How Harvard Flunked Economics

IF YOU WANT TO KNOW WHY THE U.S. ECONOMY IS A MESS, LOOK TO THE HARVARD BUSINESS SCHOOL AND ITS ARMY OF CRAVEN MBAS.

- Duff McDonald

In the aftermath of the 2008 financial crisis, much of the country was enraged because not a single Wall Street hotshot—the guys who got us into the mess—was prosecuted.

While there are many financiers who could have been made to take the perp walk, there’s also a case to be made that the fault lies with those who laid the intellectual foundation upon which a market-driven financial crisis could happen in the first place.

That brings us to Michael Jensen, a tenured finance professor at Harvard Business School, where he has spent the bulk of his career. Few still believe in the message he sold everyone on in the 1980s—not even at HBS—but the damage is done, and his legacy is an ugly one. So why does he still have a job? He has tenure, for starters, but the other reason is that when Harvard Business School talks about making the world a better place, it’s just posturing. What it’s about is making money. And in the 1980s, Jensen brought the school a lot of money and (for a few years) intellectual credibility. But that’s getting ahead of the story.