Broad outline of presentation
By Jem Smith and Sarah Lewis
My personal interest
As an organisational psychologist I am fascinated by the unquestioned acceptance, in most organisations, of ‘efficiency’ as the highest organisational priority.
The pros and cons of an ‘efficiency mindset’
Economic ‘efficiency’ brings immense benefit at the macro (societal) and organisational level. It also brings some unintended consequences, particularly mindlessness, a lack of redundancy (in complexity terms e.g. overlap or slack – with the attendant space for flexibility, purposeless interaction, incidental learning etc.), and a lack of respect for the full nature of being human. Efficiency is located in the Tayloristic model of organisation as a problem to be solved. At a society level it introduces division and separateness (you shop at Sainsbury’s, me at Lidl’s so our paths don’t cross).
Societies have found various ways to mitigate some of these effects. Here I want to focus on the mitigation of the division and separation caused by efficient societal organisation. For example in feudal times we had Noblesse Oblige, the idea that the nobility had an obligation to look after and protect those who lived on the land that God had granted them. This made them worthy stewards of their inheritance. For centuries religious beliefs (most include alms giving) supported care for your neighbours and in the UK for the 50-60 years after the Second World War, the social compact (Welfare State), saw this role taken over by national governments. All of these work to maintain collective responsibility and awareness. They are, in effect, relational agreements.
Today, the fragile ‘balance’ of the free market economy with mitigating social processes is breaking down. The relational agreements are under considerable strain. Behaviour is not as constrained, for many, by religious expectations as it once was; and the social compact is being dishonoured and the welfare state dismantled. At the same time financial systems are malfunctioning: they are not efficiently ensuring maximum wealth production, and, they are increasing societal inequalities as the lack of available capital for investment is adversely affecting ‘the small people’. It is a great time to be attending purposefully to this ‘balance’ that gets the best of what the free market does (its strengths) and the best of what relational connectedness can offer.
Is this an opportunity to forge a new balance of ‘free market economics’ and ‘relational agreements’? Can we tweak our understanding of efficiency to accommodate this? Does our increasing ability to measure happiness, wellbeing and maybe even societal interconnectedness allow us to include these things in ‘what is measureable’ so that we can track, monitor and calculate how ‘efficient’ the market is being in a different way to present?
Introduction – What is an economy?
An economy is a system to turn resources (land, machines, people, fossil fuels etc.) into goods and services and then to distribute these to people in the economy. The best economic system is the one that makes the people in it happiest.
However there is only a limited amount of goods and services that can be produced under any system but people always want more. Economics is said to be about ‘using limited resources to best satisfy unlimited wants’. Also, by producing goods and services by working people give up their leisure time, which makes them less happy.
Choices must therefore be made, the aim of which is ‘efficiency’.
Why is it so important in achieving efficiency to use prices? The basic answer is that, usually, prices don’t lie. Thus while people may tell you that they are willing to trade more expensive coffee for better terms for coffee growers, i.e. that knowing fair trade is happening makes them happier than getting cheap coffee, it isn’t until they see the price of fair trade coffee compared to Nescafe and then buy the more expensive one that the economy really knows that they want to make that trade-off, and therefore that it will make them happier.
The aim of Economics is efficiency. There are two types of efficiency: productive efficiency (where you are producing the most goods and services that you can) and allocative efficiency (where you are distributing the goods/services in the way that produces the most happiness (what economists call ‘utility’) in society).
These can be achieved without uniformity in ideological approach. Thus you can have a free-market capitalist system in the production of goods and services and a much more socialist one in their allocation and still achieve efficiency in both.
Theory and experience has show that productive efficiency necessitates a free-trade, market-based approach (except where there is clear market failure, e.g. Healthcare, Education, Pollution) whereas allocative efficiency can be achieved in many ways, basically because it is unknown if inequality in the allocation of goods/services affects the aggregate happiness of society.
Thus Sweden, with its high growth and equality, and the United States, with its high growth and high inequality, are from a strictly technical point of view both equally successful economic systems, whereas Soviet Russia, with its state control of production and so low growth, was not.
There was a lot of discussion and interaction in the session; this is the document we produced afterwards that is a summary of those discussions.
Summary of thoughts from Ghent session: ‘Moving towards an economy of interconnecting strengths’
The focus on happiness but from different perspectives.
The economy is connections, between people and resources and production and sustainability.
There is a connection between resources, how they are used and the sources of those resources and how sustainable they are.
There is a connection, though an imperfect one, between prices and value in the economy.
What makes people happy today?
It is important to change the view of the economy from a variety of competing models (Socialist vs. Free market etc.) to one of a family, each member with different strengths and weaknesses but working for a shared interest.
Organisations within the economy need to move towards being allocatively efficient as well as productively efficient.
Within organisations we must become braver and more independent in our behaviour for the good of the organisation and wider society, despite the risk to our jobs and pensions.
We must learn to look at the economy not so much from a perspective of scarcity as from abundance, particularly in terms of human potential.
Technology will create greater openness and access to information to the members of the economy, giving them greater power to make decisions affecting their own happiness.
This will cause the economy to move from being driven by the invisible hand to the transparent/visible hand.
How do decisions we make about our how to achieve our happiness affect the happiness of others, particularly the young, now and for future generations?
We can take this into the world by having the children’s fire burn in every boardroom and school and community organisation.
We must educate the young on the value of strength as well as one the value of material things.
How can you connect to the abundancy of the unlimited?
What image do you have of the economy?
When were you most proud of your work?
What was the best office (?) publicity that you have seen?
Are you willing to stop thinking about £ $ € adding value, and start thinking about value?
Are you prepared to fire all your employees, and start working with friends?
How would it be to offer your competitors your help? To be combined better for your clients, employees etc.
Can you re-define happiness?
How can we encourage children to ‘discover’ what created happiness and ‘dream’ as soon as possible?
How can we visualise the value of happiness?
What are the KPI’s of happiness?