Why the hyper-rationality of economics isn’t so good as a management education

Behavioral Assumptions and Management Ability: A Tentative Test
Date: 2009-06
By: Benito Arruñada
Xosé H. Vázquez

The paper explores the consequences that relying on different behavioral assumptions in training managers may have on their future performance. We argue that training with an emphasis on the standard assumptions used in economics (rationality and self-interest) leads future managers to rely excessively on rational and explicit safeguarding, crowding out instinctive contractual heuristics and signaling a bad type to potential partners. In contrast, human assumptions used in management theories, because of their diverse, implicit and even contradictory nature, do not conflict with the innate set of cooperative tools and may provide a good training ground for such tools. We present tentative confirmatory evidence by examining how the weight given to behavioral assumptions in the core courses of the top 100 business schools influences the average salaries of their MBA graduates. Controlling for the average quality of their students and some other schools characteristics, average salaries are significantly greater for those schools whose core MBA courses contain a higher proportion of management courses as opposed to courses based on economics or technical disciplines.

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12 years ago

In short, if you want to economise[sic] study economics, if you want to manage, study management?

Chris Lloyd
Chris Lloyd(@chris-lloyd)
12 years ago

Oh dear,
These researchers conflate MBA graduates salary being higher with their having been better educated for business. They must be better if they get paid more, right? Sounds like the authors must have done a recent economics course.

They toss finance and strategy in with economics. WTF? While the management subjects are HR management, leadership and organisation behaviour the content free zones of the MBA. I am sure that these courses equip graduates with the confidence and skills to land a good job and quickly glad hand their way up the corporate ladder. But does their fluency in management speak actually add any value to their organisation? It is the shameless bullshit factor at US business school that does the harm (see here) and I am afraid that the source of the infection is the management courses of MBAs.