Praiseworthiness and Endogenous Growth

30 Pages Posted: 27 Mar 2008

See all articles by David M. Levy

David M. Levy

George Mason University - Center for Study of Public Choice

Dalibor Rohac

Legatum Institute; King's College London

Date Written: 29 February 2008

Abstract

This paper demonstrates that increasing returns to scale can be sustained when agents care about praiseworthiness of their conduct. Unlike the desire to attain approbation from external sources, the notion of praiseworthiness seems to have been neglected by contemporary economic literature. Yet the relevance of praiseworthiness as an internal motivational force was stressed by a number of classical economists. We construct an endogenous growth model in which agents derive utility not only from their consumption but also from praiseworthiness of their action. In such a setting, the motivation by praiseworthiness is able to generate positive and accelerating growth of output per labourer in steady state. The main implication of our model is that the existence of increasing returns depends critically on presence of sufficient approbation attributed to creativity. Furthermore, the presence or the absence of these rewards may be suceptible to explain the cross-sectional differences in growth rates, growth miracles and growth disasters.

Keywords: research and development, approbation, praiseworthiness, endogenous growth

JEL Classification: B12, O31, O41, N00

Suggested Citation

Levy, David M. and Rohac, Dalibor, Praiseworthiness and Endogenous Growth (29 February 2008). Available at SSRN: https://ssrn.com/abstract=1113179 or http://dx.doi.org/10.2139/ssrn.1113179

David M. Levy (Contact Author)

George Mason University - Center for Study of Public Choice ( email )

MSN 1d3 Carow Hall
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United States

Dalibor Rohac

Legatum Institute ( email )

11 Charles Street
Mayfair, London, London W1J 5DW
United Kingdom

King's College London ( email )

Strand
London, England WC2R 2LS
United Kingdom
07585303666 (Phone)

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