Crossroads—The Myth of a Monolithic Economics: Fundamental Assumptions and the Use of Economic Models in Policy and Strategy Research

Abstract

In 1990, in the first issue of Organization Science, Paul Hirsch and his co-authors Ray Friedman and Mitchell Koza published a caveat to researchers about possible pitfalls of using economic models in behaviorally oriented strategy and policy research (Hirsch et al. 1990). “Crossroads” provides a context for a reply to this paper and Todd Zenger and William Hesterly have taken the opportunity to do so. They seek to clarify where economics stands with respect to fundamental assumptions about humans, organizations, markets and investors. They concur with many of Hirsch, Friedman, and Koza's (1990) warnings concerning the adoption of unrealistic assumptions, but disagree that the assumptions they impute to economics are universally held by economic models, particularly those models most often used by strategy and policy researchers. Zenger and Hesterly show that there are significant differences among economic theories in their fundamental assumptions. Finally, they suggest how strategy and policy researchers might constructively respond to economic approaches to strategy and organization. They argue that there is more to economic assumptions and models than was noted in the initial article and suggest ways in which collaboration may and does occur between economics and behavioral approaches to the study of organizational strategy and policy. Taken together, the papers by Hirsch et al. and by Zenger and Hesterly serve to illuminate and extend an important debate (Introduction by Peter J. Frost).