From Social Control to Financial Economics: The Linked Ecologies of Economics and Business in Twentieth Century America

As the main producers of managerial elites, business schools represent strategic research sites for understanding the formation of economic practices and representations. This article draws on historical material to analyze the changing place of economics in American business education over the course of the 20th century. We use the Wharton School as an illustration of the earliest trends and dilemmas (c. 1900-1930), when business schools found themselves caught between their business connections and their striving for moral legitimacy in higher education. We show how several of the school's leaders were closely involved in progressive reforms and presided over the development of the empirical social sciences to address questions of labor regulation and control within manufacturing industries. Next, we look at the creation of the Carnegie Tech Graduate School of Industrial Administration after World War II. This episode illustrates the increasingly successful claims of social scientists, backed by philanthropic foundations, on business education and the growing appeal of "scientific" approaches to decision making and management. We also show that these transformations were homologically related to changes in the prevailing mode of governance in the American economy: business schools became essential sites for the development of tools and methods (e.g., input-output approaches, linear programming, forecasting) for the management of the new large, diversified conglomerates. Finally, we argue that the rise of the Graduate School of Business at the University of Chicago from the 1960s onwards marks the decisive ascendancy of economics, and particularly financial economics, in business education over the other behavioral disciplines, as well as the decisive ascendancy of business schools as producers of economic knowledge. By following teacher-student networks, we also document the key role of business schools in diffusing "Chicago-style" economic approaches—offering support for anti-regulatory approaches and popularizing narrowly financial understandings of the firm (Fligstein 1990, 2002)—that sociologists have described as characteristic of the modern neo-liberal regime.