HUMANISTIC MANAGEMENT
In a world facing multiple crises, our foundational institutions are failing
to offer effective solutions. Drawing on the emerging consilience of
knowledge, Michael Pirson debunks the fundamental yet outdated
assumptions of human nature that guide twentieth-century management
theory and practice – as captured in the “economistic” paradigm – and
instead provides an urgently needed conceptual and practical “humanistic”
framework, based on the protection of human dignity and the promotion of
well-being. By outlining the science-based pillars of this innovative
system, Pirson provides a new model for the responsible twenty-firstcentury leader seeking sustainable ways to organize in a world of crisis.
Highlighting relevant applications for research, practice, teaching, and
policy, this book is ideal for graduate students and professionals seeking to
develop their understanding of responsible business, business ethics, and
corporate responsibility.
MICHAEL
PIRSON
is Associate Professor of Management, Global
Sustainability, and Social Entrepreneurship, and Director of the Center for
Humanistic Management at Fordham University. He cofounded the
Humanistic Management Network and serves as Editor of the Humanistic
Management Journal. He has won numerous awards, including from the
Academy of Management, and has published extensively on humanistic
management, philosophy, and business ethics.
2
Advance Praise
This book is an absolute must read to any business school student and leader
of any type of organization, from profit to non-profit, small to large, business
to political!
Christopher Arbet Engels, Chief Medical Officer Poxelpharma, former
VP at Biogen, Boston Massachusetts
In Humanistic Management, Michael Pirson argues for a significant shift in
how we all – companies and individuals alike – need to conceive the practice
of managing today and most importantly tomorrow, putting the old
“economistic” paradigm behind us and moving rapidly towards a more
humanistic paradigm for managing organizations and our economic
institutions. Read this important, accessible, and beautifully-developed book.
You will be glad you did!
Sandra Waddock, Boston College
As a 30-year veteran of Wall Street, I lived through many of the examples
cited by Dr. Michael Pirson in exposing the shortcomings of Economistic
leadership. His is a well-researched and compelling case for the critical
importance of empathy, dignity and collaboration in the success of 21st
century enterprises.
Ron D. Cordes, Co-founder of AssetMark and the Cordes Foundation
Humankind looks over the edge of a precipitous cliff, reflected in business
scandals and public mistrust. The path we have taken stops at the edge. In
Humanistic Management Michael Pirson points to another path, one away
from the cliff, toward a future where dignity counts as much as maximization.
Thomas Donaldson, The Wharton School University of Pennsylvania
3
Finally! Here is a book that explains what “humanistic management” is all
about. Pirson’s work is an important step towards a change of paradigm in the
way we think, teach, practice business.
Claus Dierksmeier, Director of the Weltethos-Institut
This is an important book. It explains how the narrative of business is
changing, and why we should adopt this more human understanding of
business. Read it more than once. We can and should make business better.
R. Edward Freeman, University of Virginia, The Darden School
This book is a revelation! So many people in senior management positions
today feel a huge disconnect between their personal values and those of their
businesses and the wider economy. They long for a new story-a new way of
doing business. This brilliant book not only explains why they feel as they do
but shows how to construct an economy that reflects who we truly are as
people.
Stewart Wallis, Visiting Professor, Lancaster University and previously
Director, New Economics Foundation
Michael Pirson provides a sterling upgrade to the inadequate business
economic theories that currently shape democratic capitalism. With this
brilliant book, Pirson helps readers see a path toward better theory, which has
the potential of spurring better practice and a more meritorious future for us
all.
Roger Martin, Institute Director of the Martin Prosperity Institute and
the Michael Lee-Chin Family Institute for Corporate Citizenship,
Rotman School of Management
Michael Pirson re-introduces humanity into problems of economic organizing.
His book is both a masterpiece of interdisciplinary scholarship and an easy-toread appeal to common sense in how we live and work. If you are struggling to
find purpose and meaning in these turbulent times, read Humanistic
4
Management. It offers a clear, accessible, dignity-centered bridge to an
economy in service to life.
Chris Laszlo, Weatherhead School of Management and Case Western
Reserve University
An important book, it provides critical foundations for a new narrative of an
economy in service to life.
L. Hunter Lovins, President, Natural Capitalism Solutions
Managers and policy makers who want to improve business and society of
tomorrow should read Pirson’s thoughtful analysis. Shifting business strategy
towards dignity and wellbeing can benefit not only employees but society at
large.
Douglas Frantz, Pulitzer Prize winner and Deputy Secretary General,
OECD
This is an excellent book which expounds on the basics for stakeholder
responsibility: protection of dignity and contribution to wellbeing.
Klaus Schwab, Executive Chairman of the World Economic Forum
Michael Pirson provides a much needed humanistic perspective on
management given the pervasive mindlessness of current business practices.
Ellen J. Langer, Harvard University
In Humanistic Management, Michael Pirson questions decades of teachings
about what motivates people and makes them happy. We humans are
complicated beings, seeking not only stuff and security, but also connection
and meaning. Pirson makes the case that with a deeper understanding of
human motivation, we can design better economies and companies, which of
course are made up of people. Backed by deep academic research and
credibility, Pirson takes us on an important and highly readable trip toward a
new theory of management.
Andrew Winston, bestselling author, Green to Gold and The Big Pivot
5
Very few people have the intellectual breadth to accomplish what Michael
Pirson did in this remarkable book. Weaving together insights from a variety
of disciplines, he has shown us what lies at the core of our shared humanity
–our desire to be treated with dignity– and how crucial it is to develop a
paradigm for business that recognizes his fundamental truth.
Donna Hicks, Harvard University
Humanistic Management is a much needed and timely articulation of
humanistic perspectives on organizations. For researchers, managers, policy
makers and teachers alike this book is a wakeup call to take humanistic
perspectives seriously. However, beyond waking us up through research,
examples, and arguments, the book provides direction and inspiration about
how to move down the pathways toward greater well-being and human
dignity.
Jane E. Dutton, Robert L. Kahn Distinguished University Professor of
Business Administration and Psychology
Pirson’s Humanistic Management frames key questions, and provides good
tools, for cultivating businesses that affirm rather than violate human dignity
and further rather than thwart the advance of well-being for our own species
and for nature as a whole.
Vincent Stanley, Yale University, Visiting Fellow at INSEAD, and coauthor of The Responsible Company with Yvon Chouinard
Michael Pirson provides the long overdue reembedding of economic theory
and managerial practice into its scientific and real-life contexts: from ethics to
democracy, from psychology to ecology. Something that got completely
separated and fragmented is being healed and becoming whole again.
Humanistic Management transforms an impoverished chrematistic ideology
back into what it ought and originally was thought to be: an economy serving
the common good.
Christian Felber, Vienna University of Economics and Business,
initiator of the international Economy for the Common Good movement
6
We are living in a time where old understandings of politics, economic
organization and management are collapsing under their own weight. The
pernicious idea that corporations exist to create shareholder value has reached
the end of its useful life. What would organizations look like in an economy
organized around the creation of well-being? Humanistic Management
provides a solid and grounded framework for creating these new ways of
management.
Jerry Davis, Michigan Ross School of Business, and author of The
Vanishing American Corporation
An insightful book for the 99% – and the 1% who think that they run the world
should take a close look, too.
John Elkington, Chairman & Chief Pollinator, Volans; co-founder of
Environmental Data Services (ENDS) and SustainAbility; and co-author
with Jochen Zeitz of The Breakthrough Challenge
We are facing a crisis decades in the making; a crisis created by the belief that
economic growth would –on its own– deliver human dignity. With a powerful
combination of age-old wisdom and modern scientific evidence, Michael
Pirson shows why this was not and what can we do to find our way out.
Camilo A. Azcarate, Manager, The World Bank Group
In this book Michael Pirson takes us on an intriguing journey of tracing the
sources and foundations of an emerging paradigm that can inspire the next
generation of management research, management practice, and leadership
capacity building.
Otto Scharmer, MIT Sloan School of Management; Founder,
Presencing Institute; Author, Theory U
Michael Pirson draws upon a wide-ranging and rich set of inputs –from
economics, psychology, sociology, management theory, neuroscience,
sociobiology, history– to craft nothing short of a compelling and inclusive new
narrative for human activity. In this relatively short book, given the breadth of
7
its agenda, Pirson manages to define and defend just the sort of “new story”
that our world so desperately needs and in so doing, he provides the “scripts”
and arguments required for us to voice its case.
Mary C. Gentile, PhD, Creator/Director of Giving Voice To Values and
Professor of Practice, University of Virginia Darden School of Business
This is a critically important book in a time where the world is confronted
daily with the limitations of the current economic system. It’s a
comprehensive, well-researched and practical guide to an inclusive and
sustainable global economy.
Patrick Struebi, Founder and CEO, Fairtrasa Group, Ashoka Global
fellow and Schwab Foundation fellow
In Humanistic Management: Protecting Dignity and Promoting Well-Being,
Michael Pirson provides a much-needed update of flawed assumptions about
human motivations that have distorted policies and practices, showing how
caring and humane organizations are essential for better lives, businesses, and
societies. This excellent book is an important contribution to the growing
leadership and management literature paving the way for a more partnershiporiented way of living and making a living.
Riane Eisler, author of The Real Wealth of Nations: Creating a Caring
Economics and President, Center for Partnership Studies
The influence of business and how business is done is now pervasive in our
lives. Unfortunately, most of business has become dehumanized – people are
treated as merely functions or objects in the pursuit of maximum profits.
Michael Pirson shows us how we can restore human beings to the center,
where they rightly belong. This book is a landmark contribution to our
understanding of how to make this happen in practice and in our research and
teaching.
Raj Sisodia, Babson College; Co-founder & Chairman Emeritus,
Conscious Capitalism Inc.
8
HUMANISTIC
MANAGEMENT
Protecting Dignity and Promoting
Well-Being
Michael Pirson
Fordham University, New York
9
University Printing House, Cambridge CB2 8BS, United Kingdom
One Liberty Plaza, 20th Floor, New York, NY 10006, USA
477 Williamstown Road, Port Melbourne, VIC 3207, Australia
4843/24, 2nd Floor, Ansari Road, Daryaganj, Delhi – 110002, India
79 Anson Road, #06–04/06, Singapore 079906
Cambridge University Press is part of the University of Cambridge.
It furthers the University’s mission by disseminating knowledge in the
pursuit of education, learning, and research at the highest international
levels of excellence.
www.cambridge.org
Information on this title: www.cambridge.org/9781107160729
DOI: 10.1017/9781316675946
© Michael Pirson 2017
This publication is in copyright. Subject to statutory exception and to the
provisions of relevant collective licensing agreements, no reproduction of any
part may take place without the written permission of Cambridge University
Press.
First published 2017
Printed in the United Kingdom by Clays, St Ives plc
A catalogue record for this publication is available from the British
Library.
Library of Congress Cataloging-in-Publication Data
10
Names: Pirson, Michael, author.
Title: Humanistic management : protecting dignity and promoting wellbeing / Michael Pirson, Fordham University, New York.
Description: Cambridge ; New York, NY : Cambridge University Press,
2017.
Identifiers: LCCN 2017008344| ISBN 9781107160729 (hardback) |
ISBN 9781316613719 (pbk.)
Subjects: LCSH: Management–Social aspects. | Organizational
sociology.
Classification: LCC HD30.19 .P57 2017 | DDC 658.4/08–dc23 LC
record available at https://lccn.loc.gov/2017008344
ISBN 978-1-107-16072-9 Hardback
ISBN 978-1-316-61371-9 Paperback
Cambridge University Press has no responsibility for the persistence or
accuracy of URLs for external or third-party internet websites referred to in
this publication and does not guarantee that any content on such websites is,
or will remain, accurate or appropriate.
11
Dedicated to
Marina,
Maximilian,
Leonard, and
Lucas
with appreciation, gratitude, and love.
12
Contents
Preface
Introduction
Part I Foundations of Humanistic Management
1 Two Narratives for Business
2 Understanding Human Nature
3 A New Humanistic Model
4 Economistic and Humanistic Perspectives on Organizing
5 Dignity and Well-Being as Cornerstones of Humanistic
Management
6 Economistic and Humanistic Archetypes of Management
Part II Applications of Humanistic Management
7 Developing Humanistic Management Research
8 Developing Humanistic Management Practice
9 Developing Humanistic Management Pedagogy
10 Developing Humanistic Management Policies
13
Concluding Remarks
Index
14
Preface
Dear Reader,
While traveling the world to talk about the concept of Humanistic
Management, I have frequently been asked to recommend books providing
a short overview. My answer has always been: “There are none.” Then I
would slowly add: “Yet.”
This book is the result of various efforts, including numerous
collaborations within the Humanistic Management Network. Together
with Shiban Khan, Ernst von Kimakowitz, Heiko Spitzeck, Wolfgang
Amann, Claus Dierksmeier, Consuelo Garcia de la Torre, Osmar Arandia,
and many others, I was one of the cofounders of the Humanistic
Management Network some twelve years ago. Since then, more than
twenty national interest groups and chapters of the network have been
established across the globe. We have organized numerous global
conferences and events to discuss the role of management in a world
fraught with problems. In addition, we have published more than fifteen
books and several special issues in academic peer-reviewed journals. This
book is one of the first attempts to provide an overview of Humanistic
Management as an alternative paradigm for Management. It cannot, of
course, be definitive in any way – the field is still emerging. The point of
this book is thus to introduce the basic paradigmatic ideas that have
emerged from the collaborations of different groups from various
academic disciplines, including practice and public policy, over a little
more than a decade.
15
The main purpose of this overview is therefore to inform and
stimulate further discussions around the two questions that I consider
fundamental: Who are we as people? And how can we organize to create a
world that works for all, or as we say, a life-conducive economic system?
There may be a plurality of approaches toward more humanistic
management. In the following pages, I will present one approach. It is
intended to be broad and inclusive, yet naturally limited by my personal
perspective. I want to thank Christian Felber, Donna Hicks, Hunter Lovins,
Roger Martin, Paula Parish, and Sandra Waddock for their helpful
comments on prior versions of the book. I acknowledge the remaining
limitations and am responsible for all persisting errors.
This rather massive undertaking would not have been possible
without the wonderful partnerships with my colleagues within the
Humanistic Management Network across the globe; the rich collaboration
with the Global Ethic (Weltethos) Institute in Tuebingen, Germany, the
inspiring partners at the Leading for Well-Being consortium, especially
Hunter Lovins, Chris Laszlo, David Levine, James Stoner, and Andrew
Winston; as well as my colleagues at the Academy of Management. I am
equally appreciative of the support I have received from Fordham
University and its Center for Humanistic Management in New York.
Finally, my heartfelt thanks to my wife Marina and my kids Max,
Leo, and Lucas, who would have preferred their daddy play soccer with
them rather than write a book.
16
Introduction
◈
The Need for a New Paradigm in
Management
As you can witness almost daily, we live in tumultuous times. We face an
array of global crises, ranging from increasing inequality and poverty, to
fundamentalist terrorism and war, to mass migration and environmental
destruction, all of them amplified by climate change. These crises require a
fundamental rethinking of how we organize at the global political level,
the societal level, the economic level, and the organizational level. The
economic system has become increasingly dominant, and the current
roadblocks toward progress challenge the way we organize, think about,
and do “business.”
Einstein famously stated: “We can't solve problems by using the same
kind of thinking we used when we created them.”1 Nevertheless,
mainstream business practitioners, as well as business school educators,
seem to lack an alternative way of thinking. William Allen, the former
chancellor of the Delaware Court of Chancery, notes that “[o]ne of the
marks of a truly dominant intellectual paradigm is the difficulty people
have in even imagining an alternative view.”2
The
Humanistic
Management
Network
has
worked
on
conceptualizing this much-needed alternative paradigm for business – a
17
humanistic paradigm, one based on the protection of dignity and the
promotion of well-being rather than mere wealth. This book starts by
describing the dominant narrative of the current worldview – an
economistic paradigm focused on wealth acquisition. The basic argument
is that our understanding of “who we are as people” fundamentally
influences the way we organize individually, in groups, in organizations,
and in society.
In the following pages, I present both narratives in business: the
dominant model representing “homo economicus,” which accurately
describes only about 1 percent of the population; and the alternative
“homo sapiens” model, which represents the remaining 99 percent of us.
While there is scientific evidence to support the latter perspective, the
economics and management disciplines have memetically adopted an
understanding based on inaccurate, axiomatic assumptions. This homo
economicus worldview of human beings as uncaring and narrowly selfinterested has influenced the way business structures are set up (limited
liability, focus on profit maximization). The homo sapiens perspective
allows us to understand the importance of care, the notion of human
dignity, and the evolutionary reasons for humans only surviving when
organizing for the common good. By adopting this perspective we can
envision organizations as caring communities that converge to produce for
the benefit of the common good.
In collaboration with the Humanistic Management Network and
beyond, scholars have chronicled numerous organizations that follow the
humanistic paradigm, which succeed because they focus on the protection
of human dignity and the promotion of societal well-being. Some of these
organizations are highlighted in Chapter 8. The fact that many such
organizations are run successfully, and often more profitably over time,
18
proves that there are alternatives to the current economistic understanding
of how best to organize human endeavors.
Humanistic management scholars focus on human dignity, described
by Kant as that which escapes all price mechanism and which is valued
intrinsically (freedom, love, care, responsibility, character, ethics). This,
they argue, has superior theoretical accuracy to the current paradigm. In
addition, if the end goal of organizing were expanded to include wellbeing or common good, scholars can demonstrate how business might play
an active role in solving current global problems.
In the first part of the book, the basic conceptual foundations of
humanistic management are presented.3 In the second part of the book, the
applications of the humanistic management perspective are outlined for
research, practice, pedagogy, and policy. In the first chapters, the notion of
humanistic management as an organizing principle for the protection of
human dignity and the promotion of human flourishing within the carrying
capacity of the planet are introduced. This notion is becoming increasingly
relevant given the multitude of problems humanity faces. In addition, the
dysfunctionality of the existing, dominant paradigm is demonstrated by
showing that it violates human dignity and undermines human flourishing,
while constantly disregarding the planetary boundaries. A humanistic
perspective of human nature is presented, outlining the consequences of
this perspective for groups, organizations, and society. The basic pillars of
the humanistic management paradigm present a framework for differing
organizing archetypes. The book suggests that these archetypes can help
guide a transition toward more humanistic management practice,
pedagogy, and management-related public policy. It examines the research
implications and specific applications by means of selected examples.
Moreover, the book suggests that a humanistic paradigm is critical for
19
academic thought leaders, business leaders, civic leaders, political leaders,
as well as anybody concerned with the future of humanity.
Chapter 1 outlines the basic concept of humanistic management and
contrasts it with the mainstream view of business. Chapter 2 examines the
differing assumptions about and insights into human nature. Chapter 3
presents a humanistic understanding of human nature, which can serve as a
cornerstone of management research, practice, pedagogy, and policy.
Chapter 4 presents the consequences of such a humanistic perspective on
organizing, providing examples, among others, for business strategy,
governance, leadership, and motivation. In Chapter 5, the basic pillars of
humanistic management, human dignity, and human well-being are
outlined in greater depth. Based on these pillars, Chapter 6 suggests
different archetypes for thinking about management, which inform
research, teaching, practice, and policy making.4 Chapter 7 explores how
these archetypes can support a transition toward more humanistic
management research.5 Conversely, Chapter 8 investigates how these
archetypes can support a transition toward more humanistic management
practice. Thereafter, Chapter 9 explores how these archetypes can support
a transition toward more humanistic management pedagogy, and Chapter
10 how they can support a transition toward more humanistic management
policy. The concluding chapter presents a summary and outlines pathways
toward a collaborative approach to a more human-centered economy.
The book is meant to be a stepping-stone to facilitate further, rich
conversation and collaboration.
Notes
1 Albert Einstein. BrainyQuote.com, Xplore Inc, 2016.
www.brainyquote.com/quotes/quotes/a/alberteins121993.html, accessed
20
June 27, 2016.
2 Allen, W. T. (1993). “Contracts and communities in corporation law.”
Washington & Lee Law Review, 50, 1395–1407. (Cited from Page 1401).
3 Readers interested in a more thorough philosophical treatment of the
humanistic management paradigm should check out Claus Dierksmeier’s
book: Reframing Economic Ethics- Philosophical Foundations of
Humanistic Management. www.springer.com/us/book/9783319322995
4 Some readers may want to skim or skip Chapter 6, as it may be too
conceptual for them. The following chapters build on the framework
presented in Chapter 6 yet present mostly case studies that can be
understood without the conceptual framework.
5 Friendly reviewers also suggested that those readers who are not members
of the Academy of Management might do better skimming the research
chapter, as it might distract from the more digestible chapters that follow.
21
Part I
◈
Foundations of Humanistic
Management
22
1
Two Narratives for Business
◈
A Failing Narrative
Meet Elisabeth, my neighbor. Elisabeth did all she was told to succeed in
life. After earning an MBA at a reputable school, she chose to work for a
hospital. She wanted to stay true to her desire to serve others and thought
the health care industry would allow her to do so.
One afternoon, we run into each other as she is walking her dog. I ask
her how she likes her work and she confesses, “It is awful – so stressful …
I never really wanted to be in a competitive, business type of environment,
but it seems the hospital is just as corporate and mean-spirited as
everything else.”
Meet Richard, formerly a successful Wall Street banker. He joined
the world of banking because he admired its service orientation, but quit
the industry in what he later described as a midlife crisis. The more he
thought about the type of work his bank was doing and the people with
whom it was working, the more depressed he became. He had an
especially hard time reconciling what he heard in church on Sunday with
the values that surrounded him in the financial industry. The banking and
23
service culture that he admired had turned into something of which he
wanted no part. He decided to get out.
Meet Tiffany, a former student, who never wanted to be in business,
which she believed was an arid field, devoid of human touch and care. She
did not feel attracted to the private sector and wanted to be a “good
person.” She chose a low-paying public policy career and worked for
nongovernmental entities to stay true to her personal philosophy.
Elisabeth, Richard, and Tiffany have the luxury of many choices. In
many ways they are privileged. These real-life stories highlight a shared
unhappiness about business despite privilege. While one could easily
dismiss such unhappiness as a minority view, research shows that, despite
unprecedented levels of material wealth, people are increasingly alienated
from their work1 and want to redefine the meaning of success.2 On the
flipside, an increasing number of people wish to engage in more
meaningful activities at work and beyond, and long to be part of the
solutions to the many problems that humanity faces (climate change,
terrorism, social inequality, poverty).3
Mainstream thinking about the business world has become associated
with the fictional character Gordon Gekko and his motto: “Greed is good.”
Money and power are portrayed as the ultimate motives of human
ambition, and disagreeing with this is sheer naivety. The dominant
narrative is that people are greedy, money-hungry maximizers, or homo
economicus.
Nevertheless, there seems to be something wrong with the larger
cultural narrative about what human beings value first and foremost. The
economist Richard Layard has mentioned that there is something wrong
when we have unprecedented material wealth and economic growth but
stagnating levels of human well-being.4 The famous Easterlin Paradox5
24
states that happiness is not significantly associated with income. As such,
the dominant narrative is failing.6
At the core of the three life stories above lies a narrative about
business that has failed to deliver the “good life,” as many people perceive
it. The wish to change the narrative is the crux of a concerted effort to
rethink how people have come to understand life and their role within the
economic system. The position advocated here is that a change in the
narrative can contribute to a better life and a better economy.
Crisis Signals – Three Challenges to the
Current System
Our current societal setup is largely driven by an understanding of the
economic system as the central driver of progress. This notion is arguably
more relevant in developed regions of the world. However, some
observers, including Nobel Laureate Joseph Stiglitz, bemoan the
increasing spread of the “Washington Consensus” around the globe.7 As a
consequence, the economistic logic, according to which markets provide
the ultimate rationale for what is valuable, is increasingly a globally shared
cultural narrative. This narrative is, however, increasingly challenged.8 We
are experiencing what scientific historian Thomas Kuhn called a
paradigmatic crisis.9
Individual-Level Challenges
On the individual level, scholars observe an interesting anomaly.10 While
the current system is credited with creating more wealth for many, the
average life satisfaction level has not increased.11 Gross domestic product
(GDP) growth and growth in well-being have decoupled.12 Factors that
25
contribute to well-being have a relatively low correlation with material
wealth once a certain wealth level has been achieved.13 From a systemic
perspective, a government’s quality in terms of democratic and human
rights, the level of corruption, the system’s stability, high social capital,
and a strong economy with low rates of unemployment and inflation all
contribute to subjective well-being. On an individual level, the quality of
social relationships, good physical and mental health, and a generally
positive attitude toward life are central drivers of well-being.14 As an
attitude, materialism, for example, is toxic for well-being.15 Many studies
show that a personal quest for more money or consumer goods decreases
people’s sense of personal well-being.16 George Monbiot highlights that:
This is the dreadful mistake we are making: allowing ourselves to believe
that having more money and more stuff enhances our wellbeing, a belief
possessed not only by those poor deluded people in the pictures, but by
almost every member of almost every government. Worldly ambition,
material aspiration, perpetual growth: these are a formula for mass
unhappiness.17
The current system is built on increases in consumption that may lead to
economic growth, yet make many people less happy with their lives. The
advertising industry, for example, exists to create artificial material wants
and is considered successful when more people try to feed their wants with
more consumption, which drives up raw material use and creates many
related environmental and social problems. For societies that pride
themselves on freedom of choice and democratic values, such unreflected
practices undermine their very essence.18
Organizational-Level Challenges
26
Business practices are increasingly being challenged at the organizational
level. The recent collapse of the factory building at Rana Plaza in
Bangladesh, which highlighted the working conditions of textile workers;
the corruption and cheating at Volkswagen; and the usage of legal
loopholes to evade taxes (e.g., Google, Facebook, Pfizer) challenge the
legitimacy of business as a societal institution. Over the past decades,
corporations have lost their reputations and stakeholder trust has
declined.19 Trust is, however, commonly viewed as the key enabler of
cooperation, motivation, and innovation, all of which organizations require
for peak performance and success.20 Surveys indicate that stakeholder trust
in businesses is decreasing dramatically, specifically trust in large global
companies bent on shareholder value maximization. Research finds that
the decline in trust is strongly correlated with a lack of value congruency
between the stakeholders and the organization.21 People perceive profit
maximization goals as inherently opportunistic, making it ever more
difficult for the business community to reestablish trust.22
Observers have long noted that many organizations (especially
corporations) face a decreasing level of employee commitment, which is
indicative of the increasing lack of mutual commitment. The Hay Group,
for example, finds that 43 percent of American employees are either
neutral or negative toward their workplace.23 According to several Gallup
studies, around 70 percent of US employees are either not engaged or
actively disengaged, showing an alarming inner withdrawal rate.24
Management scholar Michael Jensen argues that the goal of profit
maximization is partially responsible. He posits as self-evident that:
Creating value takes more than acceptance of value maximization as the
organizational objective. As a statement of corporate purpose or vision,
value maximization is not likely to tap into the energy and enthusiasm of
employees and managers to create value.25
27
Hence, shareholder value-maximizing organizations are under-utilizing
their employees’ potential.26
Systemic Challenges
Environmental destruction is one of the most obvious problems of our
current economic system. Humanity is using the productive capacity of
more than 1.5 planets to satisfy its desires.27 If everybody on this planet
were to consume natural resources at the rate of an average American, five
planets would be required.28 The current economy uses more resources
than can be replenished, leading to unsustainable growth and even more
economic bubbles. In financial terms, humanity is living off its planetary
capital and not off the interest it generates, which is very poor
management of resources. However, the logic of our current system
supports this lack of sustainability. Shareholder capitalism is short-termoriented and, when applied rigorously, rewards plundering rather than
preserving.29According to ecological economist Robert Costanza,
economics does not value the future.30
The current levels of poverty and inequality had pricked the
conscience of many people long before the publication of Thomas
Piketty’s Capital in the Twenty-First Century in 2015.31 The Occupy Wall
Street protests and their global spinoffs, together with various political
movements (Syriza in Greece, Podemos in Spain, the Brexit movement in
the United Kingdom, the electoral campaigns of Bernie Sanders and
Donald Trump in the United States), showcase the widespread
dissatisfaction with current levels of inequality. Such dissatisfaction is a
threat to the political system’s stability, which the growing fundamentalist
terrorism also suggests. One-sixth of the world’s population lives in
extreme poverty. Current globalization trends have led to a world in which
the rich get richer and the poor get disproportionately poorer.32 Absolute
28
poverty may have decreased in recent years, but relative poverty has
increased significantly. Inequalities feed political unrest, collectivization,
and terrorism, which in turn require significant investments to preserve the
status quo (e.g., through higher defense spending). Research increasingly
shows the deleterious effects of inequality on human well-being, especially
health.33 Shareholder capitalism is mostly blind to these consequences and
has not yet provided satisfactory answers to deal with these issues.34
Sustainability scholars Paul Hawken, Amory Lovins, and Hunter Lovins
have argued that economics does not value social relationships.35
Challenges to Theory, Practice,
Pedagogy, and Policy
Economic and business theory is under attack in fundamental ways. The
basic assumption that material wealth will lead to better lives is, in many
parts of the world, no longer true. A lot of research shows that the
assumptions that human beings are greedy and narrowly self-interested are
problematic and function like self-fulfilling prophecies.36 The genesis and
development of this narrative are discussed in more detail in Chapter 2.
From a theoretical perspective, these assumptions lead scholars to
understand only a very small part of human organizing practice. Just like
the drunken man who lost his key in the middle of the street but is
searching for them at the end of the street where the streetlight is, many
academics misplace their scholarly attention. Despite the richness of the
material (discussed in Chapter 2), findings that challenge the assumptions
of homo economicus have been assigned to marginal “boxes” and labeled
as deviant. The reductionist approach to economic and management theory
is legitimate to a degree but has become a paradigmatic prison.
29
Many scholars have suggested that the current paradigm is not only
problematic for theoretical and scholarly purposes, but leads to bad
management practice.37 W. Edwards Deming, the father of quality
management and a contributor to Japan’s postwar resurgence, observed
that many successful business owners rarely hire MBAs because they
believe they lack the mindset required for successful organizing.38 Studies
on business teaching’s current effects reveal that many socially undesired
traits are perpetuated when business teaching is based on purely
economistic assumptions.39 Scholars find that the rate of cheating
increases, care for others is reduced, and egotistical behavior is rewarded.
In fact, during the 2008 crises, leading business schools were singled out
as having contributed to the global financial crisis with their teaching.40
In addition, the assumption model of homo economicus increases
policy support for GDP growth at the societal level, income growth at the
individual level, and profit maximization at the organizational level – all
measures that aim to deliver material wealth, not well-being. As such, in
the US context, the Securities and Exchange Commission (SEC)
guidelines make it harder for organizations that propose providing
equitable returns and not maximizing shareholder value to enter public
financial markets. The founders of AES, a US energy company, recall that
their investment bankers had refused to support a “caring approach”
toward employees, claiming that this would violate SEC standards.41
Scholars argue that we need another Enlightenment to challenge the
hegemony of homo economicus. The Enlightenment, a European
movement in the late seventeenth and eighteenth centuries, challenged the
dominance of religious orthodoxy. It shifted fundamental assumptions
about human nature by focusing on reason, not religious dogma, as the
primary source of authority and legitimacy. As a result, it empowered
people to start thinking for themselves and to advance ideals such as
30
liberty, progress, tolerance, fraternity, constitutional government, and the
separation of church and state.42 Currently, the Enlightenment needs to
empower people like Elisabeth, Richard, and Tiffany to forge pathways
that lead to a better life. Biologist Andreas Weber calls it Enlivenment.43
The Economistic Paradigm
The experiences of Elisabeth, Richard, and Tiffany showcase the reality
that the background narrative we label “economistic” causes. Because the
economistic narrative is based on axiomatic notions of who we are as
people, it is worth exploring if those assumptions are correct. In fact, it
turns out that this narrative is not based on scientific insights, but on
assumptions most often reflected in fictional characters, such as Ebenezer
Scrooge or Gordon Gekko, and some real-life characters portrayed by The
Wolf of Wall Street or villains such as Bernie Madoff. The narrative holds
that people are fundamentally self-serving and looking for material wealth
as an indicator of success. The narrative is therefore amoral in the sense
that any behavior is acceptable as long as it helps create more money.
Other people are treated as a means to personal gain, and trickster behavior
is considered sly, smart, and legitimate. These assumptions are simple, and
therefore very powerful.
In more scientific terms, these assumptions refer to humans as
individuals driven by rational interests aimed at maximizing utility (homo
economicus). As measurable entities or preferences, wealth and income
have, however, gradually supplanted utility as a broad concept of what
brings happiness. Rational interests are those that can be negotiated in an
exchange setting: More of x utility should therefore trump less of the
same. The quantity of options supersedes the quality of options. There is
now a vast literature both criticizing and defending homo economicus, yet
31
the main argument here is that beyond legitimate reductions for theoretical
purposes in economics, homo economicus assumptions have become
performative in ways beyond mere theoretical prescriptions, especially in
the domain of business and management.
The simplicity of homo economicus assumptions follows what is also
known as Occam’s razor, or the law of parsimony. This law states that the
hypothesis with the fewest assumptions should be selected from all the
competing hypotheses. Although other, more complicated solutions may
ultimately prove correct, in the absence of certainty, the fewer assumptions
made, the better.44 Applied to market-based behavior questions, these
assumptions seem to accurately describe common motivations. However,
when uncoupled from their original purpose, they become misguided.
When studying how most people will behave in a market setting where the
price mechanism regulates the supply of and demand for a product, the
homo economicus model is useful. When human relationships are,
however, studied in organizational contexts, such a lens will fail to capture
human complexity.
Whereas parsimony in itself is valuable for theoretical purposes, it
had an additional effect on economics by making it more mathematicsbased. Outsiders started viewing economics as scientifically more
rigorous. Rakesh Khurana, a former Harvard Business School professor
turned Harvard College dean, suggests that, in general, management
research and business schools adopted the methodological tool box of
economics, along with its underlying assumptions, to turn a practice-based
trade school into what would be seen as a science-based university
school.45 This shift was undertaken to enhance the visibility and
reputational status of a newly emerging class of businessmen and
professional managers, who could not otherwise compete in terms of
societal status with doctors, lawyers, and priests.
32
Khurana argues that in order to acquire a reputational status, business
and management had to become a profession that would require a
university degree. Until the late 1800s, there was almost no business
education, while trade schools would teach accounting, bakery, butchery,
etc. Business and management research turned to the axiomatic notion of
people as homo economicus to justify itself as scientific and rigorous. This
enabled business schools to claim to be legitimate professional schools
with affiliation to a “serious, reputable” university. Rather than seeing the
irony of its unscientific basis, management theory has used “economic
man” as its ticket to become a respected “science.”46
This argument is not novel: Karl Marx and John Maynard Keynes
also used it. Keynes states: “Economists, like other scientists, have chosen
the hypothesis from which they set out, and which they offer to beginners
because it is the simplest, and not because it is the nearest to the facts.”47
In his essay on the Church of Economism, Richard Norgaard suggests
that leading economists are aware of the quasi-religious nature of
economics:
Economists themselves have acknowledged the ultimately religious
nature of their discipline. In 1932, Frank Knight, the most scholarly and
broad-thinking of the founders of the influential market-oriented Chicago
School of Economics, literally argued that economics, at a fundamental
level, had to be a religion, the basic tenets of which must be hidden from
all but a few:
The point is that the “principles” – by which a society or a group lives in
tolerable harmony are essentially religious. The essential nature of a
religious principle is that not merely is it immoral to oppose it, but to ask
what it is, is morally identical with denial and attack.
There must be ultimates, and they must be religious, in economics as
anywhere else, if one has anything to say touching conduct or social
33
policy in a practical way. Man is a believing animal and to few, if any, is
it given to criticize the foundations of belief ‘intelligently.’ To inquire
into the ultimates behind accepted group values is obscene and
sacrilegious: objective inquiry is an attempt to uncover the nakedness of
man, his soul as well as his body, his deeds, his culture, and his very
gods. Certainly the large general [economics] courses should be
prevented from raising any question about objectivity, but should assume
the objectivity of the slogans they inculcate, as a sacred feature of the
system.48
The argument is that business theory and management “science” have
unconsciously, memetically, uncritically, and unreflectedly adopted the
precepts of the Church of Economism (for a number of reasons, including
status orientation, “physics envy,” or the authentic quest for scientific
rigor).49 One of the core foundations of this quasi-religious business theory
is the assumption that profit maximization is a signal of effectiveness, and
that the main concern of organizing should be related to efficiency.50 Such
unquestioned concerns for efficiency are mostly presented in the
“objective” form. Management scientists, for example, study quantitative
decision-making based on utilitarian cost/benefit assessments. Within this
framework, people become resources as in “human resources” or “human
capital.” To be seen as objective, researchers’ moral concerns have to be
eliminated, and qualitative judgments replaced with fact-based evidence.
The evidence, for which management science is looking, is the rational
behavior that leads to an organization’s greater profitability. Frederic
Taylor heralded such a perspective, and Henry Ford most famously
adopted it. Their successes practically legitimized what seemed
theoretically expedient.
The perceived connection of economics with the theory of all
theories, Darwinian evolution, was another cultural force that helped
establish economics-based management theory. Many observers have
34
noted that the Herbert Spencer’s popularization of Darwin’s insights gave
scientific backing to an amoral kind of behavior that would favor the
strongest over the weak. According to Spencer’s Social Darwinism,
natural selection favored the ruthless over the caring, the competitive over
the collaborative, and, as an extension of this, the unethical over the
ethical. While a careful reading of Darwin would immediately refute such
a perspective, at the time, such Spencerian accounts lent credibility to
homo economicus assumptions about human nature. These assumptions
resonated with Adam Smith’s perspective of humans as driven by selfinterest, while ignoring his observations that what people really desire is to
be beloved and to belong.51
Keynes argues that the confluence of these two perspectives took the
individualist perspective of the modern era to a logical extreme:
The parallelism between economic laissez-faire and Darwinianism, … is
now seen, as Herbert Spencer was foremost to recognise, to be very close
indeed. Darwin invoked sexual love, acting through sexual selection, as
an adjutant to natural selection by competition, to direct evolution along
lines which should be desirable as well as effective, so the individualist
invokes the love of money, acting through the pursuit of profit, as an
adjutant to natural selection, to bring about the production on the greatest
possible scale of what is most strongly desired as measured by exchange
value.
The beauty and the simplicity of such a theory are so great that it is easy
to forget that it follows not from the actual facts, but from an incomplete
hypothesis introduced for the sake of simplicity. Apart from other
objections to be mentioned later, the conclusion that individuals acting
independently for their own advantage will produce the greatest
aggregate of wealth, depends on a variety of unreal assumptions to the
effect that the processes of production and consumption are in no way
organic, that there exists a sufficient foreknowledge of conditions and
35
requirements, and that there are adequate opportunities of obtaining this
foreknowledge. For economists generally reserve for a later stage of their
argument the complications which arise - (1) when the efficient units of
production are large relatively to the units of consumption, (2) when
overhead costs or joint costs are present, (3) when internal economies
tend to the aggregation of production, (4) when the time required for
adjustments is long, (5) when ignorance prevails over knowledge and (6)
when monopolies and combinations interfere with equality in bargaining
- they reserve, that is to say, for a later stage their analysis of the actual
facts. Moreover, many of those who recognise that the simplified
hypothesis does not accurately correspond to fact conclude nevertheless
that it does represent what is “natural” and therefore ideal. They regard
the simplified hypothesis as health, and the further complications as
disease.52
The economistic narrative has led to problems on multiple levels, because
the misrepresentation of individuals has logical consequences for groups,
organizations, and society. The current perspective has led to many
negative consequences (diseases, as Keynes states above), yet, owing to its
dominance, a majority of educated observers consider the “quasireligious” narrative of economics and management to be scientific and
healthy.
The American sociologist Paul Lawrence suggests that the Spencerian
version of social Darwinism perverted the meaning of survival of the
fittest to mean the survival of the toughest, strongest, and most ruthless
species, not the survival of the most adaptive species.53 Lawrence argues
that true Darwinian theory could indeed provide vital insights into human
nature. He suggests that an accurate scientific understanding can help
overcome quasi-religious assumptions that hinder the quest for better
organizing practices. He, along with other researchers, argues that
evolutionary theory can provide a truly scientific basis for economics and
36
for management. Researchers such as E.O. Wilson, as well as David Sloan
Wilson, claim that evolutionary insights can help bridge cultural divides
and provide a deeper understanding of humanities’ shared ambitions.54
The Humanistic Paradigm
E.O. Wilson, the great biologist, argues that a renewed convergence of the
humanities and sciences is helping us better understand human beings as
social animals endowed with reason, which Aristotle stated so succinctly
several thousand years ago. From the philosophical work of Aristotle to
Adam Smith to Darwin, to the newly emerging fields of evolutionary
psychology, neuroscience, and sociobiology, evidence is mounting that
humans are hard-wired for empathy and collaboration, and that that
sociality is fundamental to survival. The human tendency to be social,
kind, and moral is no longer seen as a deviation and a bug, but as a feature.
Wilson suggests that the humanities and social sciences can draw on the
latest findings in natural science to project a better story for humanity – a
humanistic paradigm.
Evolutionary theory concludes that humans are fundamentally caring
and social, and that they are fundamentally moral. One can make more
sense of this by looking at daily experience in which humans find that they
care about each other (in family, work, and friendship circles) and about
society at large (reading the news, checking in with “friends” on social
media, etc.). A life devoid of care leads to misery in many ways. Humans
have long determined that isolation is the most cruel punishment, whether
physical isolation on a remote island (exiled like Napoleon), in a solitary
confinement cell, or psychologically isolated through feelings of shame.
Being alone is considered a tragedy and leads many to depression,
dysfunction, or even suicide, rendering isolation crueller than death.
37
Expanding on the social nature of human beings, Darwin suggests
that morality must have developed to manage the manifold social
relations.55 This insight into the relevance of morality, values, and care for
our common good is normally buried by a story of business propagating
greed, a psychopathic lack of care, and destruction of life. The alternative,
humanistic narrative acknowledges human beings as highly social and
moral. Humans become humane when they are involved in dynamic,
relational communities that supersede the mere coordination of markets.
To capture this insight, the humanistic narrative employs the term
dignity, which serves as a philosophical category for things that escape the
market mechanism: those things and events that do not have a price and
cannot be exchanged. To see how relevant dignity-related, non-market
concerns are to human life, consider one of the most successful advertising
campaigns of the early twenty-first century. For more than seventeen
years, MasterCard’s slogan was: “There are things in life that are priceless,
for everything else there is MasterCard.” The campaign was successful
because it spoke to an authentic human experience. It demonstrated that
while markets are important, the most important things in life transcend
the market logic. The humanistic paradigm captures this essential truth
about human nature and suggests that human beings require dignity to
flourish. Elisabeth, Richard, and Tiffany longed for qualities in life that
cannot be bought, such as integrity, love, community, and respect. Such
qualities, along with empathy, compassion, and care, are key enablers of
human flourishing.
In the humanistic perspective, then, humans not only desire autonomy
and independence but crave for affiliation and one-ness. They are thus not
independent, but interdependent. While the market is a useful coordination
mechanism, it cannot fully meet our human and organizational needs.
Social groups and communities are critical elements for a functioning
38
society, and only those communities that help human beings protect their
dignity can support human flourishing. Practices that allow for the
protection of dignity and the promotion of well-being are part and parcel
of humanistic management.
Concluding Remarks
There is a clear need for a better story of who we are as human beings.
Many people experience cognitive dissonance between what they think
business is and what life should be about.56 The stories of Elisabeth,
Richard, and Tiffany highlight the intense wish to flourish beyond material
wealth. To achieve parsimony, economics-based management “science”
has adopted a flawed paradigmatic set of assumptions about human nature.
Increasing evidence from across the sciences highlights the downsides of
the economistic perspective. The emerging consilience of knowledge is a
starting point for more accurate theorizing and better management practice
– a humanistic paradigm.
Notes
1 www.gallup.com/poll/188144/employee-engagement-stagnant-2015.aspx
2 www.gallup.com/businessjournal/188033/worldwide-employeeengagement-crisis.aspx
3 www.forbes.com/sites/karlmoore/2014/10/02/millennials-work-forpurpose-not-paycheck/#47348b35a225
4 Layard, R. (2005). Happiness – Lessons From a New Science, London,
Penguin Press.
39
5 The Easterlin Paradox describes that despite GDP growth in developed
nations, happiness levels have largely remained constant since World War
II.
6 It may be worth noting that more recent empirical research by Nobel
Laureates Daniel Kahneman and Angus Deaton have shown a slight
correlation of wealth with health and happiness, putting the overall claim of
Easterlin in perspective. Nevertheless, the mere focus on GDP growth as
political goal is questioned by them as well. See, e.g., Deaton, A. (2013).
The Great Escape: Health, Wealth, and the Origins of Inequality. Princeton
University Press.
7 Stiglitz, J. (2013). The Price of Inequality. New York, W.W. Norton.
8 I use the words “paradigm” and “narrative” interchangeably here; to be
more precise, the paradigm is the base example on which thinking is based
(such as homo economicus), and the narrative is the story that extends that
example to make it culturally appealing.
9 Kuhn, T. (1996). The Structure of Scientific Revolutions. University of
Chicago Press.
10 Pirson, M., et al. (2009). “Introduction to humanism in business.”
Humanism in Business. The Humanistic Management Network. Cambridge,
Cambridge University Press.
11 Easterlin, R. (2001). “Income and happiness: towards a unified theory.”
Economic Journal, 111(July), 465–484.
12 Costanza, R., I. Kubiszewski, E. Giovannini, H. Lovins, J. McGlade, K.
E. Pickett, K. V. Ragnarsdóttir, D. Roberts, R. De Vogli, and R. Wilkinson.
(2014). “Development.” Nature, 505(7483), 283–285.
13 Diener, E. and M. E. P. Seligman (2004). “Beyond money: toward and
economy of well-being.” Psychological Science in the Public Interest, 5,
1–31.
40
14 Diener and Seligman. “Beyond money,” 1–31.
15 Kasser, T. and A. C. Ahuvia (2002). “Materialistic values and well-being
in business students.” European Journal of Social Psychology, 32, 137–146.
16 www.theguardian.com/commentisfree/2013/dec/09/materialism-systemeats-us-from-inside-out
17 Ibid.
18 Pirson. “Introduction to humanism in business.”
19 www.theguardian.com/sustainable-business/2015/jan/21/public-trustglobal-business-government-low-decline
20 Pirson, M. and D. Malhotra (2011). “Foundations of organizational trust:
what matters to different stakeholders?” Organization Science, 22(4),
1087–1104.
21 Pirson, M. (2007). Facing the Trust Gap: How Organizations Can
Measure and Manage Stakeholder Trust. St. Gallen, University of St.
Gallen.
22 Pirson, M., et al. (2012). “Public trust in business and its determinants.”
Public Trust, eds. E. Freeman and A. C. Wicks. Simons, T. (2002). “The
high cost of lost trust.” Harvard Business Review, September, 1–3.
23 The Hay Group (2002). Engage Employees and Boost Performance.
www.haygroup.com/us/downloads/details.aspx?id=7343 (accessed June 21,
2016)
24 For example: www.gallup.com/poll/188144/employee-engagementstagnant-2015.aspx
www.gallup.com/businessjournal/188033/worldwide-employeeengagement-crisis.aspx (accessed June 22, 2016)
25 Jensen, M. C. (2001). “Value maximisation, stakeholder theory, and the
corporate objective function.” European Financial Management, 7(3), 297
41
(citation from page 278)
26 Pirson et al., “Introduction to humanism in business.”
27 www.bbc.com/news/magazine-33133712 (accessed June 21, 2016)
28 Boyle, D., et al. (2006). Are you happy? new economics past, present
and future. NEF.
29 Pirson et al., “Introduction to humanism in business.”
30 Costanza, R. (1992). Ecological Economics: The Science and
Management of Sustainability. Columbia University Press. See also
Chichilnisky, G. (1996). “An axiomatic approach to sustainable
development.” Social Choice and Welfare, 13(2), 231–257.
31 Piketty, T. (2014). Capital in the 21st century. Cambridge, MA, Harvard
University Press.
32 Sachs, J. (2005). The End of Poverty: Economic Possibilities for Our
Time. New York, Penguin Group.
33 Wilkinson, R. G., and K. E. Pickett. (2009) “Income Inequality and
Social Dysfunction.” Annual Review of Sociology, 35, 493–511.
34 Pirson et al., “Introduction to humanism in business.”
35 Hawken, P., Lovins, A. B., and Lovins, L. H. (2013). Natural
Capitalism: The Next Industrial Revolution. New York, Routledge. See also
Chichilnisky, G. (1996). “An axiomatic approach to sustainable
development.” Social Choice and Welfare, 13(2), 231–257.
36 Argyris, C. (1973). “Organization man: Rational and self-actualizing.”
Public Administration Review, 33(July/August), 354–357; Ghoshal, S.
(2005). “Bad management theories are destroying good management
practices.” Academy of Management Learning and Education, 4(1), 75–91;
Ferraro, F., J. Pfeffer and R. I. Sutton (2005). “Economics language and
42
assumptions: How theories can become self-fulfilling.” Academy of
Management Review, 30(1), 8–24.
37 Ibid.
38 Gabor, A. (2010), remarks delivered at Deming Memorial Conference on
the future of business and business education, at Fordham University, May
11.
39 Dierksmeier, C. (2011). “Reorienting management education: from homo
oeconomicus to human dignity.” Business Schools under Fire. H. M.
Network. New York, Palgrave McMillan.
40 Holland, K. (2009). Is it Time to Retrain Business Schools? New York
Times. March 12.
41 Bakke, D. (2005). Joy at Work. Seattle, WA, PVG.
42 Zafirovski, M. (2010), The Enlightenment and Its Effects on Modern
Society. New York, Springer. 144.
43 Weber, A. (2013) Enlivenment. Towards A Fundamental Shift In The
Concepts Of Nature, Culture And Politics. Berlin, Heinrich-Böll-Stiftung.
44 http://radiopaedia.org/articles/occams-razor (last accessed May 23, 2016)
45 Khurana, R. (2007). From Higher Aims to Hired Hands: The Social
Transformation of American Business Schools and The Unfulfilled Promise
of Management As a Profession. Princeton University Press.
46 Khurana. From Higher Aims to Hired Hands: The Social Transformation
of American Business Schools and the Unfulfilled Promise of Management
as a Profession.
47 www.panarchy.org/keynes/laissezfaire.1926.html (last accessed April 12,
2016)
43
48 www.countercurrents.org/norgaard301215.htm (last accessed March 28,
2016)
49 For example: Dierksmeier, C. (2011). “The freedom-responsibility nexus
in management philosophy and business ethics.” Journal of Business Ethics,
101(2), 263–283, or Khurana, From Higher Aims To Hired Hands.
50 Nadeau, R. (2012). Rebirth of the Sacred: Science, Religion, and the New
Environmental Ethos. Oxford University Press.
51 Smith, A. (2010). The Theory of Moral Sentiments. New York, Penguin.
Or Hansen, M
(www.natcapsolutions.org/Presidio/Articles/Globalization/Note_on_Adam_
Smith_as_Theorist_of_Sustainability_MHANSEN.pdf) Relevant Quotes:
“Human happiness depends primarily upon “composure and tranquility of
mind” which is based on feelings of “gratitude and love” (TMS49). Or “the
chief part of happiness arises from the consciousness of being beloved…”
(TMS56).
52 www.panarchy.org/keynes/laissezfaire.1926.html
53 Lawrence, P. (2007). Being Human – A Renewed Darwinian Theory of
Human Behavior. www.prlawrence.com. Cambridge, MA and Lawrence, P.
R., and M. Pirson (2015). “Economistic and humanistic narratives of
leadership in the age of globality: Toward a renewed Darwinian theory of
leadership.” Journal of Business Ethics, 128(2), 383–394.
54 Wilson, E. O. (2012). On Human Nature. Cambridge, MA, Harvard
University Press. Wilson, E. O. (2012). The Social Conquest of Earth. New
York, W. W. Norton & Company; Wilson, D. S. (2015). Does Altruism
Exist?: Culture, Genes, and the Welfare of Others. New Haven, CT, Yale
University Press.
55 Darwin, C. (1909). The Descent of Man and Selection in Relation to Sex.
New York, Appleton and Company.
44
56 Tetlock, P., et al. (2000). “The psychology of the unthinkable: taboo
trade-offs, forbidden base rates, and heretical counterfactuals.” Journal of
Personality and Social Psychology, 78(5), 853–870; Baron, J. and M.
Spranca (1997). “Protected values.” Organizational Behavior and Human
Decision Processes, 70(1), 1–16.
45
2
Understanding Human Nature
◈
One of the critical stepping-stones to better management theory and
practice is a better and more accurate understanding of who we are as
people. The economistic narrative is based on assumptions that lead to a
reductionist model, which, in many ways, only describes deficient human
beings, such as psychopaths, sociopaths, or free-riders – men and women
without morals. In this chapter, the economistic understanding of human
nature will be analyzed in greater depth and compared to current scientific
insights. The chapter draws on several sources of knowledge and insight to
provide a more accurate understanding and to build a humanistic
perspective of human nature. In the following pages, insights from the
natural sciences, the humanities, and the social sciences are presented.
While one could draw on many other sources, the hope is to showcase the
increasing
consilience
of
knowledge,
the
convergence
of
our
understanding across disciplines of who we are as human beings.
The REM Model
The most prominent articulation of human nature according to the
economistic paradigm is that set forth by Michael Jensen and William
46
Meckling, two of the most prominent and oft-cited management scholars.
Whereas many researchers have memetically and unreflectedly adopted an
economistic perspective, these scholars specified their understanding of
human nature.
In their 1994 paper titled “The Nature of Man,” they presented a
novel take on homo economicus.1 They both largely agree that, in the
traditional economistic sense, homo economicus is a useless vehicle for
good science. In their words,
In [t]he economic model … the individual is an evaluator and maximizer,
but has only one want: money income. He or she is a short-run money
maximizer who does not care for others, art, morality, love, respect,
honesty, etc. In its simplest form, the economic model characterizes
people as unwilling to trade current money income for future money
income, no matter what return they could earn. The economic model is,
of course, not very interesting as a model of human behavior. People do
not behave this way. In most cases use of this model reflects economists’
desire for simplicity in modeling; the exclusive pursuit of wealth or
money income is easier to model than the complexity of the actual
preferences of individuals. As a consequence, however, non-economists
often use this model as a foil to discredit economics – that is, to argue
that economics is of limited use because economists focus only on a
single characteristic of behavior – and one of the least attractive at that,
the selfish desire for money.
They also postulate that understanding human behavior is fundamental to
understanding how organizations function, whether they are profit-making
firms, nonprofit enterprises, or government agencies. They argue that their
model, REMM – the Resourceful, Evaluative, Maximizing Model – is
superior. They suggest that REMM describes actual human behavior better
than does any other existing model of human behavior, including homo
47
economicus. The REMM specification of human nature is the foundation
of agency theory. Jensen and Meckling state that
[REMM] serves as the foundation for the agency model of financial,
organizational, and governance structure of firms. The growing body of
social science research on human behavior has a common message:
Whether they are politicians, managers, academics, professionals,
philanthropists, or factory workers, individuals are resourceful, evaluative
maximizers.2
In turn, agency theory is hailed as a grand theory in the social sciences,
influencing economics, management, sociology, and political science.3 As
such, REMM holds sway over a much larger part of social science than its
design intended. The famed economist Harold Demsetz4 argued that
economistic theoretical models should be used to study human behavior in
the marketplace.5 They are therefore useful to help us understand the
possibility of spontaneous order in the marketplace, but should not be seen
as prescriptive tools with regard to other institutions, such as organizations
or societies.6
Nevertheless, Jensen and Meckling improved upon homo economicus
by proposing REMM and had an enormous impact not only on
management theory but also on management practice. Based on their
research on the theory of the firm, corporate governance was redesigned,
motivational schemes were developed, and stock options created. Harvard
University’s Rakesh Khurana describes an event in the early 1980s, in
which corporate raiders linked to T. Boone Pickens provided regulators
with copies of Jensen and Meckling’s papers when they had to convince
them that his proposed takeovers would be the best way to deliver
shareholder value maximization.7 As such, REMM thinking took a firm
hold on practice. REMM also became a cultural phenomenon when movie
director Oliver Stone portrayed corporate raiders in his movie Wall Street,
48
and his main character Gordon Gekko uttered the famous line: “Greed, for
lack of a better word, is good.” It is therefore difficult to understate the
impact of Jensen and Meckling’s perspective on human nature, as it
percolates tacitly throughout the social sciences and business culture.
REMM Revisited
It may be helpful to examine REMM and its intellectual arguments more
closely. Jensen and Meckling suggested that REMM was the product of
more than 200 years of research and debate in economics, the other social
sciences, and philosophy. They provided a number of postulates that
served as a “bare bones summary of the concept.”
Examining these postulates more closely is enlightening.
Postulate I
Every individual cares; he or she is an evaluator. (a) The individual cares
about almost everything: knowledge, independence, the plight of others,
the environment, honor, interpersonal relationships, status, peer approval,
group norms, culture, wealth, rules of conduct, the weather, music, art,
and so on. (b) REMM is always willing to make trade-offs and
substitutions. Each individual is always willing to give up some
sufficiently small amount of any particular good (oranges, water, air,
housing, honesty, or safety) for some sufficiently large quantity of other
goods. Furthermore, valuation is relative in the sense that the value of a
unit of any particular good decreases as the individual enjoys more of it
relative to other goods. (c) Individual preferences are transitive—that is,
if A is preferred to B, and B is preferred to C, then A is preferred to C.8
While it is arguably true that everyone cares, it does not necessarily
logically follow that humans are inevitably evaluators. To be an evaluator,
you need to have an inherent ability to judge and assess, which a computer
does routinely, but human beings less often. Psychological research
49
suggests that we cannot process all the information required to constantly
evaluate.9 Therefore, many occurrences in life happen without evaluation,
often as a result of unevaluated routines or traditions. Evaluation is
essential if we are to make trade-offs, but some things in life escape
quantitative evaluation. For example, most parents refuse to evaluate their
love for one child over another. Similarly, psychologists find that constant
evaluation is a source of stress, and most people avoid it if they can.10
Indeed, much of mindfulness practice teaches people to NOT evaluate.
While REMM is based on an assumption that people are in constant
evaluation, other people practice meditation to become nonjudgmental.
Increasing research indicates that when humans behave in nonjudgmental
ways, they – unlike what REMM believes – are happier.11
In addition, some – and perhaps many – of the most important
elements of life have an intrinsic value and cannot be evaluated
quantitatively to allow for (b): trade-offs and substitutions. Kant offers
dignity as a category to describe all the life elements that cannot be
exchanged. The assumption that we are always willing to make trade-offs
is thus false. To argue that we are always willing to make substitutions
only makes sense in the context of markets in which substitutions are
desired. Postulate I does not allow for commitments, such as marriage
vows, relationships, or friendships, whose nature is not subject to barter or
quid pro quo; while healthy community life, in which people support each
other without taking potential payback into account (e.g., care for children,
the elderly, and even dead ancestors), is unimaginable.
Jensen and Meckling extend Postulate I by adding I(b): there are no
human needs as such, which cannot be exchanged, but only wants which
can be exchanged:
REMM implies that there is no such thing as a need, a proposition that
arouses considerable resistance. The fallacy of the notion of need follows
50
from Postulate I-b, the proposition that the individual is always willing to
make trade-offs. That proposition means individuals are always willing to
substitute—that is, they are always willing to give up a sufficiently small
amount of any good for a sufficiently large amount of other goods.
Failure to take account of substitution is one of the most frequent
mistakes in the analysis of human behavior. George Bernard Shaw, the
famous playwright and social thinker, reportedly once claimed that while
on an ocean voyage he asked a celebrated actress on deck one evening
whether she would be willing to sleep with him for a million dollars. She
was agreeable. He followed with a counterproposal: “What about ten
dollars?” “What do you think I am?” she responded indignantly. He
replied, “We’ve already established that – now we’re just haggling over
price.” Like it or not, individuals are willing to sacrifice a little of almost
anything we care to name, even reputation or morality, for a sufficiently
large quantity of other desired things; and these things do not have to be
money or even material goods.12
Clearly, in the example provided above, the authors imply, as Henry
Mintzberg paraphrases, that humans are “whores,” selling anything and
everything and honoring nothing.13 This is factually inaccurate, even
though it may arise in certain situations.14 Research increasingly finds that
moral judgments and value-based commitments are intrinsic elements of
human sociality.15 While the above postulate is certainly entertaining, the
mere claim that humans have no needs does not make it so. From an
evolutionary perspective, humans have developed basic needs that they
cannot trade off if they are to survive. Needs exist to the degree that they
must be fulfilled, like eating or drinking, because without these, survival is
impossible. According to REMM assumptions, small babies would trade
off their need for food to gain fame, for example. While eating is a need,
fame is a want, and it is hard to credit that babies would prefer fame over
food. While there are clearly extreme situations, for example, when people
51
trade off their personal integrity for personal survival by prostituting
themselves, those situations do not represent normal human behavior.
Jensen and Meckling build on this notion of wants in Postulate II:
Postulate II
Each individual’s wants are unlimited. (a) If we designate those things
that REMM values positively as “goods,” then he or she prefers more
goods to less. Goods can be anything from art objects to ethical norms.
(b) REMM cannot be satiated. He or she always wants more of some
things, be they material goods such as art, sculpture, castles, and
pyramids; or non-material goods such as solitude, companionship,
honesty, respect, love, fame, and immortality.16
In this postulate, REMM shows its deep connection with the homo
economicus model. REMM must have unlimited wants, otherwise the
maximization of utility cannot make sense. While Jensen and Meckling
attempt to broaden the realm of “goods” from the purely material to the
ideal, REMM is simply homo economicus reborn and attempting to
maximize.
Psychology and neuroscience research challenges the belief that the
human urge to satisfy wants is unlimited.17 Increasing evidence shows that
wanting less can be healthy,18 and that an increasing number of young
people reject the notion that more is better.19 Pursuing unlimited wants
may be burdening and troublesome. “Affluenza,” the description of the
consistent pursuit of more, is considered a modern disease.20 According to
REMM, affluenza should not exist; given that humans inherently want
more, there can be no satiation. Not only does recent psychological
evidence contradict this assumption, but the global religious traditions
have long suggested that wisdom starts with the recognition that there is
such a thing as “enough.”21
52
Similarly, psychology finds that people are happiest if they commit to
a limited number of choices.22 For example, people with one spouse and
who are able to grow in that relationship are happier than those who are
promiscuous. Evolutionary biology, which finds that most humans desire
to have a nuclear family, supports the finding. While not always
practically possible, a stable relationship increases the survival chances of
healthy offspring.23 If people acted according to REMM, they would
always desire an unlimited number of partners.
Jensen and Meckling build on the notion of unlimited wants with
Postulate III.
Postulate III
Each individual is a maximizer. He or she acts so as to enjoy the highest
level of value possible. Individuals are always constrained in satisfying
their wants. Wealth, time, and the physical laws of nature are examples of
important constraints that affect the opportunities available to any
individual. Individuals are also constrained by the limits of their own
knowledge about various goods and opportunities; their choices of goods
or courses of action will reflect the costs of acquiring the knowledge or
information necessary to evaluate those choices. The notion of an
opportunity set provides the limit on the level of value attainable by any
individual. The opportunity set is usually regarded as something that is
given and when one takes into account information costs, much behavior
that appears to be suboptimal “satisficing” can be explained as attempts
to maximize subject to such costs external to the individual. Economists
usually represent it as a wealth or income constraint and a set of prices at
which the individual can buy goods. But the notion of an individual’s
opportunity set can be generalized to include the set of activities he or she
can perform during a 24-hour day – or in a lifetime.24
In this attempt to refurbish homo economicus, constraints are accepted, but
the old maximization assumption still holds sway.
53
Optimization and satisfaction of wants certainly occur in the real
world. But research has shown that it is almost impossible for real humans
to accurately predict a 24-hour day of constraints, let alone a lifetime set of
constraints, or satisfaction opportunities. People are bad at predicting the
future.25 While there may be some individuals who routinely try to
maximize choice options, they are hardly representative. Research finds
that most people tend to reduce choice options and decide to choose what
is “good enough,” rather than the best, simply because their brain forces
them to do so.26 Psychologists routinely find that people who balance
choice options and satisfice are happier. In contrast, psychologist Barry
Schwartz and colleagues report that “maximizers” are less optimistic, have
less self-esteem, experience less life satisfaction, are more susceptible to
social pressure, and are often more depressed.27
Jensen and Meckling seemingly try to solve two problems with the
notion of opportunity sets. The first problem is that of theoretical accuracy,
and the second that of parsimony. As they stated before, the simple linear
utility maximization assumption that homo economicus represents is
inaccurate and, in their opinion, reflects the economist’s desire for
simplicity in modeling. By contrast, the opportunity sets notion suggests
that humans engage a wider spectrum of options, within which they
maximize, for example, honor, knowledge, independence, or culture. This
makes REMM more realistic. On the other hand, opportunity sets can still
be parsimonious enough to be modeled using higher forms of mathematics
supported by computing power, which should render REMM appealing to
those who want to keep modeling.
While some researchers agree that opportunity sets are helpful, others
suggest that if anything can become part of an opportunity set, the theory
becomes vacuous and modeling impossible.28 If Postulate III were true, it
would be reasonable, for example, to assume that, for some people,
54
character development, personal integrity, and mindful consumption are
part of an opportunity set. Still, it is difficult to understand how a human
being would maximize these opportunities. For example, the mindful
reduction of consumption cannot logically be maximized without
starvation. It is equally difficult to fathom the maximization of personal
integrity or character development. If some of human beings’ aspirations
cannot be maximized, but only satisfied or balanced, Postulate III cannot
hold.
Jensen and Meckling not only posit general static opportunity sets but
also suggest that people can learn and change these opportunity sets. In
Postulate IV, they state:
The individual is resourceful. Individuals are creative. They are able to
conceive of changes in their environment, foresee the consequences
thereof, and respond by creating new opportunities. Although an
individual’s opportunity set is limited at any instant in time by his or her
knowledge and the state of the world, that limitation is not immutable.
Human beings are not only capable of learning about new opportunities,
they also engage in resourceful, creative activities that expand their
opportunities in various ways. The kind of highly mechanical behavior
posited by economists – that is, assigning probabilities and expected
values to various actions and choosing the action with the highest
expected value – is formally consistent with the evaluating, maximizing
model defined in Postulates I through III. But such behavior falls short of
the human capabilities posited by REMM; it says nothing about the
individual’s ingenuity and creativity.29
Postulate IV presents an important insight that will be critical for a
humanistic perspective on human development and flourishing. However,
the mechanical perspective Jensen and Meckling criticize appears in their
rather mechanical postulates I–III. It is conceivable, for example, that
human creativity could be employed to maximize insatiable wants, but
55
they ignore the possibility that the same human creativity could be used to
mindfully balance basic human needs. To take their perspective to its
logical conclusion, let’s consider the example of Elisabeth, who was
introduced in Chapter 1. Elisabeth is a mother of two kids, married to a
man who travels often for his work. She works in hospital administration
and also needs to take care of her mother who lives in the area. Her wish to
be successful at her job, have a good relationship with her spouse, provide
a good education for her kids, and take care of her mother’s needs defines
her opportunity set. The REMM-type Elisabeth could use her ingenuity to
create a life situation in which she decides to maximize all of these
ambitions. Wanting to be successful at her job, she would need to spend
more time and energy at the hospital. Because she hardly sees her husband,
she decides (knowing no commitments and willing to substitute anything)
to divorce her husband and marry her boss. At the hospital, they can spend
more time together, while increasing her income. The additional income
could be used to pay a tutor for her kids, allowing her to outsource their
education. Spending that much time at work, she ingeniously suggests to
her mother that she should (pretend to) become ill, which will mean that
she too can be at the hospital. While such behavior may be ingenious and
creative, it is also rather absurd. It is far more likely that Elisabeth will
simply decide to spend just enough time at the hospital to ensure she does
not lose her job, spend quality time with her current husband and not get
divorced, take care of her kids when she can in order to personally provide
educational experiences, and look after her mother in her home when she
is able to. In the latter case, Elisabeth is balancing creatively rather than
ingeniously maximizing options within her opportunity set.
It is important to note that Jensen and Meckling never strive for an
accurate model, but simply for a better model than that of homo
economicus. Many of their assumptions are partially true, and they spend
56
much energy in demonstrating their postulations’ validity in and beyond
economics and management literature. The philosopher Karl Popper
would, however, call many of these efforts “verificationism,” which he
describes as the tendency to explain reality with the set of assumptions we
create.30 Consequently, when studying human organizing practices,
researchers tend to make reality fit their assumptions, rather than the
inverse.
Alternative Perspectives on Human
Nature
It is important to acknowledge that every model of human behavior will
have to trade off parsimony for accuracy. REMM loosens many restrictive
assumptions about homo economicus to gain accuracy, but it was never
designed to be perfect. Given this, there may be alternative ways to better
conceptualize human nature that provide superior accuracy. Others
endeavoring to understand human nature provide a counterpoint to
REMM. The famed biologist E.O. Wilson suggests that there seems to be a
consilience of knowledge in which core insights from the sciences overlap
with those of the humanities.31 These insights can help us understand
human nature better. This increasing consilience of knowledge can serve
as a stepping-stone to better theorizing and, it is hoped, better practice.
Human Nature: The View of the Sciences
A growing number of scholars criticize the current overemphasis on
methodological individualism in the social sciences and management
studies.32 Stemming from the individualist traditions of the Enlightenment,
which emerged in opposition to the pervasive collectivism of the times,
57
individualism had the unintended consequence of misinterpreting human
nature as isolationist, needing no social embeddedness, and driven by
exchangeable wants. Marx ridiculed this intellectual tendency in the
nineteenth century’s liberal economics domain as “Robinsonades.”33
Keynes similarly criticized the atomistic perspective of human nature as
dangerous.34
The critics of mainstream economics increasingly advocate the use of
evolutionary theory to help put economics (and management) on a sounder
footing.35 E.O. Wilson argues that perspectives from the natural sciences,
and especially biology, shed light on human nature.36 Biology, and in
particular evolutionary biology, labels human beings as “eusocial” – truly
social. In The Social Conquest of Earth (2012), Wilson writes that this true
sociality, the interconnectedness of human beings, has been the key to
survival.37 He and many other scholars argue that the dominant species
that inhabited our planet prior to the emergence of the human species were
eusocial. He draws comparisons between vertebrates’ and invertebrates’
two different ways of achieving conquest of the earth, arguing that both
came about through eusociality’s main feature: collaboration. According to
this theory, group and tribe formation is a fundamental human trait and is
based on basic emotions that are hard-wired decision-making tools. As a
consequence of this sociality, human beings have developed emotions that
drive basic decision-making, allowing us to guide our emotions toward
cooperative outcomes (called morality) and to behave in a genuinely
altruistic way in order to benefit the group (as a result of group selection
mechanisms). These insights and propositions largely contradict the
REMM propositions that underpin mainstream economics and business
theorizing.
Sociality
58
E.O Wilson makes a bold statement:
Perhaps most people, including many scholars, would like to keep human
nature at least partly in the dark. It is the monster in the fever swamp of
public discourse. Its perception is distorted by idiosyncratic personal selfregard and expectation. Economists have by and large steered around it,
while philosophers bold enough to search for it always lost their way.
Theologians tend to give up, attributing different parts to God and the
devil. Political ideologues ranging from anarchists to fascists have
defined it to their selfish advantage.38
Referring to biology and evolutionary theory, Wilson argues that inherited
regularities in the mental development common to our species define
human nature. Nevertheless, he suggests that our “epigenetic rules,” which
have evolved through the interaction of individual and group selection
mechanisms, define us. Homo sapiens is therefore a result of an interplay
between a genetic and a cultural evolution that occurred over a long period
and started in deep prehistory. Wilson specifies that the hard-wired
epigenetic rules are the core of human nature. These epigenetic rules create
the resulting behaviors common to Homo sapiens. That means that the
behaviors are “prepared” and ready to be developed, but need to be
learned. That is why education and socialization are critical for human
survival.39
Supporting this proposition, George Murdock (1945) combed through
human behaviors that many hundreds of societies, which anthropologists
studied in the past, share.40 Murdock attempted to highlight cultural
practices that are almost universal. A selection of these practices featuring
human nature’s eusocial character includes community organization,
cooperative labor, courtship, dancing, decorative art, division of labor,
education, ethics, faith healing, family feasting, food taboos, funeral rites,
games, gift giving, government, hospitality, incest taboos, inheritance
59
rules, joking, kin groups, kin nomenclature, marriage, mealtimes, postnatal
care, property rights, religious ritual, sexual restriction, soul concepts,
status differentiation, and the list goes on.
Other thought games also bear witness to our eusocial nature. Why
would inventions like the internet, cell phones, or Facebook make any
sense, or have any commercial value, if we were not fundamentally social?
The fundamental need – Paul Lawrence calls it the “drive to bond” – is
hard-wired; it serves an evolutionary purpose, which is the survival of the
species rather than individual utility maximization.41
Morality
If we are fundamentally social, this may mean that we are also
fundamentally moral. Charles Darwin observed
that any animal whatever, endowed with well-marked social instincts, the
parental and filial affections being here included, would inevitably
acquire a moral sense or conscience, as soon as its intellectual powers
had become as well, or nearly as well developed, as in man. For, firstly,
the social instincts lead an animal to take pleasure in the society of its
fellows, to feel a certain amount of sympathy with them, and to perform
various services for them.42
Joshua Greene, a noted scholar whose work bridges various disciplines in
a true humanist fashion, writes: “Under ordinary circumstances, we
shudder at the thought of behaving violently toward innocent people, even
total strangers, and this most likely is a crucial feature of our moral
brains.”43 Greene says that, in sum, we are a caring species, albeit in a
limited way, and we probably inherited at least some of our caring
capacity from our primate ancestors, if not our more distant ancestors. We
60
care most of all about our relatives and friends, but we also care about
acquaintances and strangers.
Robert Wright argues in the same vein and suggests that humans are
moral animals. Both Wright and Greene suggest that we have a moral
machinery in our brain originating from our hypersocial nature.44 Joshua
Greene writes:
From simple cells to supersocial animals like us, the story of life on Earth
is the story of increasingly complex cooperation. Cooperation is why we
are here, and yet at the same time, maintaining cooperation is our greatest
challenge. Morality is the human brain’s answer to this challenge. Such
morality is derived from emotional baseline responses, and Greene argues
that for each cooperative strategy, our moral brains have a corresponding
set of emotional dispositions that execute this strategy. Such strategies
include concern for others, direct and indirect reciprocity, commitment to
threats and promises, and reputation.45
All of this psychological machinery is perfectly designed to promote
cooperation among otherwise selfish individuals, implementing strategies
that can be formalized in abstract mathematical terms. The additional
insight that Greene and his collaborators present is that human morality
and, as a result, cooperation are typically intuitive, not calculated or
rational. They conducted experiments in which they timed responses that
required moral decision-making and cooperation choices. Their results
demonstrated that cooperative choices were made so fast that they had to
be intuitive.
E.O. Wilson writes that morality, conformity, religious fervor, and
fighting ability, combined with imagination and memory, produced Homo
sapiens as a winner in terms of survival.46
Empathy and Emotionality
61
Frans de Waal, a leading primatologist, writes that empathy is hard-wired,
and that the emotional basis of empathy is critical for our sociality. We
cannot live peacefully in families, communities, and tribes without having
the tools to do so.47 Contrary to the Hobbesian, Spencerian, and Randian
notion of human nature, Homo sapiens is alive today because we care. De
Waal and others find that empathy is, in many ways, a key lever to
collaboration and can turn self-interest into mutual interest. In fact, Eric
Liu and Nick Hanauer state that, through empathy, humans experience
“true self-interest as mutual interest.”48
De Waal and others argue that humans are not even that special in
terms of empathetic abilities, but that animals of all kinds are capable of
empathy and collaboration. Charles Darwin early on suggested that hardwired emotions representing the core of human nature drive such empathy.
In The Expression of the Emotions in Man and Animals, Darwin suggests
that empathetic instincts must have evolved from natural selection.49 E.O.
Wilson argues that humans are fundamentally emotional beings, because
these emotions aided survival and reproduction.50 David Matsumoto writes
that
emotions humans experience today emerged (or were naturally selected)
in our evolutionary history as rapid information processing systems that
helped us deal with the environment and events that occurred. That is,
emotions evolved to help us cope with events and situations that had
consequences for our immediate welfare. If humans didn’t have
emotions, we wouldn’t know when to attack, defend, flee, care for others,
reject food, or approach something useful, all of which were helpful in
our evolutionary histories (as they are today). If we didn’t feel disgusted
at spoilt food, we would eat it. If we weren’t outraged when rivals stole
our food, resources, or mates, we wouldn’t defend them strongly. If we
didn’t feel the joy in caring for a child, or the compassion in caring for a
62
loved one, we wouldn’t enjoy the social bonds that make human cultures
and relationships unique.51
Joshua Greene and others suggest that empathy and our collaborative
tendencies are instinctive and emotion based. Frans de Waal calls it the
“feeling brain,”52 arguing that the basis of our emotional sensors is hardcoded in our brains. As observed before about the human tendency to be
social, kind, and moral, emotions are a feature, not a bug. Emotions help
us deal with the complexity of our eusocial life.
Basic emotions that can be witnessed across different cultures, and
thus hint at their universality, include anger, contempt, disgust, fear,
enjoyment, sadness, and surprise. These emotions are called basic, because
they are shared across a number of species, including our primate
ancestors. This fundamental emotionality questions the uniquely rational
focus of Jensen and Meckling’s REMM propositions. Emotions also call
theories of human behavior that are purely based on rationality, such as
rational choice and decision-making, into questions.
Altruism
Eusociality and its derivatives – morality and baseline empathy supported
by emotions – lead to human behavior that further questions REMM’s
basic assumptions regarding the maximization of self-interest.
The role of fairness and the development of altruistic punishment to
uphold the tribe’s moral rules have been documented in various studies.53
Altruism has been actively studied in fields as varied as biology,
economics, sociology, and game theory. It differs from cooperation, as
altruism requires no direct benefit or reciprocity. Emerging research
suggests that altruism is a behavior common to the human species, because
group selection favored those groups with altruists over those without.54
63
Altruism can be understood as an individual’s behavior that benefits other
individuals, even though these actions may negatively impact the
individual’s chances of survival. A well-known example is that of
individuals who watch out for a predator and signal danger to the group,
thus potentially drawing the predator’s attention to themselves.55 Studies
show that without the emergence of altruism, populations go extinct.56
David Sloan Wilson summarizes the research as: “Selfishness beats
altruism within groups. Altruistic groups beat selfish groups. Everything
else is commentary.”57 Selfish behavior is found to undermine
communities and leads to trouble for the group. For communities that
survive, E.O. Wilson argues, the countervailing forces of altruism evolve
through group selection, not just through individual selection.58 It appears
that a group-based selection mechanism screens for altruism. As such,
altruism is now viewed as a key feature of functioning human groups.59
Taken together, the findings from the natural sciences concerning
human nature provide a clearer perspective on who we are as human
beings. A number of elements long considered bugs in our system have
now been identified as features, including sociality, morality, emotionality,
and altruism. These insights challenge REMM’s claims about the nature of
man that underlie a larger, dominant theoretical framework in management
sciences.
H...
Purchase answer to see full
attachment