Kindness as Economic Theory

It is an odd coincidence that Misura launched almost exactly 250 years after the birth of modern economic theory and capitalism, if we date both from the publication of Adam Smith’s The Wealth of Nations on 9 March 1776.

Newton’s theory of gravity was useful until relativity offered a better account of reality. It is not the mass of one body pulling another that explains attraction, but the way mass bends space-time and produces that effect. Classical economic theory has worked in much the same way. Useful for a long time. Until reality started asking for a better explanation.

We are living through a particularly unstable global moment, one in which it can seem frivolous, even innocent, to speak about beauty or goodness. In fact, they demand the opposite. They require a brutal kind of honesty, and a very hard kind of will.

Adam Smith was wrong about at least one thing. The pursuit of private gain does not lead to the maximisation of collective benefit. And nowhere is that clearer than in game theory.

Economists tend to argue that the solution to the Prisoner’s Dilemma is perfect information. The logic goes like this. If both sides can negotiate, they can agree to cooperate and reach an outcome that minimises their joint losses, even if it does not minimise each individual loss. But that is not actually true. Perfect information is not enough. The only thing that makes a collective optimum possible is the willingness to sacrifice individual gain for someone else. That is goodness. And Elinor Ostrom, the first woman to win the Nobel Prize in Economics, showed that it exists and that it makes economic sense.

Climate negotiations will not succeed until we are willing to give something up for the benefit of others. If we refuse to place someone else’s interest above our own, everyone loses. Just as in the Prisoner’s Dilemma. It is easy to abuse power. The real value lies in choosing not to. Goodness is the only thing that can save the climate, and species, and resources, and equality, and democracies, and ourselves.

To understand that is to understand the beauty hidden in the world. Goodness is not accidental. It has a logic. It is part of our species’ evolutionary success, written into hormones such as oxytocin and serotonin. Rousseau was right. Human beings evolved to be good. Once you begin looking for the beauty hidden in the world, you end up, inevitably, believing in goodness as a force of progress.

It is easy to surrender to negativity. That too is part of our evolutionary inheritance. Psychologists call it negativity bias. It helps us anticipate threats. Except when it ends up feeding them.

This is not about heroes or martyrs. Goodness is humble by nature. You only have to look around. Look for beauty. Find goodness. Catch it. Become part of the solution, not the problem.

By Alberto Muelas – Partner for Impact and Prospective at Harmon and Head of Misura Economics