The following is a summary of Edmund Phelps' keynote address to attendees at the Fifth Conference of Government and Economics held at Tsinghua University, Beijing, on April 22, 2022. Dr. Phelps is a 2006 Nobel Laureate in Economics and McVickar Professor of Political Economy at Columbia University.

On April 27, 2023, the Fifth Annual Conference of Government and Economics, co-hosted by the Society for the Analysis of Government and Economics (SAGE) along with Tsinghua University's School of Social Sciences and the Academic Center for Chinese Economic Thought and Practice (ACCEPT), was broadcasted online. Edmund Phelps, a 2006 Nobel Laureate in Economic Sciences and McVickar Professor of Political Economy at Columbia University, delivered a keynote address to attendees at the conference in a video presentation.

Phelps contended that innovation often does not in fact come from inventions or discoveries made by scientists. In his book Mass Flourishing, he pointed out that a large number of new products and methods that emerged in the 1880s primarily relied on the wisdom of a multitude of ordinary people. Innovation occurs within the business sector of the economy itself, from the new ways of thinking spontaneously conceived by workers, managers, or ordinary employees to new ideas for producing better products or new ideas for establishing better methods. The dynamism of a given country, and especially in those cases where the level of economic dynamism is comparatively high, can generate a unique set of economic activities, driving the expansion of associated financing, development and marketing sectors and the cultivation of a cadre of managers, which in turn can propel rapid productivity growth, higher wages, and increased levels of employee engagement and satisfaction.

He suggested that whether a country has the dynamism for indigenous innovation does not depend on whether it maintains a free market, but rather on whether its people have the desire to innovate. Innovators tend to stand apart from mainstream beliefs, have accumulated ample insight, and are capable of thinking outside the box. They share the values of initiative, competition and a desire to achieve, all of which have a positive and powerful impact on economic performance. Of course, this dynamism also requires a social and political climate that supports innovation. For China, there are certain difficulties, such as a difficulty in obtaining financing from the banking system, the tendency for companies to be too hierarchical, uncertainty about the prospects for undertaking research and development, and concerns about whether the government would support exploration into uncharted territory. Even so, Phelps remains upbeat that China has the underlying capacity needed to propel this kind of innovation and looks forward to seeing how well the country progresses in this direction over time.