Core Assumptions in Business Theory

Overview & Synopsis

The modern market-based economy generates great wealth, but it lags on well-being; it has mastered efficiency, but struggles with equity; it boasts size, but falls short on sustainability. In other words, our economy delivers performance but neglects progress (i.e., fairness, well-being, and sustainability). Many rightly call for tighter regulation, higher (“true”) prices, and longer-term incentives. Others appeal to corporate purpose, shared value, and stakeholder-centrism. Beyond smarter regulation and the reformed practice of business, we must attend as well to education and a reformed theory of business. In particular, we must look at core assumptions in the business paradigm. In an applied field such as business, where theory tends to be normative, flawed assumptions could act as a “wedge” cleaving apart performance and progress. In this volume, Subramanian Rangan brings together eminent social scientists, philosophers, and business leaders to explore and evaluate core assumptions in each of the major fields of business—including economics, strategy, marketing, operations, decision science, leadership, governance, technology, and finance. This structured field-by-field reflection aims to reveal and expand the bounds of our rationality. Core Assumptions in Business Theory proposes a revised profit function that integrates harm, outlines how economic actors may draw on moral philosophy to enact Pareto equity (and not just Pareto efficiency), suggests a two-stage rationality approach that can attend to well-being, and recasts marketing as consumer education and not merely demand promotion. With an emphasis on the education rather than the regulation of economic power, this volume argues that moral reasoning and moral roles can fruitfully supplement prudential reasoning and functional responsibilities. Such an evolution will enable our economy to be both modern and moral.