Practical wisdom and understanding the economy

Purpose - This paper aims to look at the development of economic theory into what Aristotle called a "theoretical science" and the subsequent rejection of practical wisdom. Since business education is largely based on economic theory, this has an effect on management and other business disciplines. Design/methodology/approach - This paper examines how the philosophical preconceptions that underlie economic theory greatly influence the development of economic theory and policy. The approach is to use the history of economic ideas to get a deeper understanding of current economic ideas and issues. Findings - The paper finds that the attempt to turn economics into a hard science forced economists to adopt an overly narrow view of the human person, to exclude ethics from their analysis and to ignore historical and social context; that is the real economy. Following this research agenda turned economics into a mere defense of laissez-faire ideology, and led to the promotion of economic policies that are harmful to society, such as the deregulation of the financial services industry in the 1990s that set the stage for the financial meltdown and economic crisis of 2008. Practical implications - The paper shows that economic theory that excludes ethics, and takes an overly narrow view of the human person, weakens the effectiveness of economic analysis. Including ethics and a more valid philosophical anthropology leads to better analysis and policy. Social implications - A more realistic and ethically grounded economic analysis will have a great effect on society for it will take away the common argument that ethical considerations need to be ignored in economic analysis and policy. Originality/value - The paper's originality is in using the insights of the Catholic social thought tradition, specifically its view of the human person, to promote a broader approach to economics. [ABSTRACT FROM AUTHOR]; Copyright of Journal of Management Development is the property of Emerald Group Publishing Limited and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)