“Shewhart recognized the fact that good management consists of making one mistake now and then, and the other one now and then. What was needed, he saw, is rules that can be put into practice by which to try and achieve minimum net economic loss from both mistakes. To this end, he contrived the 3-sgma control limits. They provide, under a wide range of unknowable circumstances, future and past, a rational and economic guide to minimum economic loss from both mistakes.”
W. E. Deming, “Out of the Crisis”, pages 318-319.
Shewhart’s and Deming’s meaning for concept of “economic” runs much deeper than the connotative value in popular usage, and that meaning is central to understanding Shewhart’s control chart theory and Deming’s extrapolation of that theory to the broader universe of action that can be called human enterprise.
I often find the Website “Online Etymology Dictionary ” very useful. I use it to examine how meanings morph over time and how those changes reflect cultural, political, and paradigmatic transformations.
economy (adj.) as a term in advertising, at first meant simply “cheaper” (1821), then “bigger and thus cheaper per unit or amount” (1950). See economy (n.).
Also…
And…
Roughly speaking, we have three dates — 1530, 1650, and 1821. In early usage, the meaning of “economic”, retaining its classical Greek roots, referred to a husbanding or stewardship of resources in which we try to make the most of what we have. The underlying concept is NOT based on a notion of growth, progress, or gain, but rather the ongoing task (problem) of optimization.
By around 1650 to 1781 the meaning had morphed into a notion more akin to “thrift”, in which optimization of resources is transformed into a notion of exchange value. In other words, rather than balancing resources in a wholistic fashion, the cost-benefit relation begins to take precedence. This transformation occurs in the context of what is called, The Enlightenment in which a mechanistic paradigm becomes dominant. (e.g. Sir Isaac Newton, 1643 – 1727.
The mechanistic Newtonian notion of economics — the deterministic clockwork of exchange value —- emerges shortly thereafter in the form of the “science of economics” (e.g. Adam Smith, 1723 – 1790) and achieves popular credence around 1835. This emergence parallels the emergence of the science of human motivation —- Psychology – circa 1800 and the wealth stratification model of “Capitalism”, which we have come to regard as the true method for producing wealth that reflects the “scientific” principles of economics and psychology, in which individuals seek thrifty outcomes (maximum ROI) in all interactions with others.
Enter stage left, statisticians Shewhart and Deming, on the heels of Darwin, Einstein, Heisenberg, etc, who were busily noting anomaly and undermining Newton’s deterministic clockwork vision of the world. The world they showed us was not a clockwork of interlocking gears. It was not linear action–reaction nor stimulus-response. It was a cloud of relativistic interactions that we cannot reduce nor determine with predictive certainty. (What is the speed of light, exactly?)
The disconfirmation of the Newtonian deterministic model at the extremes of bigness and smallness led some, though not all, to question the application of the clockwork model in scientific inquiry of all kinds, including psychology, economics, and sociology, all of which came into existence in the penumbra of the Newtonian model and all of which have been notoriously ineffective at predicting outcomes and producing useful technology (methods).
To return to the idea of “economic”, today we are confronted with the “modern” and “scientific” connotation of economic as mechanistic relations of exchange, motivational psychology, progress, growth, and deterministic natural laws. It is in this context that W. Shewhart rocked the boat and Deming rocked the ship. There are no true facts and there is no theory that is true. Given the limits of our ability to know, we cannot predict by reducing the world we know (our systems) to parts. Our only option is to listen to the voice of the process and try to optimize our decisions, designs, and actions, given our aims.
For Shewhart and Deming, “economic” did not mean maximizing ROI in exchange. In the classical sense, it meant a method of stewardship of resources in a manner that, given our aims, allows us to seek out an optimum that is always in flux and can never be wholly achieved. Shewhart theorized that 3-sigma was a signaling point that provided an economically sound basis for understanding what our systems of enterprise do and for predicting what they will do in the future.
Deming had nothing against profit. He saw that by understanding Shewhart’s concept of economic (optimization of decision making), it become more likely that everyone would profit.
“Economists have led us down the wrong path.” W. E. Deming.
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