We're no longer surprised that so many people bow down to the
Invisible Hand of economics, worshipping its messenger coins and notes,
and attending its oracles, the Wall Street analysts. Adam Smith, the
18th-century originator of the invisible hand metaphor, took pains to
affirm its workings should be tempered by moral considerations and
should not be interpreted as the will of God. Those emphases have been
lost.

People who interpret the metaphor in supernatural terms, despite
hearing that “You can’t take it with you,” thus appear to believe they
can take it with them – amassing more wealth than they could spend in 30
lifetimes, yet failing to do any good with it in the here and now.

Smith’s work created classical economics. It held that efficient
distribution of goods to those who need and can afford them leads to
maximum profit for the intermediaries. The maximizing principle
persisted in neoclassical economics. It was named, by none other than
Karl Marx, “capitalism.”

Until recently, it worked well, despite its role as a secular
religion. Certainly better than economies that were run by live, visible
human central planners. But now that the climate crisis is upon us,
it’s evident that laissez-faire economics, with its emphasis on
“maximizing,” has led to use and waste of resources far exceeding
reasonable need.

It is time to take a fresh look at lesser-known ideas of capitalist economics.

In the late 1940s, (later, Nobel Laureate) Herbert Simon
introduced the notion of “satisficing” as an alternative to maximizing.
In essence, it emphasized “enough” rather than “the most.” My own
mentors, Abraham Charnes and W.W. “Bill” Cooper, both colleagues of
Simon at Carnegie Tech (now CMU), put Simon’s idea into mathematics with
their “goal programming.” The math of operations research, previously
oriented only to maximizing (profit) or minimizing (cost), could now
handle considerations of “enough.”

Simon’s was a seminal work of what’s now known as behavioral
economics, though “satisficing” does not seem to play a prominent enough
role in the new discipline. Unlike Adam Smith, Herb Simon did not back
“satisficing” with moral arguments, instead advocating its use when
available information or computing capacity made maximizing impractical.

I go on record here emphasizing the ethical argument for embracing satisficing.

In the journal Green and Low-Carbon Economy, I wrote that we need an economics

·      focused not on efficiency (equilibrium) but on flexibility and perpetual disequilibria;

·      an economics that penalizes – rather than rewards – the creation of negative environmental and social externalities;

·      an economics in which incumbent industries will not attempt to quash newer and greener technologies;

·      and an economics that encourages enterprises to think long-term, rather than obsess about quarterly earnings.

The Earth can provide enough, especially with advancing
technology, to feed, clothe, house, and warm every human on the planet.
Of course we need machines that yield, for example, maximum thermal
efficiency. We must, though, carefully consider when to maximize and
when to satisfice.

Bill Cooper was fond of this bit of doggerel attributed to Kenneth Boulding:

“The upshot is, we cannot tailor

Policy by a single scalar,

Unless we know the priceless price

Of Honor, Justice, Pride and Vice.

This means a crisis is arising

For simple-minded maximizing.”