A business professor challenges the conventional belief that the father of economics endorsed key assumptions used to justify greed and oppose regulation.
As corporate scandals and financial crises have harmed millions and eroded public trust, debut author Cox (Marketing, Univ. of Texas, Austin) wants business schools to emphasize ethics and social responsibility to offset curriculums that foster a culture of avarice and radical individualism. Mainstream economics, he argues, embraces a political philosophy that promotes the “twin pillars of market capitalism: greedy and rational economic man and the self-regulating power of perfect competition.” Both concepts supposedly find authority in Adam Smith, whose “invisible hand” transforms the personal vice of avarice into the public virtue of economic growth. But Cox effectively describes how these theoretical economic models break down in practice, often harming free enterprise. He persuasively argues that Smith would not recognize or accept them. Cox confesses that for decades as a student and professor he had not read Smith’s 950-page Wealth of Nations, accepting what others attributed to it. Intensive study of works by and about the economist and philosopher convinced Cox that Smith distinguished between healthy self-interest and that which was “vulgarly understood”—greed. Cox cites numerous government interventions that Smith endorsed, from a minimum wage to progressive taxation, to show that his philosophy was not laissez faire. While Cox aims his work at academia, he writes clearly in mostly jargon-free language that anyone should be able to understand, striking a good balance between scholarly theory and everyday business practice. His case is thorough, well-organized, well-researched, and documented with footnotes, an extensive bibliography, and a basic index. The prose conveys a passion born of regret that the author might have served his own students better; he laments that he presented them “with a hash” of “two conflicting business philosophies.” Particularly effective is his juxtaposition of two former students at the school where he is now professor emeritus: Rick Causey became Enron’s chief accounting officer and went to federal prison; Sherron Watkins, who pens the volume’s afterword, became an Enron whistleblower and Time magazine “Person of the Year” in 2002.
A needed and overdue corrective, this book should be essential reading for business and economics scholars and for anyone interested in these subjects.