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Blinders for Economists

My blinders hypothesis is still alive and well. I'm an accountant, but much of my training is in economics (plus I have a masters degree in econ). Economist number one is Adam Smith, an 18th century Scottish Enlightenment philosopher, famous for self-interest, the invisible hand and the basic framework of free markets. Other famous economists include John Stewart Mill (particularly for utilitarianism) and Karl Marx (and his critique of capitalism and brand of socialism). Tara Westover, author of Educated, focused on Mill's perspective on women (and incorporated it in her Ph.D. dissertation). Michael Sandel's Justice (and his MOOC on the same subject) considered Mill as a philosopher of justice, using his utilitarian perspective. I did a research project on Marx's power conflict theory (using a sociology perspective) to analyze the functioning of city government (with no mention of Marx). Basically, multiple fields (mainly in the social sciences) refer to revered philosophers; thus, Smith, Mill and Marx are economists; philosophy and sociology also claim all three. We have our blinders firmly in place, in part because we focus on our own interests and partly because we have no clue (or don't care) about other perspectives.

Presumably, an economist could have a discussion with Sandel and Westover on Mill, without much perspective of the others' point of view and may talk past each other (or it could be delightful). I doubt if many (or any) economists would be in the audience of either Sandel or Westover talking about their books, and visa versa. This is one of the downsides of specialization. As an academic, I found the people in one department (or college) often had contempt for those in others. Especially since retirement, I've discovered others have interesting perspectives accountants (and economists) could make use of--or at least find interesting. For example, agency theory is a common model in economics (and used in accounting research) and, in my opinion, should consider an expanded perspective including incentives considered in sociology, plus psychology (including behavioral economics). I discovered an article in management developing a comprehensive measure of CEO narcissism, which could be used (and expanded) in agency theory models of executive compensation. The agency model of executive compensation focuses on extrinsic (basically external) rewards, specifically compensation. Intrinsic and other extrinsic benefits are ignored, but would (if I was still doing research) be included in the agency model development.

As I describe elsewhere, duty and virtue are alternative philosophical perspectives to self-interest. Building economic models incorporating these (and others) would provide different perspectives, alternative variables to consider, and probably different predictions. Behavioral economics should provide additional control variables. Economics could become less sociopathic and perhaps drop the label "the dismal science."

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