Is rational economic man dead?
Blog by Susan Murray, David Hume Institute
25th February 2021
Put simply, yes.
For the much more detailed answer, read Professor Linda Scott’s The Double X Economy. The book is a whistle stop tour of anthropology, history, science and economics. It firmly positions economics as a social science and shows how interpretation can vary depending on your personal experience. Professor Scott’s much longer answer is that rational economic man never existed other than as a concept in textbooks.
The Double X Economy does for economics what Caroline Criado Perez’s book Invisible Women did for data. It brings together research from many sources and systematically debunks myth after myth relating to economics.
It is no wonder that the book is being shortlisted for business and science writing prizes, and in 2021 is being translated into 40 languages.
The Double X Economy discusses the historic origins of the myth about women’s inability to manage money. And how this is connected to the lack of women’s voices being heard in economic debates or taken seriously as academic economists. For too long only a limited number of voices have been heard when it comes to our economy.
I’ve heard many of the myths mentioned in relation to business in Scotland. For instance to explain away the stark differences in who receives venture capital funding “Women just don’t start the kind of businesses that scale.”
Linda examines this self-perpetuating funding cycle, that male-led businesses receive more funding and so they are more able to grow, so are deemed to be more successful, and the cycle goes on. Although there have been some in-roads in terms of new angel investors targeting women-led businesses, the majority of VC funding is still received by a narrow group of people.
The data clearly shows the volume of missed opportunity from an unequal economy - not just in terms of starting and growing businesses, but also in terms of managing and governing them. By not valuing diversity of thought in business we are failing to allow organisations to benefit from a wide range of experience that can make organisations stronger - as well as risking group-think. As the David Hume Institute found in our 2020 analysis of Scotland’s top leaders, almost every sector in Scotland suffers because it lacks diversity, but business suffers the most. Just 5% of Scotland’s top business leaders are women.
If we want a thriving economy it is time to stop wasting talent. We must value diversity in all its forms and all work harder to achieve it.
If you missed the event with Professor Linda Scott and Rachel Statham or would like to watch again, the recording is available here. Subtitles are available through YouTube.
If you are interested in diversity of thought in economics, join the David Hume Institute in conversation with Dr Arun Advani and Mairi Spowage on 23rd March to discuss Arun’s latest research on diversity in economics. Register here.
