The New Bashing of Economics: The Case of Management Theory
| Nicolai Foss |
Where is the place to go for real, hardcore economics-bashing? Anthropology? Sociology? Hardly. At least for the outside observer (i.e., this blogger), these disciplines seem to have become so absorbed in terminological nitty-gritty, paradigm proliferation, and pomo excesses that they seem to have lost much interest in neighbouring disciplines. No, the answer is, management theory.
Cases in point? Check out any of these rather recent papers by management heavyweights:
- Adler, P. S. 2002. Corporate scandals: It’s time for reflection in business schools. Academy of Management Executive, 16: 148-149.
- Ferraro, F., Pfeffer, J, & Sutton, R.I. 2005. Economics language and assumptions: How theories can become self-fulfilling. Academy of Management Review, 30: 8-24.
- Ghoshal, S., & Moran, P. M. 1996. Bad for practice: A critique of the transaction cost theory. Academy of Management Review, 21: 13–47.
- Ghoshal, S. 2003. Business schools share the blame for Enron. Financial Times, July 17.
- Ghoshal, S. 2005. Bad management theories are destroying good management practices. Academy of Management Learning & Education, 4: 75-91.
- Mintzberg, H. 2002. Beyond Selfishness. (with Robert Simons and Kunal Basu) Sloan Management Review (Fall, 2002).
The summary of Mintzberg’s paper provides a nice guide to this cottage industry:
In an article written well before Enron became a euphemism for corporate irresponsibility, the authors make the case that such misdeeds, so prevalent in recent months, are symptoms of a syndrome of selfishness that has taken hold of our business institutions, our societies and our minds. Drawing on history, literature, philosophy and management thinking, they argue that the syndrome is built on a series of half-truths — or fabrications — each of which has driven a debilitating wedge into society.Our narrow view of ourselves as "economic man" has driven a wedge of distrust between our individual wants and our social needs. A distorted view of shareholder value has driven a wedge of disengagement between those who create economic performance and those who harvest it. Our obsession with heroic leadership has created a wedge of disconnection between leaders and everyone else. The glorification of the "lean and mean" organization has driven a wedge of discontinuity between short-term and long-term goals. And the convenient, widely held notion that "a rising tide lifts all boats" has ratified a wedge of disparity between the prime beneficiaries of stock-price increases and the large numbers of people disadvantaged by the corresponding actions.
The authors challenge and deconstruct each of these flawed premises and offer an alternative. Real prosperity, they say, combines economic development with social generosity — and that requires a new philosophy of social and managerial engagement.
Ferraro, Pfeffer, and Sutton (2005) provide the underlying logic for these kind of assertions. They argue that the language and assumptions of social science theories not only influence but in fact determine much of what individuals do, experience, and think. They further claim that a self-fulfilling prophecy is created through negative theoretical assumptions about human motives and behavior being reinforced and diffused through the mechanisms of language, social norms, and institutional design, which in turn determine individual behaviour and reality. Ferraro, Pfeffer and Sutton highlight economics, specifically the assumption of self-interest, as a case in point.
However, these writers treat “economics” as a monolithic entity, roughly equivalent to Chicago economics appr. 1971. They have apparently no knowledge of the recent fashionable attempts to incorporate, for example, other-regarding behaviour in game theory models. They observe, and complain, that economics is “dominant,” and ascribe this to sinister plots without considering the obvious alternative that economics is useful because it captures real underlying mechanisms. The underlying social ontology apparently is that anything can be constructed by a theory, whether true or false. Extreme “reflexivity” and “social constructivism” rule the roost. There are no stable fundamentals in social life (e.g., efficiency). The social world is a bootstrap phenomenon.
Teppo Felin and I are working on a paper that takes issue with the whole recent econ-bashing industry in management. It will later be posted on this blog.
(Apologies to Israel Kirzner for stealing part of the title of his “Self-interest and the New Bashing of Economics” (originally published in Critical Review 1990; reprinted in his The Meaning of the Market Process, Routledge, 1996).)