On the Micro-Foundations of Creative Economy: Life Satisfaction and Social Identity

Abstract

Incorporating the unavoidable changes manifesting in the behavior of individuals as an outcome of evolution at the level of development of the economy and society, we pinpoint a new theoretical background requiring the reconfiguring of the micro-foundations of economic theory regarding the creative economy. We thus set the theoretical micro-foundations of the creative economy where the main microeconomic incentive lies in life satisfaction attainment rather than utility maximization. At the macroeconomic level, we propose the pairing of sustainability with the creative economy. The objective is met through the vehicle of social identity derived from the responses to a questionnaire distributed in Greek society. Through principal components analysis, we locate two sets of variables shaping life satisfaction: the exogenous influences within social identity (state of health, age, and level of education) and the endogenous primary influences within social identity (lending, cultural change, and happiness). Each one of these variables is determined by other interpretative variables. Furthermore, we observe a weakness of economic policy to influence life satisfaction in advanced Western societies, resulting in a paradox of the economic toolkit. Our findings are relevant for policymaking to promote life satisfaction, especially within the creative economy context.