“Necessity is the mother of invention” says one old proverb. What better time than right now to think and plan for new, innovative approaches to problems facing all of us?

Unlike the various candidates trying to garner votes, I am neither a politician nor on a “do good” pedestal.

I am a trained, retired educator who spent the majority of my career teaching college economics. Fortunately, I was also able to consult to entrepreneurial ventures, helping start-ups to avoid the many pitfalls that cause some 90% of ideas to fail.

Among many others, the economic assumption of “maximization” was chief among them.

It is basically unheard of in the American context not to maximize anything, especially profits. The events of last week show graphically the dangers inherent in maximizing as major American institutions failed.

It may be highly idealistic to think that individuals, rather than the federal government, can make effective changes in the approach to American business.

“Satisfycing”

However, individuals are slowly warming to the principle (eloquently coined by Nobel recipient Herbert Simon in 1978) of “satisfycing” rather than “maximizing.” Based on Simon’s writings and lectures, “satisfycing” refers to a decision-making process that seeks a satisfactory answer rather than a maximized solution.

The question, of course, is a philosophical one. Conventional wisdom teaches that maximization is an overall goal of economics.

That was, of course, before the current domino in the financial crisis fell last week.

There are, however, proven positive and realistic applications of “satisfycing,” provided that the basic nature of mankind can be swayed.

One immediate, feasible example lies in the reclamation or restoration of what is less than euphemistically referred to as “slum housing.” Often, these blights of abandoned houses, lots overgrown with weeds and crime-riddled neighborhoods have arisen through economic or social dislocations. Many of those are directly attributable to maximization of profits at the expense of individuals’ livelihoods and their homes.

The reclamation of slum projects is not new.

The most famous and seminal experiment of slum neighborhood reclamation is perhaps Brooklyn’s Bedford-Stuyvesant section. The decline of the neighborhood can be traced to various business and social factors tracing back to the eras following World War II. It was not until the late Senators Robert F. Kennedy and Jacob Javits tackled the problem in 1967 through the formation of the non-profit Bedford-Stuyvesant Restoration Corporation.

However, it took much of the 40 years to succeed since Kennedy and Javits sowed the seeds of the reclamation of Bedford-Stuyvesant.

Despite massive injections of cash and substantial political influence, in the short run, Bedford-Stuyvesant struggled. For most of its 40-year history, slum conditions, including drugs, violence and a generally segregated character of the neighborhood, prevailed. Many critics proclaimed the social experiment a failure.

It was not until after the turn of this century that “gentrification” occurred in the area. Today, Bedford-Stuyvesant has become a thriving, multi-racial neighborhood of New York.

“Gentrification” carries with it its own set of social ills. It generally occurs when middle-class individuals move into a depressed area and displace poorer or racially diverse residents. The Haight-Ashbury area of San Francisco, the haven of hippiedom in the 1960s, was another World War II slum until the hippie movement and later the gay explosion in San Francisco resulted in “gentrification,” restoring it to a culturally diverse neighborhood.

Urban renewal across the nation had various positive and negative effects.

Success, however, took the major portion of half a century. Social criticisms range from big business profiteers, to failure to address the fundamental requirements of poverty, to environmental damage.

Greater immediate success could have been achieved had an understanding and acceptance of the concept of satisfycing, rather than maximizing, been prevalent in economics and business thinking. More importantly, reliance on the individual, rather than on the federal government’s forced income redistribution policies, could provide the necessary fuel to success.

The concept may be idealistic but is certainly not without precedent.

Habitat for Humanity

The “Fund for Humanity,” which achieved fame after former President Jimmy Carter’s involvement in 1984, spurred Habitat for Humanity to international fame. Founded in the 1940’s, the non-profit, non-governmental organization now exists in 90 countries. Branches exist in all of the 50 states of the United States. The organization builds new homes for needy individuals on a non-profit, no interest basis. The privately funded organization proudly points to its record of constructing more than 250,000 homes. It relies heavily on volunteers, together with individual emphasis on pride of home ownership coupled with an established work ethic.

While Habit for Humanity focuses on building new homes for needy families worldwide, a slow trend is emerging in slum reclamation using the various applications of the theory of “satisfycing.”

Individuals who share the philosophical perspective work with private community leaders to provide slum reclamation on a non-profit basis with zero or low interest rates, applying some of the ideas of Habit for Humanity.

Individual experiments are being conducted especially in towns and cities that have experienced lost jobs and economic dislocations before the current financial crisis. Abandoned homes quickly attract the various elements of slum creation.

The positive impact many of these individual experiments are making, however, is hardly headline-grabbing. Individual projects often require close, individual supervision. It may require three to five years for concrete effects to be realized in a particular neighborhood. That timeframe, however, is significantly less than the 30 or more years it took for Bedford-Stuyvesant and others to achieve success.

Moreover, this mode of reclamation of distressed communities does not have to carry with it the inherent pitfalls of social or environmental ills too often resulting from governmental projects.

The private, individual experiments have resulted in social improvement in the community, reduction in high crime areas and the creation of new jobs. Most of the new jobs created are in small business, creating both a new sense of independence and self-esteem to accompany the new status of home ownership.

Acceptance and exercise of the principle of “satisfycing” can result in upgraded and improved sections of the town or city with stable residents who were previously marginally or unemployed “slum residents.” Considerable social and community benefits can be obtained without the stigma of federal government “giveaway” programs at the expense of the taxpayer.

Prescient individuals not tied to conventional economic theories can both create substantial tax write-offs under the satisfycing principle, while creating social benefits directly in their community without a massive federal bureaucracy and the control it invariably entails. More importantly, it can restore the self-worth of individuals who may have been forced, through the effects of profit maximization, to live in less than desirable circumstances.

Related posts:

1. New Executive Order: National Emergency to Stabilize U.S. Financial Crisis
2. Did the Community Reinvestment Act Lead to the Present Financial Crisis?
3. Bretton Woods II: Will a New Financial-World Order Solve the Economic Crisis?
4. What is the best analogy to help us understand the financial crisis?
5. Europe at Risk: The Next Possible Round in the Financial Crisis