The Future of Economics and Management in a Post-Crisis World

Background and objectives

This initiative seeks to convene a forward-looking, balanced, reflective and informed debate, including academics and practitioners, to connect macro-economic perspectives with corporate governance, corporate strategy and management.  This integrative debate has so far not taken place. 

 

The following critical points requiring urgent reflection have emerged from recent high-level discussion among EABIS members:

 

How significant is the current crisis for economics?
This question has given rise to a polarised debate between those who belief the crisis is consistent with standard economic principles and those who see it as wholly inconsistent. Unresolved issues include which lessons need to be learned for the future of economics, for the role of finance in the economy and in society, for the management of the global economy and the role of institutions of governance, all of which must also be considered from a longer-term historical perspective.

 

Must we abandon the equilibrium-based paradigm of economics?
Some argue that “economics is broken” because of its failure to anticipate past and current developments and its misleading conclusions that follow from its assumptions – i.e., that market-based competition brings the best outcomes even when market failure and imperfections are rife. Others argue that the demise of the Efficient Market Hypothesis (EMH) in financial economics does not mean that the whole of economics (involving its many branches and sub-fields) is “broken”. Also, institutional economics and behavioural economics are gaining recognition and legitimacy. What is their contribution?

 

Economics is a core discipline in the business curriculum.
It is central to the analysis of markets, it feeds into finance and it informs the teaching of other subjects such as international business, strategic management and corporate governance.  Yet its long-standing focus on perfect information, market efficiency and rational choice is often at odds with the reality of modern management. Should economics remain at the heart of the business curriculum given what many now regard as its unrealistic assumptions about human nature? Or its inherently cynical views on human nature which has taken self-fulfilling powers? If economics is to retain its core position, how should economics be taught – as a set of ideas, a system of analysis, a set of beliefs, a practical philosophy (as it was originally conceived)?

 

How should economics and management incorporate issues of global sustainability and global governance?
How should major social, environmental and governance pressures that increasingly affect markets, companies, regulators and consumers be addressed? What is the relationship between economics, management and governance? What constitutes sustained comparative advantage in the global economy? What is the balance between competition and collaboration? Can collaborative governance models be effective in enhancing sustainability of global markets?  

 

What does all this mean for strategy and management?
There is substantially increased systemic complexity and potential turbulence in global economic systems. This may call for different models and approaches to managerial economics and strategic management. This may also question the relevance of firm-centric approaches like agency theory and stakeholder theory. Ultimately, our challenge is to understand how economics will help managers to make better decisions in a post crisis era and how students of business and management can be better prepared for this world.