Creating Economic Value by Design

John Heskett

School of Design, The Hong Kong Polytechnic University, Hong Kong

This paper examines the influence of major economic theories in shaping views of what constitutes value as created by design. It begins by examining Neo-Classical theory, which is dominant in the English-speaking world and underpins the ideology of the so-called “free market” system. Its focus on markets and prices as set by market forces are believed to solve all problems if left free from government interference. The implosion of this system and its emphasis on unrestricted individualism is a crisis of theory as well as practice. There are, however, other economic systems that relate to design in a more positive manner, such as Austrian theory and its belief that users determine value; institutional theory, which examines the influence of contexts and organizations; or New Growth Theory, which asserts the power of ideas as an unlimited resource in economic activity. These offer a window to business activity that enables designers to communicate the value of their work. Moreover, if the practical implications of these theoretical positions are understood by designers, it becomes possible to construct an extension of them that specifically addresses what the economic contribution of design can be in terms that business managers can understand.

Keywords – Design, Value Creation, Innovation. 

Relevance to Design Practice – Communicating clearly the value of design that designers can contribute to any organization is a continuous challenge. Understanding economic theory as it shapes business attitudes and conversely, how design can shape economic value, can be a valuable means of integrating design into business thinking.

Introduction

This paper is an attempt to summarize work undertaken over several years on the relationship between economics and design. The origins of the project go back to meetings with officials of the U.S. Federal Department of Commerce and the Council on Competitiveness in the mid-1990s. The officials were all economists and it rapidly became clear their concept of design was of something superficial, easily copied and not really capable of generating value. They were educated, intelligent and courteous people, but it was clear that design had no role of any significance in their view of the economic world. 

Obviously for some reason, the discipline of economics does not acknowledge design. To be fair it must also be acknowledged that the discipline of design is deficient in communicating its economic role. Some designers might ask: why bother? My answer to that would be that basically, design is a professional business activity practiced overwhelmingly within business contexts and if designers cannot argue the economic relevance of their practice in convincing terms, the views of the officials I met in Washington will be justified and they will remain what the American designer, George Nelson, long ago termed “exotic menials.” 

The work of Herbert Simon, Nobel Laureate in Economics in 1978, is a rare exception of design being considered as a factor in economic theory. His starting point was acknowledging that the world we inhabit is increasingly artificial, created by human beings. For Simon (1981), design was not restricted to making material artefacts, but was a fundamental professional competence extending to policy-making and practices of many kinds and on many levels:

Everyone designs who devises courses of action aimed at changing existing situations into preferred ones. The intellectual activity that produces material artifacts is no different fundamentally from the one that prescribes remedies for a sick patient or the one that devises a new sales plan for a company or a social welfare policy for a state. Design, so construed, is the core of all professional training; it is the principal mark that distinguishes the professions from the sciences. (p.129) 

Implicit in Simon’s reasoning is an emphasis on design as a thought-process underpinning all kinds of professional activities; yet the varied skills through which design is manifested are not discussed. He did indicate, however, why design is so rarely considered in economic theory. Economics, he stated, works on three levels, those of the individual; the market; and the entire economy (p. 31). The centre of interest in traditional economics, however, is markets and not individuals or businesses (p. 37). A serious problem is thereby raised at the outset: two important considerations relating to design—how goods and services are developed for the market place and how they are used—receive scant attention. 

 

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