Do Economists Breed Greed and Guile?
That's what Bob Sutton asks in this essay (don't skip the comments). Although some economists will quarrel with this view, most of the models and assumptions they pass on to their students reflect a fundamental belief about human beings: We are hard-wired to be selfish. They assume that it's a dog-eat-dog world, and that humans want and take as much for themselves as possible and to stomp on others along the way. As an example, "agency theory" remains one of the most influential theories among economists and business-school finance professors. Major proponents of agency and transaction cost theory not only assume that human beings pursue their narrow self-interest; they also assume that people do so with guile ("treacherous cunning; skillful deceit"). If you travel through life believing that all human beings behave this way, you will look to screw people at every turn and assume that they will do it to you given the chance. And if you act as if this true of every human interaction, and treat everyone around you as if they too are always looking for only short-term and selfish wins, you will create a self-fulfilling prophecy. The problem with social science is that our belief about human nature helps shape human nature itself. this research paper examines the issue in more detail. And here is another blog post by Bob Sutton on the same topic.