Deconstructing Bob and Jeff
| David Hoopes |
For better or worse the hard-hearted authors at O&M have hurt the feelings of our colleagues in other fields. In the spirit of being more specific about why the bloggers here are so harsh I’d like to take a look at an award-winning paper from the Academy of Management Review (Ferraro, F., Pfeffer, J., and Sutton, R.I., “Economics Language and Assumptions: How Theory Can Become Self-Fulfilling”). In this paper we are told how the language of economics (the assumptions that people are selfish cheats) encourages people to be selfish cheats. Aside: in my opinion sociologists have a much darker image of humankind than economists (if we must make careless generalizations).
As I note in an earlier post, the idea of self-interest is often grossly misrepresented. Perhaps economists can thank themselves for this. I don’t know. However, it is important to examine this component of price theory by looking at its roots. In developing public policy toward government intervention in the allocation of goods (mercantilists vs. free traders in Smith’s day) allowing people to make their own decisions is more efficient than having a handful of people making the decisions for everyone. And even if individuals focus on their own needs the result for society is better than having a few people guessing at what everyone else wants and imposing their guesses.
The starting point of the AMR critique is the ever-present complaint about the economics world telling us all that we need to be selfish and greedy (make decisions based on our own self-interest). From here, our friends in the org. theory camp state, “If people are relentless in the pursuit of their own self-interest and equally relentless in the their lack of concern for others’ interests. . . .” What? Where did that second part come in? A very important bridge theory has been added. If people pursue their own self-interest then they also cannot care about anyone else. Management scholars wonder why their (our) work is not used in public policy debates. Small wonder.
Using examples from Lincoln Electric, General Electric (guess they haven’t read the newer case), and a Japanese restaurant chain (Global Dining), Ferraro, Sutton, and Pfeffer explain how “the assumptions and ideas of economics . . . create a world in which the ideas are true . . . and produce a world that corresponds to the assumptions and ideas themselves” (p. 12). And there you have it, these three companies have employees compete with each other and this proves that the economists’ dogma creates a world where people relentlessly pursue their own interests and relentlessly lack any concern for others.
One of the most disturbing implications of such work is that it shows a very poor knowledge of the field of economics. A common malaise of those who make very broad (and seemingly baseless) critiques.
An interesting counter-example to the claim that economists are teaching everyone to only look out for themselves is Jack Hirshleifer’s 2001 book The Dark Side of the Force: Economic Foundations of Conflict Theory. The force is, unsurprisingly, self-interest. How is this a counter example? I think it shows that Professor Hirshleifer was not “relentless in [his] lack of concern for others.”
Of course anyone with a passing knowledge of economics might note how hard economists attempted to prove that monopolies were destructive (see Bain and S-C-P “model”). Also, many economists dedicate their lives to promoting “consumer welfare.” No, not consumerism, how government policy can maximize what consumers receive for their money.
Keep on the lookout for a wonderful paper by Nicolai and Teppo that addresses these issues with much more rigor and detail.