Individual and collective mindsets are not merely passive aspects of an economy but active contributors to its success or failure....

 Individual mentality and psychology significantly influence low GDP growth by affecting decision-making, talent allocation, and societal culture, as evidenced by research on cognitive biases, personality traits, and intelligence levels. Factors like a society's psychological make-up, including personality traits such as conscientiousness and the presence of an entrepreneurship culture, correlate with differences in economic growth. Similarly, the average cognitive ability of a population and the efficient allocation of talented individuals into suitable roles also play crucial roles in a society's economic development.

How mentality and psychology impact economic growth

Cognitive Biases:

Psychological biases can lead to poor economic decisions at the individual and societal levels, which can slow economic growth.

Personality Traits:

Specific personality traits, such as high conscientiousness and traits linked to entrepreneurship, can contribute to a more dynamic economy.

Talent Allocation:

The efficient allocation of talent within a society—where individuals with higher abilities perform more complex tasks—is strongly correlated with higher levels of economic growth.

Average Cognitive Ability:

The overall level of cognitive ability within a population is a significant factor in economic development and can impact innovation and national income.

Leadership and Motivation:

Effective leadership that inspires vision and promotes collective goals can drive economic progress, while power that is used for corruption or control can hinder it.

Societal Mindset:

A society's collective mindset, influenced by psychological factors, can either foster innovation and growth or create an environment of fear and instability.

Psychological factors vs. economic fundamentals

While economic factors like physical capital, labor force, and technology are traditional drivers of GDP growth, incorporating psychological factors provides a more complete understanding of economic differences between regions and cities. Psychological research demonstrates that these individual and collective mindsets are not merely passive aspects of an economy but active contributors to its success or failure.