Susanna Sällström Matthews, Fellow and Lecturer at Cambridge Univ 1997-2021 will present a theoretical model that provides logical foundations for the old economics intuition that virtue and profit is a hierarchy of long and short term economic motivations that support innovation and growth.

Susanna Sällström Matthews models purposive motivations to improve future production possibilities, and shows that a trade-off between maintaining and enhancing resources arises. That freedom is an important determinant of economic growth is undisputed. However, the argument used is usually with reference to giving entrepreneurs the freedom to succeed by realising all profitable opportunities, and the paternalistic argument for limiting people's freedom is to protect them from failure.

The model presented here explains why tools for wealth creation, i.e. social norms, technology and prices are the opposite to dynamic laws and why they can be used both to enable and to hinder growth, and why we cannot tell them apart unless we understand dynamic economic laws. A geometric argument is presented that explains some psychological evidence on failing and progress and that is consistent with dynamic economic laws that maximise our rate of progress.

The model also explains why the optimal degree of freedom should not be constant, but change. We need to alternatively let go of control, to give people the freedom to fail - and seize control again to protect them from causing themselves and others too much harm. Over time, as our collective consciousness evolves, we can increase the amount of freedom.

Finally, the model explains why the recent experiment with economic liberalisation enabled a lot of good: allowing more failures raised our collective consciousness about the nature of dynamic economic laws.

After receiveing a PhD from the Stockholm School of Economics on the dynamics of Price and quality, Susanna Matthews Sällström took up a post as Stanley Smith Research Fellow at the University of St Andrews in 1997 and was appointed University Lecturer att the University of Cambridge and made a Fellow of St John's College Cambridge, and Fellow of CEPR in 2000. Susanna's main research interest is about improving our understanding of the interaction of several dynamic mechanisms at work in the economy that have to do with that we are collectively learning how to create more wealth from finite resources as we attempt to create wealth.