Rational Choice Theory and Organizational Theory: A Critique
Publication Year: 1998
An ambitious new work by a well-respected economic sociologist, Rational Choice Theory and Organizational Theory: A Critique, offers a new perspective on the strategy and actions of organizations. In merging economic, psychological, and sociological literature as they focus on organizations, author Mary Zey contends that a historical political economy contingency theory provides the key to understanding how organizations function and the relationships between individuals and organizations in which they work. She brings to our attention that economic and other types of organizations differ in their behavior from rational individuals and rational markets. Zey integrates macro- and micro-levels of analysis while drawing together internal and external contingencies to explain how decisions are taken. Zey interprets, synthesizes, and critiques the important work of renowned scholars of rational ...
- Front Matter
- Back Matter
- Subject Index
- Chapter 1: Introduction
- What is Rational Choice Theory?
- Major Proponents of Rational Choice Theory
- Major Proponents of the Convergence of Rational Choice Theory and Organizational Theory
- Chapter 2: Individual Rationality versus Collective Rationality
- Individual Rationality
- Collective Rationality
- Utility Maximization
- Utility Theory is a Normative and a Rational Theory
- The Assumption of Context Independence and the Context-Dependent Organization
- Rational Man versus Economic (Selfish) Man
- Optimality of Rational behavior
- Rationality, Utility Theory, and Choice
- The Normative Dimension and the Generalization of Individual behavior to the Collective
- Revealed Preferences Theory
- Empirical Tests
- Chapter 3: Basic Characteristics of Rational Choice Models versus Organizational Theories
- Intellectual Heritage
- Philosophical Stance
- Assumptions about the Nature of Humans
- Mode of Theorizing
- Comparison of Organizational and Rational Choice Theories
- Macro-Micro Links
- Chapter 4: Critique of Rational Choice Theory's Explanations of Social Relationships
- The Nature of Power
- Potential versus Actual Power
- Conflict under Conditions of Unequal Power Distributions
- Authority, Ownership, and Agency
- Culture and Legitimacy
- Chapter 5: Rational Systems of Organization and Rational Choice Economic Theories of Organizations
- Critique of Organizational Economics
- Organizational Economics and the Unit of Analysis
- One Organization Equals One Person
- The Organization as a Market
- Power in Organizational Economic Theory versus Power in Theories of Organizations
- Chapter 6: Criticisms of Rational Choice Models
- The Individual is Antecedent to and Independent of the Group
- Humans are only Self-Interested
- Humans Act only out of Rationality
- Value is Subjective
- Humans are Utility Maximizing
- Utility is Subjective
- Neoclassical View is Value Neutral
- The Individual is the Appropriate Unit of Analysis
- Organizations Function Rationally
- Organizations Function Efficiently
- Power and Conflict are Limited
To Steve Murdock, one who is truly committed to fair and equal opportunity and treatment for all that does not stop at the conventional lines of gender, race, and poverty
Copyright © 1998 by Sage Publications, Inc.
All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.
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Library of Congress Cataloging-in-Publication Data
Rational choice theory and organizational theory: A critique / by Mary Zey.
Includes bibliographical references and index.
ISBN 0-8039-5135-3 (cloth: acid-free paper). — ISBN 0-8039-5136-1 (pbk.: acid-free paper)
1. Rational choice theory. 2. Economic man. 3. Organizational sociology. I. Title.
This book is printed on acid-free paper.
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I am an organizational sociologist, trained in economic sociology and structural contingency theory at the University of Wisconsin—Madison. For more than two decades, I have benefitted from the teachings and friendships of Michael Aiken, Eric Olin Wright, and Richard Schoenherr, who died prematurely in 1995. From interaction with these structural contingency theorists and neo-Marxists, I developed my political economy contingency model of organizational analysis in the early 1980s with the assistance of Michael Aiken. I have been writing from this perspective for more than two decades.
My objective when I began this book in the early 1980s was to advance the study of macro-organizational theory, which draws upon the sociological and management traditions. These traditions view the organization as the unit of analysis and focus on the relationships of the organization to entities within and external to the organization.
This volume is part of a larger program in which I argue for the empirical validity of structural change of organizations as dependent [Page x]on the political-legal and economic factors in their environment, including change in capital, the state, and competing and supporting organizations. My position has involved arguing against the more conservative functional sociologists, the more liberal economic theorists of the agency theory, institutional economic transaction cost theory, and for capital dependency theory.
This book has developed over a long period. It began to take form shortly after I began studying and presenting papers in the 1980s about then-evolving fraud networks established by Michael Milken, Ivan Boesky, and various sellers and buyers of junk bonds. In several academic settings, I was faced with shout-downs by organizational economists, who based their objections on the premise that insider trading and securities fraud should not be against the law, and that these actors were merely acting rationally. These scholars, newly socialized as organizational economists, could not understand that the premises from which I was working differed from their premises. In fact, they could not see that organizational entities have any real existence beyond that of benefiting their owners or stockholders.
This book is written in response to the neoclassical economic rational choice theories and the organizational economic theories, which have developed in the past decade and which have gained center stage in current organizational analysis.
I would like to express my gratitude to Dr. William Perry, Dean of Faculties at Texas A&M University, who provided me with a semester of faculty leave in the fall of 1996 to recollect data and, unknown to him, complete this book. His support has been of great help to me during this time.
I would also like to thank Eric Olin Wright for allowing me to attend his graduate seminar in economic sociology at the University of Wisconsin—Madison in the spring of 1996 and to experience for a second time, a decade later, his excellent lectures. In addition, I would like to thank Jane Pillivan for providing a third opportunity for me to enjoy the stimulating environment of the University of Wisconsin —Madison sociology department.
Some five years ago, in 1991, I was a Visiting Scholar in the Stanford Center for Organizations Research (SCOR). My mentoring host was Dick Scott. Both he and James March asked me to present working draft chapters of my Banking on Fraud book in their seminars. Dick Scott was chairing a research seminar on organizations in the Department [Page xii]of Sociology in which the faculty of the department, including John Meyer, and their graduate students were presenting their work. I also participated in the Scandinavian Consortium for Organizations Research seminar, chaired by James March, during which he and his graduate students critiqued my work. I received comments on my work and discussed it with Jeffery Pfeffer, Robert Sutton, and Joel Podolny. I am indebted to them for the lunch discussions about the intellectual diversity in the foundations of management theory and for their support of my research.
During my semester at Stanford, I enjoyed the company of a number of other visiting scholars who assisted me in locating the appropriate library in which to collect financial data for my study of the transformation in corporate form in the 1980s (Zey and Camp 1996 and Zey forthcoming) and who provided intellectual stimulation on a daily basis. Lex Donaldson was my constant intellectual antagonist, strongest critic, and friend, as well as my informant about the development of managerial theory. For his friendship and support, I am deeply grateful.
For their typing and editing, respectfully, the drafts of this manuscript, I would like to thank Charla Adkins and Maveret McClellan. Without their support and friendship, this book would have never been completed. Most important, I would like to thank Harry Briggs, who has supported my work for nearly a decade and, as my editor, flew from California to Texas A&M University in the fall of 1996 and strongly encouraged me to finish this book. His undying support and encouragement have sustained me through the writing of this book as well as my previous book with Sage Publications, Decision Making: Alternatives to Rational Choice Models (Zey 1992).
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