01_TheNatureMan

01_TheNatureMan - THE NATURE OF MAN Michael C. Jensen...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
THE NATURE OF MAN Michael C. Jensen Harvard Business School mjensen@hbs.edu and William H. Meckling University of Rochester Abstract Understanding human behavior is fundamental to understanding how organizations function, whether they are profit-making firms, non-profit enterprises, or government agencies. Much disagreement among managers, scientists, policy makers, and citizens arises from substantial differences in the way we think about human nature—about their strengths, frailties, intelligence, ignorance, honesty, selfishness, and generosity. In this paper we discuss five alternative models of human behavior that are commonly used (though usually implicitly). They are the Resourceful, Evaluative, Maximizing Model (REMM), Economic (or Money Maximizing) Model, Psychological (or Hierarchy of Needs) Model, Sociological (or Social Victim) Model, and the Political (or Perfect Agent) Model. We argue that REMM best describes the systematically rational part of human behavior. It serves as the foundation for the agency model of financial, organizational, and governance structure of firms. The growing body of social science research on human behavior has a common message: Whether they are politicians, managers, academics, professionals, philanthropists, or factory workers, individuals are resourceful, evaluative maximizers. They respond creatively to the opportunities the environment presents, and they work to loosen constraints that prevent them from doing what they wish. They care about not only money, but about almost everything—respect, honor, power, love, and the welfare of others. The challenge for our society, and for all organizations in it, is to establish rules of the game that tap and direct human energy in ways that increase rather than reduce the effective use of our scarce resources. © M. C. Jensen and W. H. Meckling, 1994 Journal of Applied Corporate Finance , Summer 1994, V. 7, No. 2, pp. 4 - 19. also published in Michael C. Jensen, Foundations of Organizational Strategy , Harvard University Press, 1998. This document is available on the Social Science Research Network (SSRN) Electronic Library at: http://papers.ssrn.com/sol3/paper.taf?ABSTRACT_ID=5471
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
THE NATURE OF MAN * Michael C. Jensen Harvard Business School mjensen@hbs.edu and William H. Meckling University of Rochester Journal of Applied Corporate Finance , Summer 1994, V. 7, No. 2, pp. 4 - 19. and Michael C. Jensen, Foundations of Organizational Strategy , Harvard University Press, 1998. Understanding human behavior is fundamental to understanding how organizations function, whether they be profit-making firms in the private sector, non- profit enterprises, or government agencies intended to serve the “public interest.” Much policy disagreement among managers, scientists, policy makers, and citizens arises from substantial, though usually implicit, differences in the way we think about human * We use the word “man” here in its use as a non-gender-specific reference to human beings. We have
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 39

01_TheNatureMan - THE NATURE OF MAN Michael C. Jensen...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online