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Economics language and assumptions: How theories can become self-fulfilling

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Author Info

  • Ferraro, Fabrizio

    ()
    (IESE Business School)

  • Pfeffer, Jeffrey

    (Stanford University)

  • Sutton, Robert I.

    (Stanford University)

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    Abstract

    Social science theories can become self-fulfilling because they shape institutional designs and management practices as well as social norms and expectations about behavior, thereby creating the behavior they predict. Social theories also perpetuate themselves to the extent that they promulgate language and assumptions that become widely used and accepted. Language and assumptions affect what people see and think about and what alternative organizational arrangements they consider implementing. We illustrate these ideas by considering how the language and assumptions of economics shape management practices. We argue that theories can "win" in the marketplace for ideas independently of their empirical validity to the extent that their assumptions and language become taken for granted, normatively valued, and therefore, create conditions that make the theories come "true."

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    Bibliographic Info

    Paper provided by IESE Business School in its series IESE Research Papers with number D/530.

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    Length: 23 pages
    Date of creation: 03 Dec 2003
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0530

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    Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
    Web page: http://www.iese.edu/
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    Related research

    Keywords: language; self-fulfilling prophecy; social science; economic theories;

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    1. John McMillan, 2003. "Market Design: The Policy Uses of Theory," American Economic Review, American Economic Association, vol. 93(2), pages 139-144, May.
    2. Bram Cadsby, Charles & Maynes, Elizabeth, 1998. "Choosing between a socially efficient and free-riding equilibrium: Nurses versus economics and business students," Journal of Economic Behavior & Organization, Elsevier, vol. 37(2), pages 183-192, October.
    3. Baron, James N & Hannan, Michael T, 1994. "The Impact of Economics on Contemporary Sociology," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1111-46, September.
    4. Robert H. Frank & Thomas Gilovich & Dennis T. Regan, 1993. "Does Studying Economics Inhibit Cooperation?," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 159-171, Spring.
    5. Noreen, Eric, 1988. "The economics of ethics: A new perspective on agency theory," Accounting, Organizations and Society, Elsevier, vol. 13(4), pages 359-369, June.
    6. Stephen Wood, 1996. "High Commitment Management and Payment Systems," Journal of Management Studies, Wiley Blackwell, vol. 33(1), pages 53-77, 01.
    7. Rik Pieters & Hans Baumgartner, 2002. "Who Talks to Whom? Intra- and Interdisciplinary Communication of Economics Journals," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 483-509, June.
    8. Simonson, Itamar & Nye, Peter, 1992. "The effect of accountability on susceptibility to decision errors," Organizational Behavior and Human Decision Processes, Elsevier, vol. 51(3), pages 416-446, April.
    9. Thaler, Richard H, 1988. "The Ultimatum Game," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 195-206, Fall.
    10. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
    11. Daniel Kahneman, 2003. "A Psychological Perspective on Economics," American Economic Review, American Economic Association, vol. 93(2), pages 162-168, May.
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