Theory and Society

, Volume 42, Issue 2, pp 121–159

From social control to financial economics: the linked ecologies of economics and business in twentieth century America

Article

Abstract

This article draws on historical material to examine the co-evolution of economic science and business education over the course of the twentieth century, showing that fields evolve not only through internal struggles but also through struggles taking place in adjacent fields. More specifically, we argue that the scientific strategies of business schools played an essential—if largely invisible and poorly understood—role in major transformations in the organization and substantive direction of social-scientific knowledge, and specifically economic knowledge, in twentieth century America. We use the Wharton School as an illustration of the earliest trends and dilemmas (ca. 1900–1930), when business schools found themselves caught between their business connections and their striving for moral legitimacy in higher education. Next, we look at the creation of the Carnegie Tech Graduate School of Industrial Administration after World War II. This episode illustrates the increasingly successful claims of social scientists, backed by philanthropic foundations, on business education and the growing appeal of “scientific” approaches to decision-making and management. Finally, we argue that the rise of the Graduate School of Business at the University of Chicago from the 1960s onwards (and its closely related cousin at the University of Rochester) marks the decisive ascendancy of economics, and particularly financial economics, in business education over the other behavioral disciplines. We document the key role of these institutions in diffusing “Chicago-style” economic approaches—offering support for deregulatory policies and popularizing narrowly financial understandings of the firm—that sociologists have described as characteristic of the modern neo liberal regime.

Keywords

Professions Disciplines Foundations Universities Institutionalism Management 

References

  1. AACSB (American Association of Collegiate Schools of Business). (1999). Business school data trends.Google Scholar
  2. Abbott, A. (2005). Linked ecologies. States and universities as environments for professions. Sociological Theory, 23(3), 245–274.CrossRefGoogle Scholar
  3. Abend, G. (2008). A social history of business ethics (1800–1933). PhD dissertation. Northwestern University. Department of Sociology.Google Scholar
  4. Amadae, S. (2003). Rationalizing capitalist democracy. The cold war origins of rational choice theory. Cambridge: Cambridge University Press.Google Scholar
  5. Amadae, S. M., & Bueno de Mesquita, B. (1999). The Rochester School: the origins of positive political theory. Annual Review of Political Science, 2(1), 269–295.Google Scholar
  6. Aronson, S. A. (1992). Serving America’s business. Graduate business schools and American business 1945–1960. Business History, 34(1), 160–182.CrossRefGoogle Scholar
  7. Augier, M., & Prietula, M. (2007). Historical roots of a behavioral theory of the firm model at GSIA. Organization Science, 18(3), 507–522.CrossRefGoogle Scholar
  8. Bach, G. L. L. (1960a). Foundation policy toward basic research in business. In: Thomas Carroll and Robert Aaron Gordon notes (Ford Foundation Archives).Google Scholar
  9. Bach, G. L. L. (1960b). The Ford Foundation and the revolution in business education. (Ford Foundation Archives).Google Scholar
  10. Bach, G. L. L., et al. (1956). Economics in the curricula of schools of business: discussion. American Economic Review, 46(2), 563–577.Google Scholar
  11. Baker, G. P., & Smith, G. D. (1998). The new financial capitalists: Kohlberg Kravis Roberts and the creation of corporate value. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  12. Barber, W. (1985). From new era to new deal: Herbert Hoover, the economists, and American economic policy, 1921–1933. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  13. Bebchuk, L., & Fried, J. (2006). Pay without performance. The unfulfilled promise of executive compensation. Cambridge: Harvard University Press.Google Scholar
  14. Berelson, B. (1972). Oral History. Ford Foundation Archives.Google Scholar
  15. Bernstein, M. (2001). A perilous progress: Economists and public purpose in twentieth century America. Princeton: Princeton University Press.Google Scholar
  16. Blau, F. (2005). Report of the Committee on the Status of Women in the Economics Profession 2004. http://www.researchgate.net/publication/4727480_Report_of_the_Committee_on_the_Status_of_Women_in_the_Economics_Profession.
  17. Bornemann, A. (1957). The development of economics and administration in the school of business. Journal of Business, 30(2), 131–140.CrossRefGoogle Scholar
  18. Bossard, J., & Dewhurst, J. F. (1931). University education for business. Philadelphia: University of Pennsylvania Press.Google Scholar
  19. Bourdieu, P. (1975). The specificity of the scientific field and the social conditions of the progress of reason. Social Science Information, 14, 19–47.Google Scholar
  20. Bourdieu, P. (1992). The logic of practice. Stanford: Stanford University Press.Google Scholar
  21. Bourdieu, P. (1993). The field of cultural production: Essays on art and literature. New York: Columbia University Press.Google Scholar
  22. Bruce, K. (2005). Magnus Alexander, the economists, and the issue of labor turnover. Business History, 47(4), 493–510.CrossRefGoogle Scholar
  23. Callon, M. (1998). Introduction: the embeddedness of economic markets in economics. In M. Callon (Ed.), The laws of the markets (pp. 1–57). Oxford: Blackwell.Google Scholar
  24. Carroll, T. H. (1958). Carroll files Ford Foundation archives, box 410.Google Scholar
  25. Carroll, T. H. (1959). A foundation expresses its interest in higher education for business management. The Journal of the Academy of Management, 2(3), 155–165.CrossRefGoogle Scholar
  26. Chandler, A. (1990 [1962]). Strategy and structure. Chapters in the history of the industrial enterprise. Cambridge: The MIT Press.Google Scholar
  27. Coase, R. (1993). Law and economics at Chicago. Journal of Law and Economics, 36(1), 239–254.CrossRefGoogle Scholar
  28. Cockett, R. (1994). Thinking the unthinkable. Think-tanks and the economic counter-revolution 1931–1983. London: HarperCollins.Google Scholar
  29. Colander, D., & Landreth, H. (Eds.). (1996). The coming of Keynesianism to America: Conversations with the founders of Keynesian economics. Cheltenham: Edward Elgar.Google Scholar
  30. Collins, R. M. (1978). Positive business responses to the New deal: the roots of the committee for economic development, 1933–1942. The Business History Review, 52(3), 369–391.CrossRefGoogle Scholar
  31. Cooper, W. W. (2002). Abraham Charnes and WW Cooper (et al.): A brief history of a long collaboration in developing industrial uses of linear programming. Operations Research, 50(1), 35–41.Google Scholar
  32. Crowther-Heyck, H. (2006a). Herbert Simon and the GSIA: building an interdisciplinary community. Journal of the History of the Behavioral Sciences, 42(4), 311–334.CrossRefGoogle Scholar
  33. Crowther-Heyck, H. (2006b). Patrons of the revolution. Ideals and institutions in postwar behavioral science. Isis, 97, 420–446.CrossRefGoogle Scholar
  34. Davis, G. (2009). Managed by the markets: How finance reshaped America. Oxford University Press.Google Scholar
  35. DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American sociological review, 48(2), 147–160.Google Scholar
  36. Dobbin, F., Jung, J. (2010). The misapplication of Mr. Michael Jensen. How agency theory brought down the economy and why it might again. In M. Lounsbury & P. Hirsch (Eds.), Markets on trial: The economic sociology of the U.S. financial crisis. Research in the sociology of organizations, vol 30B (pp. 29–34). Emerald Group Pub.Google Scholar
  37. Dobbin, F., & Zorn, D. (2005). Corporate malfeasance and the myth of shareholder value. In D. E. Davis (Ed.), Political power and social theory (pp. 179–98). Greenwich: JAI Press.CrossRefGoogle Scholar
  38. Emirbayer, M., & Johnson, V. (2008). Bourdieu and organizational analysis. Theory and Society, 37, 1–44.CrossRefGoogle Scholar
  39. Emmett, R. (2007). Sharpening tools in the workshop. The workshop system and the Chicago school’s success. Paper presented at the University of Notre Dame Conference on Revising the Chicago School. South Bend (September 2007).Google Scholar
  40. Engwall, L., Kipping, M., & Usdiken, B. (2010). Public science systems, higher education and the trajectory of academic disciplines: Business studies in the United States and Europe. In R. Whitley, J. Glaser, & L. Engwall (Eds.), Reconfiguring knowledge production: Changing authority relationships in the sciences and their consequences for intellectual innovation (pp. 325–353). Oxford: Oxford University Press.CrossRefGoogle Scholar
  41. Eyal, G. (2002). Dangerous liaisons between military intelligence and middle eastern studies in Israel. Theory and Society, 31(5), 653–693.CrossRefGoogle Scholar
  42. Fama, E. F. (1965). Random walks in stock market prices. Financial Analysts Journal, 21(5), 55–59.CrossRefGoogle Scholar
  43. Fama, E. F. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25, 383–417.CrossRefGoogle Scholar
  44. Ferraro, F., Pfeffer, J., & Sutton, R. (2005). Economics language and assumptions: how theories can become self-fulfilling. Academy of Management Review, 30(1), 8–24.CrossRefGoogle Scholar
  45. Fisher, D. (1993). Fundamental development of the social sciences: Rockefeller philanthropy and the United States social science research council. Ann Arbor: University of Michigan Press.Google Scholar
  46. Fligstein, N. (1990). The transformation of corporate control. Cambridge: Harvard University Press.Google Scholar
  47. Fligstein, N. (2002). The architecture of markets. Princeton: Princeton University Press.Google Scholar
  48. Fligstein, N., & McAdam, D. (2011). Toward a general theory of strategic action fields. Sociological Theory, 29(1), 1–26.Google Scholar
  49. Fourcade, M. (2009). Economists and societies. Discipline and profession in the United States, Britain and France. Princeton: Princeton University Press.Google Scholar
  50. Friedman, M. (1970). The social responsibility of business is to increase profits. New York Times Magazine. September 13.Google Scholar
  51. Furner, M. (1975). Advocacy and objectivity: A crisis in the professionalization of American Social Science. University of Kentucky Press.Google Scholar
  52. Gleeson, R. E., & Schlossman, S. (1995). George Leland Bach and the rebirth of graduate management education in the United States, 1945–1975. Selections: The Magazine of the Graduate Management Admission Council, 11(3), 14.Google Scholar
  53. Gordon, R. A. (1957). Gordon to Chamberlain memo. Ford Foundation Archives, 58, Section IV. New York.Google Scholar
  54. Hall, B. J., & Leibman, J. B. (1998). Are CEO really paid like bureaucrats? Quarterly Journal of Economics, 63, 653–691.CrossRefGoogle Scholar
  55. Haveman, H., & Rao, H. (1997). Structuring a theory of moral sentiments: institutional and organizational coevolution in the early thrift industry. The American Journal of Sociology, 102(6), 1606–1651.CrossRefGoogle Scholar
  56. Heaton, H. (1952). A scholar in action: Edwin F. Gay. Cambridge: Harvard University Press.Google Scholar
  57. Hotchkiss, W. E. (1920). The basic elements and their proper balance in the curriculum of a collegiate business school. Journal of Political Economy, 28(2).Google Scholar
  58. Howell, J. E. (1966). The Ford Foundation and the revolution in business education: A case study in philanthropy. New York: Ford Foundation Archives.Google Scholar
  59. Howell, J. (1987). The Ford Foundation. In S. Schlossman, M. Sedlak, & H. Wechsler (Eds.), The new look: The Ford Foundation and the revolution in business education. Los Angeles: Graduate Management Admission Council.Google Scholar
  60. James, E. (1898). The education of business men: A view of the organization and courses of study in the commercial high schools in Europe. A report to the American bankers’ association. Chicago: The University of Chicago Press.Google Scholar
  61. Jencks, C., & Riesman, D. (1969). The academic revolution. Anchor Books.Google Scholar
  62. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 6(4), 305–360.CrossRefGoogle Scholar
  63. Jensen, M. C., & Ruback, R. S. (1983). The market for corporate control: the scientific evidence. Journal of Financial Economics, 11(1), 5–50.Google Scholar
  64. Jovanovic, F. (2008). The construction of the canonical history of financial economics. History of Political Economy, 40(2), 213–242.CrossRefGoogle Scholar
  65. Kaufman, B. (2000). Personnel/human resources management: its roots as applied economics. History of Political Economy, 32(Suppl. 1), 227–256.CrossRefGoogle Scholar
  66. Kay, I. (1992). Value at the top: Solutions to the executive compensation crisis. New York: Harper Collins.Google Scholar
  67. Khurana, R. (2007). From higher aims to hired hands. The social transformation of American business schools and the unfulfilled promise of management as a profession. Princeton: Princeton University Press.Google Scholar
  68. Lagemann, E. C. (1987). The politics of knowledge: the carnegie corporation and the formulation of public policy. History of Education Quarterly, 27(2), 205–220.CrossRefGoogle Scholar
  69. Latour, B. (1987). Science in action. How to follow scientists and engineers through society. Cambridge: Harvard University Press.Google Scholar
  70. Leavitt, H. (1996). The old days, hot groups, and managers’ lib. Administrative Science Quarterly, 41(2), 288–300.CrossRefGoogle Scholar
  71. Locke, R. (1984). The end of practical man: Entrepreneurship and higher education in Germany, France and Great Britain, 1840–1940. Greenwich: JAI Press.Google Scholar
  72. Lucas, R. (1976). Econometric policy evaluation: a critique. Carnegie-Rochester Conference Series on Public Policy, 1, 19–46.CrossRefGoogle Scholar
  73. Macdonald, D. (1956). The Ford Foundation: the men and the millions. New York: Reynal.Google Scholar
  74. MacKenzie, D. (2006). An engine, not a camera. How financial models shape markets. Cambridge: MIT Press.Google Scholar
  75. Magat, R. (1999). Unlikely partners: Philanthropic foundations and the labor movement. New York: Cornell University Press.Google Scholar
  76. Marshall, L. C. (1913). The college of commerce and administration of the University of Chicago. Journal of Political Economy, 21(2), 97–110.CrossRefGoogle Scholar
  77. Mayo, A. J., Nohria, N., & Singleton, L. G. (2007). Paths to power: How insiders and outsiders shaped American business leadership. Cambridge: Harvard Business School Press.Google Scholar
  78. McCallum, B. T. (1999). An interview with Robert E. Lucas, Jr. Macroeconomic Dynamics, 3, 278–291.CrossRefGoogle Scholar
  79. McCrea, R. C. (1925). The place of economics in the curriculum of a school of business. Paper presented at Seventh Annual Meeting of the AACSB. Columbus, Ohio. (May 7, 8, and 9, 1925). AACSB Proceedings.Google Scholar
  80. McKee, C. W., & Moulton, H. G. (1951). A survey of economic education. The Brookings Institution.Google Scholar
  81. Mercuro, N., & Medema, S. G. (1997). Economics and the law: From Posner to postmodernism and beyond. Princeton: Princeton University Press.Google Scholar
  82. Mirowski, P. (2002). Machine dreams: Economics becomes a cyborg science. Cambridge: Cambridge University Press.Google Scholar
  83. Mirowski, P., & Plehwe, D. (Eds.). (2009). The road from Mont-Pèlerin. The making of the neoliberal thought collective. Cambridge: Harvard University Press.Google Scholar
  84. Moon, H. (2002). The worldwide diffusion of business schools, 1881–1999: The historical trajectory and mechanism of expansion. Ph.D. dissertation, Department of Sociology, Stanford University.Google Scholar
  85. Nearing, S. (1911). Social adjustment. New York: Macmillan.Google Scholar
  86. Nearing, S. (1919). In M. Hillquit (Ed.), The trial of Scott Nearing and the American socialist society. The Rand School of Social Science.Google Scholar
  87. Nelson, R. H. (1987). The economics profession and the making of public policy. Journal of Economic Literature, 25(1), 49–91.Google Scholar
  88. Nik-Khah, E. (2011). George Stigler, the Graduate School of Business, and the pillars of the Chicago School. In R. Van Horn, P. Mirowski, & T. A. Stapleford (Eds.), Building Chicago economics: New perspectives on the history of America’s most powerful economics program (pp. 116-150). Cambridge: Cambridge University Press.Google Scholar
  89. Nohria, N. (2002). Changing fortunes: Remaking the industrial corporation. New York: John Wiley & Sons.Google Scholar
  90. Noll, R. (Ed.). (1985). Regulatory policy and the social sciences. Berkeley: University of California Press.Google Scholar
  91. Olkin, I. (1991). A conversation with W. Allen Wallis. Statistical Science, 6(2), 121–140.CrossRefGoogle Scholar
  92. Parsons, T. (1939). The professions and social structure. Social Forces, 17(4), 457–467.Google Scholar
  93. Peck, J. (2008). Remaking Laissez Faire. Progress in Human Geography, 32(3), 3–43.CrossRefGoogle Scholar
  94. Pieters, R., & Baumgartner, H. (2002). Who talks to whom? Intra- and Interdisciplinary communication of economics journals. Journal of Economic Literature, 40(2), 483–509.CrossRefGoogle Scholar
  95. Reder, M. W. (1982). Chicago economics: permanence and change. Journal of Economic Literature, 20(1), 1–38.Google Scholar
  96. Ross, D. (1991). The origins of American social science. Cambridge: Cambridge University Press.Google Scholar
  97. Samuelson, P. A. (1947). Foundations of economic analysis. Cambridge: Harvard University Press.Google Scholar
  98. Sass, S. A. (1982). The pragmatic imagination. A history of the Wharton School, 1881–1981. Philadelphia: University of Pennsylvania Press.Google Scholar
  99. Sass, S. A. (1988). Uneasy relationship: The business community and academic economists at the University of Pennsylvania. In W. Barber (Ed.), Economics and higher learning in the nineteenth century. Transaction Books.Google Scholar
  100. Sent, E.-M. (2002). How (Not) to influence people: the contrary tale of John Muth. History of Political Economy, 34(2), 291–319.CrossRefGoogle Scholar
  101. Shapin, S. (2008). The scientific life: A moral history of a late modern vocation. University of Chicago Press.Google Scholar
  102. Sharpe, W. (1964). Capital asset prices—a theory of market equilibrium under conditions of risk. Journal of Finance, 19(3), 425–442.Google Scholar
  103. Shenhav, Y. (1995). From chaos to systems: the engineering foundations of organization theory, 1879–1932. Administrative Science Quarterly, 40(4), 557–585.CrossRefGoogle Scholar
  104. Shenhav, Y. A. (1999). Manufacturing rationality: the engineering foundations of the managerial revolution. Oxford: Oxford University Press.Google Scholar
  105. Silk, L. (1960). The education of businessmen. Committee for Economic Development.Google Scholar
  106. Simon, H. (1991). Models of my life. New York: Basic Books.Google Scholar
  107. Starr, P. (1982). The social transformation of American medicine. Cambridge: Harvard University Press.Google Scholar
  108. Stern, J. M., Jacobs, L. H., & Chew, D. H., Jr. (Eds.). (2003). The revolution in corporate finance. New York: Wiley-Blackwell.Google Scholar
  109. Tadajewski, M. (2009). The politics of the behavioural revolution in organization studies. Organization, 16, 733–754.CrossRefGoogle Scholar
  110. Van Horn, R. (2009). Reinventing monopoly and the role of corporations: The roots of Chicago law and economics. In P. Mirowski & D. Plehwe (Eds.), The road from Mont-Pèlerin. The making of the neoliberal thought collective (pp. 204–237). Cambridge: Cambridge University Press.Google Scholar
  111. Van Metre, T. W. (1954). A history of the graduate school of business, Columbia University. The Bicentennial history of Columbia University. New York: Columbia University Press.Google Scholar
  112. Van Overtveldt, J. (2007). The Chicago School. How the University of Chicago assembled the thinkers who revolutionized economics and business. Agate Publishing.Google Scholar
  113. Veysey, L. R. (1965). The emergence of the American University. Chicago: The University of Chicago Press.Google Scholar
  114. Wallis, A. (1957). The school of business of the University of Chicago: A report to the Ford Foundation. New York: Ford Foundation Archives.Google Scholar
  115. Wheeler, J. (1965). Changes in collegiate business education in the United States 1954–64 and the role of the Ford Foundation in these changes. New York: Ford Foundation Archives.Google Scholar
  116. Whitley, R. (1986). The rise of modern finance theory: its characteristics as a scientific field and connections to the changing structure of the capital markets. Research in the History of Economic Thought and Methodology, 4, 147–178.Google Scholar
  117. Wolfe, A. B. (1926). The place of economics in the curriculum of a school of business: discussion. Journal of Political Economy, 34(2), 227–243.CrossRefGoogle Scholar
  118. Yonay, Y. (1998). The struggle over the soul of economics. Princeton: Princeton University Press.Google Scholar
  119. Zorn, D. M. (2004). Here a chief, there a chief: the rise of the CFO in the American firm. American Sociological Review, 69(3), 345–364.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2013

Authors and Affiliations

  1. 1.Sciences-Po, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)Paris Cédex 07France
  2. 2.University of CaliforniaBerkeleyUSA
  3. 3.Harvard Business SchoolBostonUSA

Personalised recommendations