Facade and self-deception in the deteriorating financial firm

Article Abstract:

Financial executives and financial regulators sometimes agree to ignore facts whose overt recognition would precipitate a crisis. They use accounting facades to do this. The financial firm may also be jeopardized by executive self-deception. Two forms of this are optimistic biases and failure to canvas market alternatives adequately. The top executive officer may also exhibit a pattern of ever-accelerating risk-taking, resulting in 'turbo-deterioration' of the firm, or the firm may be so organized as to induce imprudent risk-taking at subordinate levels. Facades and self-deceptions pose important, unresolved issues of public policy and financial regulation. (Reprinted by permission of the publisher.)

Analysis, Financial services industry, Financial services, Behavior, Risk management, Executives, Business planning, Business failures

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The behavioral foundations of public policy-making

Article Abstract:

If the empirical assumptions of cognitive psychology were to replace the a priori postulates of economics, models of behavior would be more descriptively consistent and more accurate. On the other hand, if models that assume rationality were improved, the models would be more effective at predicting aggregate behavior. Policy analysts, who study behavior and its consequences, have more need for models with strong predictive, as opposed to descriptive, capabilities. Also, discarding models of rational behavior in favor of cognitive psychology may have no other effect than to replace one form of descriptive oversimplification for another.

Methods, Social policy, Behavioral assessment

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Efficiency and power: organizational economics meets organization theory

Article Abstract:

The contested terrain of paradigmatic approaches taken by economics and organization theories are highlighted. The in-built assumption of market economists and the built-in questioning of such assumptions by organization theorists forms the main argument concluding that neither approach has essentially developed theorizing and knowledge. The presence of one approach is perhaps only possible and derives force from the absences of others.

Business enterprises

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