Transforming economics to transform business practice: Imperative for the future

by Sandra Waddock / Business as usual in business and management schools will not do any longer. With the world facing numerous political, social, and ecological crises – and a closing window of opportunity for change – it is well past time that management educators recognize the need for significant change in what and how we are teaching, and why. UN Secretary General António Guterres articulated these issues in a stunning 2020 speech about ‘The State of the Planet’, claiming that ‘Humanity is waging war on nature’, evidenced by dying coral reefs, air and water pollution, the climate crisis, the pandemic, fires and floods, and massive inequality. As he put it, ‘Human activities are at the root of our descent towards chaos’.

At the core of these problems, arguably, is the dominance of today’s growth-oriented, winner-take-all, self-interested framing of economics – with its foundational idea that the purpose of business is to make a profit, end of story. Despite advances by so-called heterodox framings of economics (e.g., ecological, feminist), dominant economics ideas drawn from neoclassical economics continue to hold sway. Further, they dramatically underpin curriculum and teaching in virtually all business schools and dominate textbooks and courses across the curriculum, from management to marketing to accounting to strategy. Think about it: despite much current attention to business purpose beyond profits, the bottom line still rules. The stickiness of this approach has led the accrediting body AACSB to publish calls to ‘reinvent business education’ and recognize that if climate change continues unabated we are ‘educating leaders for a nonexistent future’.

Here is a radical idea: what if the economic ideas that shape how businesses and their leaders operate shifted away from the still widely accepted dictum that ‘There is no alternative’ to today’s economics? Can we even envision reframing economics around a set of principles that are more realistic than the idea that people are only self-interested profit maximizers or that business and economy can grow endlessly on a finite planet? What would such a socio-ecologically-based reframing of economics mean for business practice? Arguably, such a dramatic change – a transformation in the mindsets or paradigms of business school leaders, business professors, our students, and the leaders they are to become – is essential sooner rather than later if business schools are to get out of their current trap of being part of the problem rather than the solution to crises as big as climate change and inequality. After all, as Donella Meadows recognized, the key leverage point for bringing about system transformation is mindset or paradigm change, which then influences other key influences like business purpose and the metrics that drive behaviors and practices.

So here is a provocation: to really reinvent business education, we need to first reinvent – and promulgate – economics. That is because economics ideas drive the current paradigm – and that paradigm needs to change, no matter how difficult that task is. Business schools, faculty, curricula, and future business leaders (and, of course, their businesses) need, in short, to move to an economics based on principles that give life to systems and that fundamentally shift how business is understood as a societal actor. Such an economics recognizes the realities of the world, and can drive very different behaviors and practices than profit maximization and growth at all costs. That’s a hard shift and requires a radical rethinking of not just the economic paradigm, but also business and economies’ purposes, performance metrics, practices, and power relationships that it drives.

The question then is :what might such an economics look like? Well, as a first step, it would be driven by a very different set of values (and, yes, economics does have a set of values – they just revolve around money, self-interest, and growth) than today’s dominant economics. Elsewhere, I have argued that, drawing from a vast socio-ecological and economic literature base, six values could shape such an economics. They’re pretty different from conventional economics and require the development of a care-oriented mindset. They demand, in a sense, care for each other in terms of equity and care for our planetary home in terms of fostering flourishing for all rather than exploitation that benefits the few. Consider, though, just for a moment how things might change if business schools, leaders, businesses, and economies were driven by these values:

  • Stewardship of the whole: care for the entire system at multiple levels – company, community, bioregion, planet.
  • Co-creating collective value: business purpose as the optimization of wellbeing and dignity for humans, as well as other non-human beings, and the Earth itself, conceived as the living planet that it is.
  • Cosmopolitan-localist governance: decision making localized as feasible while recognizing the global and planetary context into generative and supportive communities that share resources and ideas in ecologically regenerative ways.
  • Regenerativity, reciprocity, and circularity: use Earth’s resources within her regenerative capacity, ensure mutually beneficial trade and exchange relations, and emphasize the principle that ‘waste equals food’.
  • Relationality, connectedness: recognize (as Indigenous peoples do) humans’ embeddedness in and interdependency with communities, cultures, and nature.
  • Equitable markets and trade: offer fair, fully costed, contextually appropriate products and services that are designed to last, while allowing for local self-sufficience.

Are business schools the place to start reframing economics? Possibly, because it is in part business schools who have promulgated today’s flawed and unrealistic approach to economics. Starting with this core narrative, a narrative that underlies so many decisions, is vital to the mindset and paradigm shift needed to accomplish the systemic changes that the world so vitally needs. Making this shift in thinking is part of the mobilization of all forces that is needed to, in essence, save humanity from itself.

Sandra Waddock is the Galligan Chair of Strategy at Boston College’s Carroll School of Management.

3 thoughts on “Transforming economics to transform business practice: Imperative for the future

  1. I agree that Economics needs to include an examination of values – and that its tools can and should be applied to different values (what we truly value rather than what is assumed is valued)! I teach this in my principles courses and have written about transforming the teaching of Economics, most recently with Al Rosenbloom: https://www.emerald.com/insight/content/doi/10.1108/JGR-01-2021-0004/full/html?skipTracking=true
    Stakeholder capitalism — as a critique of the more traditional economic paradigm — is also gaining some traction.

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