Harvard Business School

In his 1958 history of HBS, economist and HBS faculty member Melvin Copeland reviewed the Schools various pre-World War II efforts to teach economics, and to apply economic theory. He concluded that those efforts were largely unsuccessful, and offered an explanation.

“Over a period of 25 years,” Copeland wrote, “a variety of attempts were made to adapt the ‘principles’ of conventional economic theory to instruction in the Business School…As I now see it, the assignment to transplant the ‘principles’ of conventional economic theory, as it then stood, to instruction in business administration was very difficult, if not impossible, to carry out effectively. Most of the economic theory concerning the business firm was restricted to hypothetical states of equilibrium under restrictive sets of static assumptions which completely ignored many of the most significant elements of business strategy and behavior, as well as many of the most important issues involved in the decisions facing an active business executive.

“Most of the theory was worked out under conditions of so-called ‘perfect’ competition, in which there were assumed to be so many producers and sellers of each completely homogeneous products that no business executive had an price decisions to make, and no problems of marketing strategy, product mix, or sales promotion. Even the theories of ‘imperfect’ competition developed in the early 1930s ignored many of the most important aspects of such problems. Because of the static assumptions, the theories had little relevance to the issues posed for business executives by the continuous dynamic change in conditions, which is one of the most important characteristics of business in the real world.”