Self-Interest: The Economist’s Straitjacket

Abstract

This paper examines contemporary economic theories that focus on the design and management of business organizations. In the first part of the paper, a taxonomy is presented that describes the different types of economists interested in this subject—market economists, regulatory economists, and enlightened economists—and illustrates the extent to which each tribe has been captured by the concept of self-interest. After arguing that this fixation has caused—and is likely to continue to cause—significant harm to our economy, the paper then presents an alternative approach based on a theory of business and discusses the implications for research and teaching.