Chapter 2: Reflecting on Conventional Wisdom: Learning From the Database¹

Over the past decade, socio-economic theory has received significant exposure throughout the United States (Boje & Rosile, 2003a; Buono & Savall, 2007; Conbere & Heorhiadi, 2011; Cummings & Worley, 2014; Gephart, 2013; Sorensen et al., 2010). This work was built it based on the idea that human potential is badly treated (mistreated) by economic and management theories (Savall, 1974, 1979). This research reflects the three basic assumptions of socio-economic theory: the primary place of human potential; the limitations of the classic accounting model; and the criticism of the scientific management of work organizations.

The first assumption comes from the macro-economic theory of the two production factors, in its various versions—classical, which is Marxist in nature, and neo-classical or Keynesian. According to this theory, two factors account for the creation of economic value: capital and labor. However, the work of econometricians dealing with the most developed theory, named the production function (Carré, Dubois, & Malinvaud, 1972; Perroux, 1973), demonstrates that these two quantified factors account for only a small part of economic value. Indeed, the unexplained residual factor accounts for half of the measured value in terms of GDP. The socio-economic theory was built on the belief that this residual factor could be analyzed by assessing the hidden costs and performances, in essence, what the theory of two natural equivalent factors cannot measure. The hidden costs concept allows us to understand why two organizations with the same capitalistic intensity and human resources, in terms of workforce and skills, can have significantly different economic performance, to the point where eventually, one is growing and the other disappears or loses its autonomy.