and Hayek's man on the spot. I call such people free minds and ask how a society's treatment of them shapes long-run growth. Society rewards or punishes free minds in two ways: with money, a share of output that only they receive, and with dignity or stigma, whose force grows with the share of conformists. In a Solow economy where knowledge grows faster when free minds are more numerous, long-run growth per head is set by the steady-state share of free minds. When money and dignity point the same way, the share goes to one or to zero. When they conflict, two growth regimes coexist, separated by a threshold, and they appear and disappear at a critical strength of dignity or stigma given in closed form. Near it, a small and temporary change in either reward moves long-run growth by a discrete and permanent amount. Money combined with stigma, the treatment Hayek saw given to commerce, is a one-way door to high growth. Dignity combined with money penalties sustains at best a partial share, and a temporary repression can end growth for good; when dignity is strong, this requires punishment beyond the loss of income. Every closed form in the paper is checked in the companion SymPy file derivations.py (https://doi.org/10.5281/zenodo.23763449).
Author: Hwang, G. George
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7224660782