In the wake of the global financial crisis of 2008, the greatest economic disaster since the Great Depression, the cover story of the July 18th 2009 issue of The Economist, entitled “What went wrong with economics,” opened with an unequivocally incriminating statement: “Of all the economic bubbles that have been pricked, few have burst more spectacularly than the reputation of economics itself.” In the months surrounding this indictment, many influential economists, including several Nobel laureates, were drawn to the same embarrassing (...) conclusion. Despite the existence of a handful of Cassandras, economists, as a group, had failed to foresee the crash. This short essay reviews the criticisms addressed to modern economic theory in the immediate aftermath of the crash. Overall, the main issues raised by critics were that (a) economists versed in the dominant models in macroeconomics and finance have been blinded to the possibility that we live in an uncertain and complex world; and (b) that the content of current economics education has sidelined many of the relevant insights to be found in the history of the discipline. This has led the critics to call for changes in the institutional structure of discipline, with a particular emphasis on the promotion of interdisciplinarity, and theoretical and methodological pluralism. (shrink)

Business ethics denial refers to one of two claims about moral motivation in a business context: that there is no need for it, or that it is impossible. Neither of these radical claims is endorsed by serious theorists in the academic fields that study business ethics. Nevertheless, public commentators, as well as university students, often make claims that seem to imply that they subscribe to some form of business ethics denial. This paper fills a gap by making explicit both the (...) various forms that business ethics denial can take, and the reasons why such views are ultimately implausible. The paper argues that this type of serious engagement with business ethics denial should be an important part of the job description for teachers of business ethics. (shrink)

Epistemic democrats are rightly concerned with the quality of outcomes and judge democratic procedures in terms of their ability to ‘track the truth’. However, their impetus to assess ‘rule by experts’ and ‘rule by the people’ as mutually exclusive has led to a meagre treatment of the role of expert knowledge in democracy. Expertise is often presented as a threat to democracy but is also crucial for enlightened political processes. Contemporary political philosophy has so far paid little attention to our (...) reliance on experts and has not sufficiently addressed the question of how expertise can be used to improve the epistemic quality of democratic decision making. We believe this lack of interest is spurred by a too hasty acceptance of arguments dismissive of the political role of experts. The article examines a series of often-cited epistemic objections and concludes that several of them are overstated or misconceived, yet they all reflect real difficulties that need to be addressed. On this background, we tentatively outline a set of mechanisms that can contribute to alleviating the irreducible problem of epistemic asymmetries and ensuring that experts really are experts and use their expertise in the right way. (shrink)

This paper argues that theories of communism and capitalism should not be considered as opposites or alternatives, but rather systems that satisfy different stages of humanity's technological development. The argument derives from Maslow's hierarchy of needs, and a focus on the role of innovation within systems. Some argue that capitalism focuses on the lower, and communism on the higher, layers of the hierarchy – which lays the basis for their inability to compete in different periods....

Natural selection is often envisaged as the ultimate cause of the apparent rationality exhibited by organisms in their specific habitat. Given the equivalence between selection and rationality as maximizing processes, one would indeed expect organisms to implement rational decision-makers. Yet, many violations of the clauses of rationality have been witnessed in various species such as starlings, hummingbirds, amoebas and honeybees. This paper attempts to interpret such discrepancies between economic rationality and biological rationality. After having distinguished two kinds of rationality we (...) introduce irrationality as a negation of economic rationality by biologically rational decision-makers. Focusing mainly on those instances of irrationalities that can be understood as exhibiting inconsistency in making choices, i.e. as non-conformity of a given behaviour to axioms such as transitivity or independence of irrelevant alternatives, we propose two possible families of Darwinian explanations that may account for these apparent irrationalities. First, we consider cases where natural selection may have been an indirect cause of irrationality. Second, we consider putative cases where violations of rationality axioms may have been directly favored by natural selection. Though the latter cases seem to clearly contradict our intuitive representation of natural selection as a process that maximizes fitness, we argue that they are actually unproblematic; for often, they can be redescribed as cases where no rationality axiom is violated, or as situations where no adaptive solution exists in the first place. (shrink)

Running like a leitmotif through Peter Roberts’ recently published philosophico-educational writings there is a humanistic thread, which this article picks out. In order to ascertain the quality of this humanism, Roberts is positioned in relation to a pair of extant humanisms: radical and integral. Points of comparability and contrast are identified in several of the writer’s genre-crossing essays. These texts, it is argued, rectify deficiencies in how the two humanisms envision alternatives to capitalism. Roberts skilfully teases out the non-obvious futurological (...) implications of the work of a diverse array of authors, spanning the boundaries of philosophy, social criticism, and literature. In so doing, he underscores the intimate connection between personal self-transformation and ideal-driven social transformation. Further, Roberts challenges humanists of both radical and integral stripes to reconsider the moral grounds of their critique of capitalism. (shrink)

The combination of increased availability of large amounts of fine-grained human behavioral data and advances in machine learning is presiding over a growing reliance on algorithms to address complex societal problems. Algorithmic decision-making processes might lead to more objective and thus potentially fairer decisions than those made by humans who may be influenced by greed, prejudice, fatigue, or hunger. However, algorithmic decision-making has been criticized for its potential to enhance discrimination, information and power asymmetry, and opacity. In this paper, we (...) provide an overview of available technical solutions to enhance fairness, accountability, and transparency in algorithmic decision-making. We also highlight the criticality and urgency to engage multi-disciplinary teams of researchers, practitioners, policy-makers, and citizens to co-develop, deploy, and evaluate in the real-world algorithmic decision-making processes designed to maximize fairness and transparency. In doing so, we describe the Open Algortihms project as a step towards realizing the vision of a world where data and algorithms are used as lenses and levers in support of democracy and development. (shrink)

This paper uses the economic crisis of 2008 as a case study to examine the explanatory validity of collective mental representations. Distinguished economists such as Paul Krugman and Joseph Stiglitz attribute collective beliefs, desires, intentions, and emotions to organizations such as banks and governments. I argue that the most plausible interpretation of these attributions is that they are metaphorical pointers to a complex of multilevel social, psychological, and neural mechanisms. This interpretation also applies to collective knowledge in science: scientific communities (...) do not literally have collective representations, but social mechanisms do make important contributions to scientific knowledge. (shrink)

Starting from the assumption that decision situations in economic contexts are characterized by fundamental uncertainty, this article argues that the decision-making of intentionally rational actors is anchored in fictions. “Fictionality” in economic action is the inhabitation in the mind of an imagined future state of the world and the beliefs in causal mechanisms leading to this future state. Actors are motivated in their actions by the imagined future and organize their activities based on these mental representations. Since these representations are (...) not confined to empirical reality, fictional expectations are also a source of creativity in the economy. Fictionality opens up a way to an understanding of the microfoundations of the dynamics of the economy. The article develops the notion of fictional expectations. It discusses the role of fictional expectations for the dynamics of the economy and addresses the question of how fictional expectations motivate action. The last part relates the notion of fiction to calculation and social macrostructures, especially institutions and cultural frames. The conclusion hints at the research program developing from the concept of fictional expectations. (shrink)

Evolutionary psychologists have suggested that confidence and conservatism promoted aggression in our ancestral past, and that this may have been an adaptive strategy given the prevailing costs and benefits of conflict. However, in modern environments, where the costs and benefits of conflict can be very different owing to the involvement of mass armies, sophisticated technology, and remote leadership, evolved tendencies toward high levels of confidence and conservatism may continue to be a contributory cause of aggression despite leading to greater costs (...) and fewer benefits. The purpose of this paper is to test whether confidence and conservatism are indeed associated with greater levels of aggression—in an explicitly political domain. We present the results of an experiment examining people’s levels of aggression in response to hypothetical international crises (a hostage crisis, a counter-insurgency campaign, and a coup). Levels of aggression (which range from concession to negotiation to military attack) were significantly predicted by subjects’ (1) confidence that their chosen policy would succeed, (2) score on a liberal-conservative scale, (3) political party affiliation, and (4) preference for the use of military force in real-world U.S. policy toward Iraq and Iran. We discuss the possible adaptive and maladaptive implications of confidence and conservatism for the prospects of war and peace in the modern world. (shrink)

In this article, I aim at problematizing the implied idea of causality in cognitive evaluations of horizontal justice events. I will draw on theories about retrospective sensemaking and its cognitive foundation in counterfactual belief formation. Issues related to horizontal or intraunit unfairness emerge in situations in which the actions of one employee influence the outcome of another due to relational interdependence. The authors of theories about horizontal unfairness have continued the traditional distinction between the three facets of justice, procedural, distributive, (...) and interactional. However, might employee A blame employee B because she (B) obtained qualitative (e.g., non-monetary appraisal) or quantitative (e.g., monetary compensation) recognition even though the latter did not, directly at least, bring about the event. The problem here is one of causality which asks the question, Can A be blamed by B for bringing about the event of outcome difference? While blame in evaluations of vertical justice certainly presumes causal agency, it might be questioned whether the same goes for horizontal unfairness. Counterfactual belief formation enables a step into the cognitive and retrospective nature of evaluations of horizontal justice events centered on the counterfactual belief “had the unfavorable event X not occurred, another and more favorable event X1 would have occurred.” This is related to the distance between the actual X and the potential event state X), in the sense that the closer the two appear, the more convincing becomes A’s belief to himself. The underlying causality of rewarding processes, however, states that some third party introduces the recognition, for example, a manager, and, therefore, B did not bring about the reward event, the third party did. It seems, then, that to understand this, we should take into consideration: 1) the formation of counterfactual beliefs and 2) the causality of blame. The article concludes that, due to the underlying causality of rewarding processes, one might solely consider one facet of horizontal justice, interactional horizontal justice. However, tapping into the phenomenological dimension of morality might allow one also to address the moral nature of distributive and procedural facets of horizontal justice as the experience of the psychosocial fabric of social reality related with feeling either “as if” one is being treated unfairly or “as if” one is treating others unfairly. (shrink)

Complex systems are to be seen as typically having multiple levels of organization. For instance, in the behavioural and cognitive sciences, there has been a long lasting trend, promoted by the seminal work of David Marr, putting focus on three distinct levels of analysis: the computational level, accounting for the What and Why issues, the algorithmic and the implementational levels specifying the How problem. However, the tremendous developments in neuroscience knowledge about processes at different scales of organization together with the (...) complexity of today cognitive theories suggest that there will hardly be only three levels of explanation. Instead, there will be many different degrees of commitments corresponding to the different granularities—from high-level (behavioural) models to low-level (neural and molecular) models of the cognitive research program. For instance, Bayesian approaches, that are usually advocated for formalizing Marr’s computational level and rational behaviour, have even been adopted to model synaptic plasticity and axon guidance by molecular gradients. As a result, we can consider the behavioural scientist as dealing with models at a multiplicity of levels. The purpose of this Research Topic in Frontiers in Theoretical and Philosophical Psychology is to promote an approach to the role of the levels and explanation and models which is of interest for cognitive scientists, neuroscientists, psychologists, behavioural scientists, and philosophers of science. (shrink)

Soon after the 2008 financial crisis, Gillian Tett, an anthropologist and the US Managing Editor of the Financial Times, suggested that regulators’ and practitioners’ inability to anticipate and respond to deep problems in the financial industry could be traced back to what she called “silo thinking,” wherein experts in one area know nothing about the methods and research of other areas. As she put it, “the essential challenges for investors today…”—and, we might add, for regulators and academics—is “to understand the (...) micro-details of the silos, and see how all the macro-pieces add up”.In years since, many researchers in many fields have sought to identify causes of the... (shrink)

The aim of this contribution is to provide an overview of conceptual approaches to incorporating a decision maker’s non-knowledge into economic theory. We will focus here on the particular kind of non-knowledge which we consider to be one of the most important for economic discussions: non-knowledge of possible consequence-relevant uncertain events which a decision maker would have to take into account when selecting between different strategies.

The paper argues that the work of Gabriel Tarde on imitation provides a fertile means of understanding how capitalism is forging a new affective technology which conforms to a logic of propensity rather than to means-end reasoning. This it does by drawing together a biological understanding of semiconscious cognition with various practical geometric arts so as to re-stage the world as a series of susceptible situations which can be ridden rather than rigidly controlled. The paper examines the advent of technologies (...) which attend to the variable geometry of so-called animal spirits in the realm of business and then, using Tarde's work as a springboard, considers some alternative means of understanding imitative rays which have less instrumental undertones. The paper is an illustration of the way in which biology and culture have increasingly become intertwined. (shrink)

Hubris among CEOs is generally considered to be undesirable: researchers in finance and in management have documented its unwelcome effects and the media ascribe many corporate failings to CEO hubris. However, the literature fails to provide a precise definition of CEO hubris and is mostly silent on how to prevent it. We use work on hubris in the fields of mythology, psychology, and ethics to develop a framework defining CEO hubris. Our framework describes a set of beliefs and behaviors, both (...) psycho-pathological and unethical in nature, which characterize the problematic relationship of the hubris-infected CEO towards his or her own self, others and the world at large. We then demonstrate how the development of authentic leadership may contribute to preventing or attenuating hubris by addressing its psycho-pathological nature through the true self and meaningful relationships with others. In addition to its psycho-pathological dimension, CEO hubris also contains an ethical dimension. We therefore propose that the development of the virtue of reverence might contribute to the prevention or attenuation of CEO hubris, because reverence makes the individual aware of his or her place in the world order and membership of the community of humans. (shrink)

This paper uses the economic crisis of 2008 as a case study to examine the explanatory validity of collective mental representations. Distinguished economists such as Paul Krugman and Joseph Stiglitz attribute collective beliefs, desires, intentions, and emotions to organizations such as banks and governments. I argue that the most plausible interpretation of these attributions is that they are metaphorical pointers to a complex of multilevel social, psychological, and neural mechanisms. This interpretation also applies to collective knowledge in science: scientific communities (...) do not literally have collective representations, but social mechanisms do make important contributions to scientific knowledge. (shrink)

This research paper approaches the following question through the hypothetico-deductive model: How is it that some companies have survived the crisis while others have not? Such question is expanded on herein: How is it that a company that suffers a cyclical crisis in the broader context of a systemic crisis is able to survive? Looking into the conditions concerning the likelihood of survival in the face of a crisis, it all points to the ethical side of the issue, thus prompting (...) a complementary and final question: To what extent can an organizational culture based on strong moral foundations foster the survival of companies in times of crisis? The first part of this study, covering economic cycles, conducts a taxonomic analysis that recognizes and relates the different types of crisis –entropic vs. dialectic; structural vs. cyclical; system vs. company crisis– and provides an account of some of the reasons that the literature on the subject uses with the aim of explaining the current crisis. The second part will cover a classification as well as a systematic description of the reasons and causes of the cyclical crises, so as to be able to identify the human factor, which is not only the most common root-cause of organizational crises but also the key to overcoming them. The third part focuses on the ethical aspects of the matter at hand, and proposes some hypotheses covering the strategic conditions and cultural requirements that would be more likely to foster company survival in environments as hostile as the one we face nowadays. The article ends by offering a series of practical proposals that, in the authors’ view, may be a useful guide for companies to strengthen their defense mechanisms when faced with prospective crises and recessions. Finally, some potential lines of research for future projects are suggested. In employing various tools such as quantitative, qualitative and mixed methods, we sought to conduct an empiric verification of whether the hypotheses that were part of this qualitative analysis were consistent. (shrink)

How can we study bounded rationality? We answer this question by proposing rational task analysis —a systematic approach that prevents experimental researchers from drawing premature conclusions regarding the rationality of agents. RTA is a methodology and perspective that is anchored in the notion of bounded rationality and aids in the unbiased interpretation of results and the design of more conclusive experimental paradigms. RTA focuses on concrete tasks as the primary interface between agents and environments and requires explicating essential task elements, (...) specifying rational norms, and bracketing the range of possible performance, before contrasting various benchmarks with actual performance. After describing RTA’s core components we illustrate its use in three case studies that examine human memory updating, multitasking behavior, and melioration. We discuss RTA’s characteristic elements and limitations by comparing it to related approaches. We conclude that RTA provides a useful tool to render the study of bounded rationality more transparent and less prone to theoretical confusion. (shrink)

This paper traces missing links in the history of economic thought. In outlining Hume's concept of 'the reflexive mind' it shows that this opened frontiers between philosophy and psychology which Bertrand Russell denied and which logical positivism in philosophy and positive economics displaced. It relates this to Hume's influence not only on Smith, but also on Schopenhauer and the later Wittgenstein, with parallels in Gestalt psychology and recent findings from neural research and cognitive psychology. It critiques Kant's reaction to Hume's (...) claim that one may assume but cannot prove cause and effect and how Samuelson's Foundations of Economic Analysis has been Kantian but wrong in claims for axioms that are universal truths. It illustrates how Samuelson's presumption that language and mathematics are 'identical' was as mistaken as the logical atomism of Russell and the early Wittgenstein, relates this to Kleinian splitting, denial and projective identification and suggests that recovery of greater realism in economics needs to regain links with such philosophy and psychology. (shrink)

Accountants preparing information are in a position to manipulate the view of economic reality presented in such information to interested parties. These manipulations can be regarded as morally reprehensible because they are not fair to users, they involve in an unjust exercise of power, and they tend to weaken the authority of accounting regulators. This paper develops a model for detecting earnings manipulators using financial statements’ ratios in a sample of Spanish listed companies. Our results provide evidence that accounting data (...) can be extremely useful in detecting manipulators. This approach can be used by a large category of users of accounting information among which we can cite stock exchange supervisors or investing professionals. (shrink)

Accountants preparing information are in a position to manipulate the view of economic reality presented in such information to interested parties. These manipulations can be regarded as morally reprehensible because they are not fair to users, they involve in an unjust exercise of power, and they tend to weaken the authority of accounting regulators. This paper develops a model for detecting earnings manipulators using financial statements’ ratios in a sample of Spanish listed companies. Our results provide evidence that accounting data (...) can be extremely useful in detecting manipulators. This approach can be used by a large category of users of accounting information among which we can cite stock exchange supervisors or investing professionals. (shrink)

The gap between economic rationality, as embedded in utility maximization, and ethical rationality, identified with a set of rules that prescribe the right course of action, has been a challenging issue for economists, philosophers, and business ethicists. Despite the difference and the noncompetition between a scientific economic approach of economics and business ethics, and a behavioral and philosophical one, we highlight the importance of the Aristotelian concept of prudence or phronesis applied to business activity. Phronesis allows for a conceptualization of (...) rationality that can be simultaneously applied to economics and ethics. It also allows conceiving the intrinsically ethical nature of economic rationality. This relationship requires an appropriate education and the intervention of the state. (shrink)

Economists tend to view ignorance as ?rational,? neglecting the possibility that ignorance is unintentional. This oversight is reflected in economists? model of ?information search,? which can be fruitfully contrasted with ?information browsing.? Information searches are designed to discover unknown knowns, whose value is calculable ex ante, such that this value justifies the cost of the search. In this model of human information acquisition, there is no primal or ?radical? ignorance that might prevent people from knowing which information to look for, (...) lacking omniscience. Unlike ignorance that is rationally chosen on the basis of an accurate cost/benefit calculation, radical ignorance can explain human error. An account of error as grounded in radical ignorance bypasses the need to appeal to irrationality in order to explain economic (and other) mistakes. (shrink)

This paper deals with Keynes’s distinction between entrepreneurship and speculation, regarding business people in general and especially investors’ behaviour. Based on Keynes’s thoughts about financial markets, it analyses how different motivations influence the decision-making process of investors and its consequences for stock markets and the real economy and clarifies that Keynes’s considerations are still useful for understanding contemporary developments and risks in the financial system. Furthermore, it points out that Keynes’s theories and policy recommendations should be understood in the context (...) of his moral considerations, especially relating to individual responsibility of investors. Finally, Keynes’s moral thoughts can be taken as a foundation for a contemporary approach to investors’ responsibility. (shrink)

This article presents the most important strands of the philosophical debate about markets. It offers some distinctions between the concept of markets and related concepts, as well as a brief outline of historical positions vis-à-vis markets. The main focus is on presenting the most common arguments for and against markets, and on analyzing the ways in which markets are related to other social institutions. In the concluding section questions about markets are connected to two related themes, methodological questions in economics (...) and the topics of business ethics and corporate social responsibility. (shrink)

The revised edition of Paul Seabright’s The Company of Strangers is critically reviewed. Seabright aims to help non-economists participating in the cross-disciplinary study of the evolution of human sociality appreciate the potential value that can be added by economists. Though the book includes nicely constructed and vivid essays on a range of economic topics, in its main ambition it largely falls short. The most serious problem is endorsement of the so-called strong reciprocity hypothesis that has been promoted by several prominent (...) economists, but does not pass muster with biologists. (shrink)

In this paper we investigated how justifications for price increases are associated with risky decision making and emotional responses. Across two studies with paired lottery choices and sequential decisions, we found that participants presented with a justification for price increases based on increasing demand decided to invest in a comparatively riskier asset more often than participants presented with a justification for price increases based on increasing tax or those presented with no justification at all. We also found that participants presented (...) with justifications for price increases based on increasing demand also reported more arousal displayed higher galvanic skin response than people in the other two justification conditions. Together, these studies provide evidence that the sole increasing demand underlying a price increase of a risky asset can influence the decision to buy it and suggests that emotional activation is involved in such a decision process. (shrink)

Aristotle warned against a 'missing middle' in logic (Gk Mesos – middle; intermediate). This paper submits that one of the reasons why there has been no major breakthrough in macroeconomics since the financial crisis of 2007-08 has been a missing middle in mainstream micro-macro syntheses, constrained by partial and general equilibrium premises. It maintains that transcending this needs recognition that large and dominant multinational corporations between small micro firms and macro outcomes – while also influencing both – merit the conceptual (...) paradigm of mesoeconomics. Drawing on a range of uses of the concept, it relates this to reasons for 'too big to fail' and suggests implications for policies to gain accountability of big business, including how a meso dimension to input-output could yield transparency on risk-prone financial transactions by banks, and of corporations contributing to climate change. It also critiques misrepresentation of Walras and Pareto, as well as suggesting areas for research which could address, and potentially redress, 'missing middles' in mainstream micro-macro syntheses. (shrink)

Until the advent of behavioral and neuroeconomics, economics has generally tended to undervalue, on average, the importance of fear. Fear has traditionally been regarded as pertaining to an alternative domain with respect to rationality: it has thus been considered as triggering mechanism of anomalous, even irrational behavior. Conversely, the article speculates on the complexity of the concept of fear and of the social effects it is thought to produce. While discussing the eventual desirability of a freed-from-fear world and Western obsession (...) with risk management and safety from the economic problem and other pressures, the paper provides a general introduction to the relevance of the relatively unexplored issue of fear to economics as discipline as well as to applied economics in public policy. (shrink)

ABSTRACT:This essay attempts to provide a useful research agenda for researchers in both strategic managementandbusiness ethics. We motivate this agenda by suggesting that the two fields started with similar interests, diverged, and are beginning to converge again. We then identify several streams that hold particular promise for developing our understanding of the relationship between strategy and ethics: stakeholder theory, managerial discretion, behavioral strategy, strategy as practice, and environmental sustainability.

ABSTRACT Capital regulations stemming from the Basel accords created incentives for banks to securitize mortgages, even risky ones; hold them at a correspondingly low Basel risk weight; or shift them off of banks' balance sheets to obtain even greater leverage. Securitization was praised by economists and regulators for dispersing risks to investors across the world, providing greater resilience to the financial system. However, since in reality banks tended to hold onto securitized assets—either on their balance sheets or off of them, (...) in off‐balance‐sheet entities—the accumulated credit risk remained with the banks, especially in the “shadow banking sector.” This explains the heightened vulnerability of the financial system to a sudden collapse. (shrink)

ABSTRACT The illusion of explanatory depth, which has been identified by cognitive psychologists, may play a prominent role in encouraging regulatory action. This special type of overconfidence would logically lead regulators to believe that they are aware of the relevant causes and consequences of the activities they might regulate, and of the unintended side effects of the regulatory actions they are contemplating. So, as with other cognitive biases, the illusion of explanatory depth is likely to lead to mistakes. And unlike (...) the biases that have been the focus of so much behavioral economics, the illusion of explanatory depth is uniquely resistant to correction by those who are aware of it as a general problem and rigorously attempt to keep it under control. (shrink)

A wide array of phenomena lumped together under the rubric of the ?commercialization of science,? the ?commodification of research,? and the ?marketplace of ideas? are both figuratively and literally Ponzi schemes. This thesis grows out of my experience of working on two concurrent projects: the first, an attempt to understand the forces behind the progressive commercialization of science; and the second, when it dawned upon me that the financial crisis then unfolding was resulting in the deepest worldwide economic contraction since (...) the Great Depression of the 1930s. This lecture explores the parallels in three different areas: the biotech sector, technology transfer offices at major universities, and possible decline of numbers of American-authored papers in major science journals. (shrink)

This study addresses a fundamental concern of research on economic ethics by examining the values of economics. While other studies have linked the study of economics to the adoption of rational economic behavior, this study goes one level deeper, investigating the values that underpin neoclassical economics and whether they are transmitted to students. We find that the study of economics is associated with an increase in hedonism and power values, a decrease self-direction value, and possibly a decrease in universalism value. (...) We measure value change among economics students using a quasi-experimental research design in accordance with the methodology of research on academic socialization. We discuss the practical implications of the internalization of economic values. (shrink)

Mark Blaug played a central role in the development of the field of the methodology of economics, alongside his theoretical work and contributions to the history of economic thought. The purpose, in this article, is to focus on his contributions to the topic of 'formalism in economics', in relation to his methodological commentaries on the Popperian and Lakatosian approaches to the philosophy of science. In Blaugian spirit, the discussion is related to economic theory and draws on the history of economic (...) thought. The argument focuses on the troublesome interface between theoretical and applied economics in mainstream economics. The article includes, as a case study, an assessment of new behavioural economics in Popperian and Lakatosian terms. The conclusion is that such an appraisal exercise—i.e., whether the research programme is progressive or degenerative—is clouded by the interface between the form of empiricism promoted by Popper and Lakatos and the methodological framework of mainstream economics. No conclusion is feasible independent of methodological approach. (shrink)

Uncertainty is a feeling of anxiety and a part of culture since the dawn of civilization. Civilizations have invented numerous ways to cope with uncertainty, statistics is one of those technologies. The rhetoric as the discourse of investment theory uncovers that the theory of statistics applied is a blind spot in the current conversation about investment theory and practice. Probability and prediction in investment theory look like a tying sale, since investment theory is founded on stochastical predictability. The proof of (...) unpredictability, however, lies outside the paradigm of statistics, because statistics assumes that the substrate, that produces probability outcomes, is stable. The theory of objective probabilities founds the Capital Asset Pricing Model but does not stochastically predict, and neither do Markowitz’s subjective probabilities for his portfolio theory. Statistical models for investing have a function, despite that they cannot predict: in essence, the models try to quantify statistically the equity, the fairness of the distribution of risk and return between parties involved. In the dissertation, a lot of ideas to change finance have had attention: the alternative statistical theory of Mandelbrot, bubble theory, political finance, the analysis of rhetoric, the analysis of culture, innovative practices, ethics in the form of virtue and value ethics, and the history of finance. How to make the culture of finance more heterogeneous? That starts with awareness of the current problems, the introduction of multiform metaphors for investment theory, and handling the ambiguity of theory uncertainty, by presenting, explaining and elaborating the alternatives. (shrink)

Does a board with greater gender diversity make better investment decisions? Drawing on Austrian economic cycle theory and work groups theory, we argue that such board openness will help male board members to overcome gender biases, discrimination, and conflicts; integrate different perspectives under the economic cycle and crisis; and foster an environment in which better decisions are made. The results of an empirical study of 14,609 firm-quarter observations from 1,555 listed firms in China between 2007 and 2009 strongly support our (...) arguments. We find that a Chinese board is more likely to accept female directorship during an economic crisis than during an economic prosperity stage. Boards with greater gender diversity are more likely to make tough, counter-cyclical investments to improve firm performance during a crisis. Our study enriches the board decision-making literature by exploring the impacts of board gender diversity on firm performance within the context of an economic crisis. The results of our study also carry significant managerial implications for overcoming gender stereotypes, biases, and prejudices on a board. (shrink)

Macroeconometric models are built on astonishingly precarious grounds and yet are used by policy makers to project precision and certainty. Econometricians use lagged dependent variables, “add factors,” and other techniques to make their models more accurate—at the expense of the integrity of the models. The reason for the unscientific nature of macroeconometric models is that, unlike the objects of controlled experimentation, real-world events are often unique and non-repeatable. Models that use repeatable events are poorly suited to accurate prediction or historical (...) explanation. (shrink)

Over recent years support for deliberative democracy as a regulative ideal against which political and economic institutions should be judged has become the dominant tradition within political theory. Deliberative democrats such as Amy Guttman and Dennis Thompson argue that deliberative public decision making would bring with it important epistemological and ethical gains. Closer inspection of these claims, however, suggests that deliberative democratic arrangements are not only impractical but are fundamentally at odds with the epistemic and ethical goals that their supporters (...) seek to advance. Arrangements based on ?exit? rather than ?voice? may be better placed to meet these challenges in a world characterized by complexity and conflicting moral values. (shrink)

Every time another corporate scandal captures media headlines, the ‘bad apple vs. bad barrel’ discussion starts anew. Yet this debate overlooks the influence of the broader societal context on organizational behavior. In this article, we argue that misbehaviors of organizations (the ‘barrels’) and their members (the ‘apples’) cannot be addressed properly without a clear understanding of their broader context (the ‘larder’). Whereas previously, a strong societal framework dampened the practical application of the Homo economicus concept (business actors as perfectly rational (...) and egocentric utility-maximizing agents without any moral concern), specialization, individualization and globalization led to a business world disembedded from broader societal norms. This emancipated business world promotes a literal interpretation of Homo economicus among business organizations and their members. Consequently, we argue that the first step toward ‘healthier’ apples and barrels is to sanitize the larder, that is, adapt the framework in which organizations and their members evolve. (shrink)

Every time another corporate scandal captures media headlines, the ‘bad apple vs. bad barrel’ discussion starts anew. Yet this debate overlooks the influence of the broader societal context on organizational behavior. In this article, we argue that misbehaviors of organizations (the ‘barrels’) and their members (the ‘apples’) cannot be addressed properly without a clear understanding of their broader context (the ‘larder’). Whereas previously, a strong societal framework dampened the practical application of the Homo economicus concept (business actors as perfectly rational (...) and egocentric utility‐maximizing agents without any moral concern), specialization, individualization and globalization led to a business world disembedded from broader societal norms. This emancipated business world promotes a literal interpretation of Homo economicus among business organizations and their members. Consequently, we argue that the first step toward ‘healthier’ apples and barrels is to sanitize the larder, that is, adapt the framework in which organizations and their members evolve. (shrink)

ABSTRACT Imagine, as most economists do, that financial-market participants understand the basic structure of the world: While they cannot predict the future with certainty, they are endowed with knowledge of the possible outcomes of their actions and the probability that each of those outcomes will occur. Given these assumptions, if bankers, regulators, investors, and rating agencies were rational, we may conclude that the financial crisis was caused by poor incentives: These actors must have knowingly jeopardized their institutions and the global (...) economy to pursue private gain. Alternatively, market participants, caught up in the mania of crowds, may have irrationally ignored risks of which they were aware and of which they knew the correct probability. Neither of these explanations for the financial crisis stands up to the evidence, since both explanations assume that the participants knew the U.S. housing market was about to crash. A fresh look at the data five years later suggests that they were ignorant of this fact, and that they acted rationally (or at least reasonably) in light of what they (thought that they) knew. This allows a more nuanced understanding of how financial institutions ended up in bedlam, why credit markets collapsed, and why they took so long to recover. (shrink)