The modern market-based economy generates wealth, but it lags on well-being; it has mastered efficiency, but struggles with equity; it boasts size, but falls short on sustainability. In other words, our economy delivers performance but neglects progress (i.e., well-being, equity, and sustainability). Many rightly call for tighter regulation, higher (“true”) prices, and longer-term incentives. Others appeal to corporate purpose, shared value, and stakeholder-centricity.

Beyond regulation and the practice of business, we must attend as well to education and the theory of business. In particular, we must look at business theory's core assumptions, whose weaknesses are long known. In an applied field such as business, where theory tends to be normative, flawed assumptions could act as a “wedge” cleaving apart performance and progress.

In this volume, Subramanian Rangan brings together eminent social scientists and philosophers to explore core assumptions in each of the major fields of business-including economics, strategy, marketing, operations, decision science, leadership, governance, technology, and finance. This structured field-by-field reflection reveals and expands the bounds of our rationality. Core Assumptions in Business Theory proposes a revised profit function that integrates harm, outlines how economic actors may draw on moral philosophy to enact Pareto-equity (and not just Pareto-efficiency), suggests a two-stage rationality approach that can attend to well-being, and recasts marketing as consumer education and not merely demand promotion.

With an emphasis on education rather than regulation of economic power, this volume argues that moral reasoning and moral roles can fruitfully supplement prudential reasoning and functional responsibilities. Such an evolution will enable our economy to be both modern and moral.

This is an open access title available under the terms of a CC BY-NC-ND 4.0 International licence. It is free to read on the Oxford Academic platform and offered as a free PDF download from OUP and selected open access locations.

Subramanian Rangan, Professor of Strategy and Management, INSEAD

Subi Rangan is Professor of Strategy and Management at INSEAD, the global business school, where he holds the Abu Dhabi Crown Prince Court Endowed Chair in Societal Progress. His research focuses on how economic actors may better integrate performance and progress. In 2013 he initiated the Society for Progress, a fellowship of eminent philosophers, social scientists, and business leaders. He is also the editor of Capitalism Beyond Mutuality? (OUP, 2018) and Performance & Progress (OUP, 2015).

List of FiguresList of ContributorsIntroduction, Subramanian RanganPart I. Economics1. From Market-Pareto to Moral-Pareto: Seven Problematic Assumptions in Business Economics Theory, Subramanian Rangan2. Assumptions in Economics, Jean Tirole3. A Half-Dozen Assumptions That Have Led Economists Astray, Robert H. Frank4. Some Assumptions in Labor Economics, David Autor5. Reflection on Tirole's Chapter, Joshua Cohen6. Reflections on Autor's and Frank's Chapters, Philip Pettit7. Reflections on Frank's, Kailas's, Rangan's, and Tirole's Chapters, Ellen QuigleyPart II. Strategy8. The Social Welfare Implications of Strategic Management Theory, Jay B. Barney9. Reflections on Barney's Chapter, Elizabeth Anderson10. Humanitarian Monopolists: Reflections on Barney's Chapter, Michael FuersteinPart III. Marketing11. Fundamental Assumptions in Marketing, Philip Kotler12. Three Assumptions Underlying Customer Value Management: An Interdisciplinary Perspective, Hilke Plassmann13. Does Anyone Need a Rolex?: Reflections on Kotler's and Plassmann's Chapters, Valerie Tiberius14. I ''Need'' a Rolex: Reflections on Kotler's and Plassmann's Chapters, Michael FuersteinPart IV. Decision Science15. Theories of Choice and Value Endogeneity, James G. March16. Some Questionable Assumptions in Economic Theory, Itzhak Gilboa17. Reflections on Gilboa's and March's Chapters, David SchmidtzPart V. Operations Research18. The Assumptions of Operations Research, Edward H. Kaplan19. Reflections on Kaplan's Chapter - I, Philip Kitcher20. Reflections on Kaplan's Chapter - II, Mathias RissePart VI. Organization Theory and Sociology21. Fundamental Assumptions in Organization Theory, Julie Battilana22. Organization and Management Theory: Our Assumptions and the Quest for a Better World, James P. Walsh23. Assumptions Rational and Not: Reflections on Battilana's and Walsh's Chapters, Kwame Anthony Appiah24. The Orientation of Economic Sociology: Assumptions and Limits, John W. Meyer25. Assumptions Underlying Sociological Models in Business Schools, Gerald F. Davis26. Social Science Assumptions: Reflections on Meyer's Chapter, David Schmidtz27. Methodological Individualism-Lessons (?) from Biology: Reflections on Davis's and Meyer's Chapters, Philip Kitcher28. Philosophical Concepts in Organization and Leadership, Valerie TiberiusPart VII. Leadership and Corporate Governance29. Fundamental Assumptions about True Leaders, Ramón Mendiola30. A Discussion on Corporate Governance, Ravi Kailas31. Incorrect Assumptions That Have Guided Our Economic System, Bertrand Collomb32. Corporate Governance and Leadership: Reflections on Kailas's and Mendiola's Chapters, Kwame Anthony Appiah33. On Corporate Governance: Reflections on Kailas's Chapter, Philip PettitPart VIII. Technology34. Assumptions Regarding Technology, S. D. Shibulal35. A Compass for Technology, Jim Hagemann Snabe36. Situating the Assumptions of Technology in Broader Normative Frameworks: Reflections on Shibulal's and Snabe's Chapters, Elizabeth Anderson37. Concerns about Technology: Reflections on Shibulal's and Snabe's Chapters, Susan NeimanPart IX. Finance38. Taking Stock of Some Core Assumptions in Finance, Raghuram Rajan39. The Finance Paradigm, Marti G. Subrahmanyam40. Reflections on Rajan's and Subrahmanyam's Chapters - I, Susan Neiman41. Reflections on Rajan's and Subrahmanyam's Chapters - II, Mathias RisseAfterword: Evolving the Theory, Actors, and Practice of Business, Ebba Abdon HansmeyerIndex