Why do Economists behave badly…like Psychopaths?

“The world is a dangerous place to live; not because of the people who are evil, but because of the people who don’t do anything about it.” 

Albert Einstein

Cooperation is the key organizing principle for complex living systems. Cells cooperate and exchange biochemicals signals to assure a healthy functioning of a biological organism; neurons exchange electrical signals and coordinate their activity to enable complex cognitive processes. Animal species from very simple organisms such as viruses and bacteria to more brainy vertebrates cooperate and share resources with each other to increase their chances of survival. For example, vampire bats regurgitate blood for colony-mates who otherwise risk starvation, while ants have two stomachs, one for their own use, and one to feed others.

Human societies are not the exception to this rule of Nature and strongly depend on high levels of collaboration between diverse, highly specialized individuals. According to researchers from evolutionary anthropology, uniquely human achievements such as language, complex technologies, arts, morality and social institutions had become possible thanks to human cognitive ability and motivation to collaborate with others for a common purpose (1). As compared to the animal kingdom, human cooperation is even more sophisticated and remarkable in its scope and scale allowing strangers or genetically unrelated individuals to coordinate their activities in large social groups (2).

Experimental studies across different cultural contexts confirm that majority of humans have a predisposition for cooperation and punish those who violate the norms of reciprocity and cooperation, even at personal cost (3; 4). It is not surprising given the fact that human brain have evolved all necessary neurobiological mechanisms for learning and applying complex social knowledge to support cooperation and prosocial behavior in large-scale groups. The Nature made cooperation intrinsically rewarding so that people feel good by doing good (5). What seems to be more puzzling is selfish opportunistic behavior that occurs in real-life situations and experimental settings…

Impulsive vs. Instrumental non-cooperators

As opposed to healthy people with prosocial other-regarding preferences, individuals with proself self-regarding tendencies demonstrate “a selfish, uncaring, and manipulative posture toward others”(6). They don’t cooperate and don’t reciprocate in social dilemma’s games, they pursuit their own monetary self-interest while disregarding the welfare of others, they prefer economic utility over fairness and they believe that manipulating other people is the key to success. In economic science, such type of individuals is called Homo Economicus while in psychological science the same prototype can be qualified as psychopaths.

Researchers have identified two main types of non-cooperators: impulsive vs. instrumental. While the both types of individuals are strikingly similar in their remorseless pursuit of selfish materialistic goals (primary psychopathy), they differ radically in their psychological profiles.

  • Impulsive non-cooperators pursue their immediate self-interest without any regard for the long-term consequences of their actions, they show distrust in other people and lack perspective-taking skills. Without self-control and self-consciousness, they exhibit pleasure-seeking sensory-driven behavior with instant gratification. As compared to instrumental non-cooperators, impulsive individuals are prone to neuroticism (i.e., experience of negative affective states such as anxiety and depression), less satisfied with their lives and exhibit stronger tendencies toward physical aggression (secondary psychopathy).
  • Instrumental non-cooperators by contrast are highly intelligent and successful individuals, capable of self-control and of working toward long-term goals. Being able to understand interpersonal situations, they show a high self-esteem, fearless dominant attitude & behavior and strongly believe that they are appreciated by other people. It is a kind of successful ‘corporate’ psychopaths who might appear charming, grandiose and sophisticated to manipulate other people for their own benefit. It has been shown that such callous manipulative individuals are very likely to be found at the top of management positions. They are attracted to large business and financial organizations “because of the potential rewards on offer in these organizations” (7).

For this reason, the instrumental non-cooperators are often members of the social and economic elite. Thanks to their charm, cool decisiveness, and calculative mindset they acquire considerable political power and social influence to change the rules of the games (laws, incentive systems) for their own gain. Driven by their unlimited greed and avarice, they are able to affect the ethical climate of the whole organization and shift the patterns of collective behavior toward organizational wrongdoing and ethical breakdowns. This irresponsible business behavior leads, in turn, to economic and financial collapses (8).

Despite the considerable costs for business and society, these dysfunctional leaders don’t care about other people — employees who lose their jobs and pension savings, investors who lose their investments or taxpayers who have to repair the damage… They willingly lie and blame others for the chaos they have created, they “have no doubts about their own value and worth”, they walk away with a clean conscience and huge amounts of money and are ready to advise “governments how to prevent such economic disasters” (7; 9).

While impulsive psychopaths often fail in their socio-economic life and thus can be easily spotted and avoided, instrumental high-functioning psychopaths, however, are the most dangerous invisible kind of people. Because of their personal charisma, charm and important social influence, they “appear normal and even to be ideal leaders” (9). To better understand and recognize these socially dangerous individuals, we should look at the determinants of human psychopathology.

Underlying causes of selfish opportunistic behavior

Unhealthy brains. Impulsive non-cooperators behave like VMPFC patients — people who have a neurological damage to their higher-order brain region responsible for emotion processing and executive function. It means that the selfish non-cooperative behavior of impulsive non-cooperators can be explained by their dysfunctional neurocognitive processes. It can be a result of different physiological and environmental factors:

  • exposure to strong environmental stressors such as neglect or abuse in early childhood. As Schore explains, “early adverse developmental experiences” may alter the biochemistry of the developing brain and “may leave behind a permanent physiological reactivity in limbic areas of the brain” (10). In other words, early relational trauma leads to altered brain development and maladaptive adult mental health and behavior;
  • substance abuse or exposure to environmental toxins (e.g., heavy metals, organic compounds or pesticides). These hazardous chemicals induce oxidative stress in the brain, stimulate apoptosis (auto-destruction) of neurons, and affect neurotransmitter release. Children are particularly vulnerable to the harmful effects of toxins and air pollution (11). Recent studies confirm that ultra-fine particles in polluted air increase inflammation in brain tissues and accelerate degenerative brain diseases and mental decline (12);
  • an inadequate energy supply to the brain (e.g., chronic stress, sleep deprivation or poor diet). Because neuronal computation is energetically expensive, disruption of the energy supply to synapses may cause neurological disorders (13). Neuroimaging studies show that chronic stress exposure (14), lack of sleep (15) or diet rich in palatable hyper-caloric food (16) are all detrimental to brain executive function and lead to compulsive maladaptive behaviors.

Unhealthy culture. While impulsive non-cooperators represent unhealthy or dysfunctional brains, what is wrong with instrumental non-cooperators or high functioning psychopaths? Since their executive function seems to be intact, the answer might be lie in some cultural influences that shape their personal values and beliefs. Indeed, large-scale surveys indicate that education exerts the most significant influence on the difference in patterns of individual value orientations (17, 18).

A growing body of empirical evidence suggests that people trained in business economics interpret reality and make a choice differently as compared with non-economists. For example, business/MBA students or students who had taken multiple economics courses:

  • prefer cost-benefit analysis over humanistic values even when two types of rules are in conflict while non-economists are less favorable to use analytical reasoning in various every-day situations (19);
  • exhibit a stronger tendency toward antisocial behaviors in social dilemma’s games (20-22);
  • are more corruptible (23);
  • are more cynical & dishonest (24);
  • have more positive attitudes toward greed and toward one’s own greedy behavior (25);
  • are less likely to donate to local social programs (26);
  • are more likely to favor profit maximization over promoting the welfare of workers when faced with a business dilemma (27);
  • value personal achievement and power more than non-economists while attributing less importance to social justice and equality (28; 29);
  • have a different perception of fairness or seem to be unaffected by the notion of fairness in their decision-making (30).

A recent longitudinal study over four decades demonstrate that these antisocial tendencies in business or MBA students don’t disappear with time but translate into self-serving greedy behavior of top executives. Based on a sample of celebrated CEOs of large U.S. corporations, researchers found that CEOs with MBA (vs. non-MBA) are more likely to engage in costly non-sustainable growth strategies via acquisitions that undermine the long-term performance of their companies. Despite the decline in the firm valuation, the MBA CEOs reap undeserved personal benefits in form of increased compensation (31).

Another study examining the link between CEO characteristics and corporate social performance (CSP) found that CSP, as measured by the strengths categories of KLD’s ratings, is negatively related to the CEO having a bachelor’s degree in economics and to their level of short-term compensation. By contrast strong or exemplary CSP is positively related to the CEO having a bachelor’s degree in humanities, having a breadth of career experience and being female (32).

How does business economics affect human cognition?

Indoctrination hypothesis. One of the most probable mechanisms of economics impact on human mind is learning effect or indoctrination. According to several studies, senior students of economics are more selfish and opportunistic as compared with the freshmen. For example, one study found that “the number of economics classes taken was positively correlated with cost-benefit reasoning.” Researchers conclude that “although people ordinarily are not perfectly rational by economists’ standards, they are capable of becoming more rational” (33). Another study reports that upper-level students are less likely to support egalitarian solutions to distribution problems than lower-level students, suggesting that time spent studying economics does have an indoctrination effect (34).

Some studies even suggest that microeconomics classes — with a strong focus on game theory where “survival imperatives often militate against cooperation” — are more harmful for human cognition than macroeconomics course. After one semester’s training, students in the microeconomics class reported significantly higher levels of dishonest or cynical responses in a survey than their peers in macroeconomics — whose responses, however, were less honest as compared with a control group of astronomy students (35).

Indeed, business economics and MBA programs have a heavy emphasis on material self-interest (36) and advocate a pessimistic view of human nature with negative moral evaluations (37). Moreover, economic theories (i) emphasize the superiority of impersonal markets and transactions over trust-based relationship; (ii) prioritize firm-level profit-maximization goals rather than broader societal considerations; (iii) privilege financial rewards over intrinsic motivation and satisfaction of inner psychological needs. A repeated and intensive exposure to such negative models of human motivation and a narrow view of the firm may instill or reinforce selfish motives in economics or MBA students (38).

Disbelief in free will. Another plausible pathway by which economics training might distort human cognition is inducing disbelief in free will. Scholars in social psychology argue that belief in free will is a crucial aspect of human culture that might motivate people to go beyond their selfish impulses “in favor of more prosocial forms of behavior” (39). Some kind of volition and self-control is required to accommodate other people needs. Experimental studies show that undermining that belief might encourage people to act in more impulsive and selfish ways, and lead to more aggressive and less helping behaviors.

Economic theories are built on the deterministic assumptions of classical reductionist science that view the world as a ‘clock-wise’ universe with linear causal relationships. Economic science became “imprisoned in the physical world described by observable variables” and human nature had been reduced to a “rational” economic man guided by his own material self-interest (40). By promoting this deterministic worldview and pessimistic view of human nature, economic theories may indeed compromise individuals’ sense of free will and personal responsibility, encourage people to succumb to their most primitive instincts and impulses and thus increase their tendencies for selfish unethical behavior (41).

Exposure to money construct & business decision frames. As discussed elsewhere, ethical prosocial cognition is an intuitive process that can be overridden by deliberative, calculative reasoning. Economic science by nature is built on rational mathematical models that promote “cold-blooded” cost-benefit analysis and strong emphasis on monetary rewards. This calculative rational mindset might “narrow the role of intuitive and social considerations” in human decision making and “overshadow the influence of intrinsic motivations” (42).

For example, experimental studies show that mere exposure to the construct of money or related symbols activate people’s business decision frame, which elicits unethical intentions and behavior (43); decrease compassionate helping (44) and increase deception (45). When being reminded of money, individuals become more self-sufficient by preferring more solitary activities and less physical intimacy (46; 47). Even children aged 5-8 years old react similarly to money reminders by reducing their willingness to help and adopting more selfish preferences (48). In other words, economic money-oriented mindset might suppress human emotion-laden prosocial tendencies and encourage unethical short-sighted behaviors.

Gender differences: Male vs. Female response to economics

Empirical evidence suggests that the exposure to economics training does not affect men and women equally. In fact, male cognition is more subject to economics’ noxious influence. For example, one study reports that “male students of economics are most corrupt, male non-economists the least whereas women occupy the middle position” (49). Another study revealed that the women tended to favor humanitarian values when they conflicted with the economic rules (50). Furthermore, a survey of more than 1750 respondents reveals that the better educated and males are most likely to think like economists (51). More generally, research shows that “gender is a significant factor in the determination of ethical conduct and that females are more ethical than males in their perception of business ethical situations” (52).

These gender differences in economic thinking and prosocial behavior might be explained by significant gender differences in brain emotional processing and empathic response. According to cognitive researchers, females generally demonstrate a higher level of empathy, more self-other awareness and greater sensitivity to others than males (53). The superior emotional skills of women might serve as a protective buffer against the deleterious impact of economics training.

Conclusion

As never before in history, today we need a high level of cooperation across organizations, social institutions and nations to address the global challenges of sustainable development. Extensive research suggests that we need both healthy brains and a healthy culture to develop human prosocial tendencies toward large-scale collaboration. In fact, a healthy brain development requires a healthy culture, “a rich complex of myths and symbols that implicitly define a people’s beliefs about their world and their rules for correct behavior” (54). Without “a sophisticated, high quality cultural environment in which to develop there will be vast reaches of our somatic, especially neural, organizational space that we cannot use because it is not accessible to us” (55).

Our dominant Western culture built of the materialistic foundations of classical science actively promote economic values and principles that overshadow human natural predispositions for social connection and cooperation. Our modern business education massively produce hollow, short-sighted managers and leaders who lack appropriate moral and ethical standards (56). If we want to change this self-destructive tendency, we have to reconstruct our cultural environment and create the conditions for an optimal brain development and human flourishing. As one prominent management scholar put it, “If we are to have an influence in building a better world for the future, adapting the pessimistic, deterministic theories will not get us there. If we really wish to reinstitute ethical or moral concerns in the practice of management, we have to first reinstitute them in our mainstream theory” (57).

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