Barbarians at the gate: a critical appraisal of the influence of economics on the field and practice of HRM

• Date: 01 November 2013
• DOI: http://doi.org/10.1111/j.1748-8583.2012.00199.x
• Published date: 01 November 2013

Barbarians at the gate: a critical appraisal of the

influence of economics on the field and practice

of HRM

David A. Spencer, Economics Division, Leeds University Business School,

The University of Leeds

Human Resource Management Journal, Vol 23, no 4, 2013, pages 346–359

This article considers the influence of economics on the field and practice of HRM. Modern innovations,

such as transaction cost economics and personnel economics, have enabled mainstream economists to

encamp on the terrain of HRM and neighbouring fields. The article will contend that these perspectives

incorporate certain ‘myths’ about key HRM issues and will argue against their transplantation into the

study of HRM. The claim made by some critics that the language and assumptions of economics

contribute to ‘bad HRM’ practices in the real world will also be critically assessed. It will be argued that

modern economic theories of HRM reflect reality rather more than they create it, and that their support

for a narrow and regressive form of HRM is, to some extent, in keeping with the actual reality of many

organisations in which unequal power and conflict remain ever-present (if sometimes under the surface).

Contact: Dr David A. Spencer, Economics Division, Leeds University Business School,

Keyworth Building, The University of Leeds, Leeds LS2 9JT, UK. Email: das@lubs.leeds.ac.ukhrmj_

346..359

INTRODUCTION

This article considers the influence of economics on the field and practice of HRM. The

mainstream economics literature up until the 1970s had relatively little to say on the

topics of work and the employment relationship; its incorporation of certain key ideas

and assumptions, including those of perfect information and perfect rationality, made it

ill-equipped to study these topics in any serious way. In the last few decades, however, there

has been an upsurge in economics research on HRM issues. Innovations such as transaction cost

economics (Williamson, 1975, 1985) and personnel economics (Lazear, 1998; Lazear and Shaw,

2007), in particular, have enabled mainstream economists to encamp on the terrain of HRM and

neighbouring fields. Since the 1990s, research in behavioural and experimental economics has

also yielded new perspectives on issues such as fairness norms and respect at work (e.g.

Ellingsen and Johannesson, 2007; Fehr and Goette, 2007), and has led to a broadening in

economics research on HRM.

The modern economics of HRM is claimed by some of its leading proponents to remedy

alleged shortcomings in existing research in the field of HRM, and to offer a basis for new kinds

of multidisciplinary research on issues concerned with the management of human resources. In

a particularly strident defence of ‘economic imperialism’, Lazear (2000b) has called for the

study of HRM to be subsumed into personnel economics. He opines, in rather bold and

abrasive terms, that:

“human resource executives are often regarded as the lowest form of managerial

life. The same has been true of those academics who study human resources. There

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doi: 10.1111/j.1748-8583.2012.00199.x

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 23 NO 4, 2013346

© 2012 John Wiley & Sons Ltd.

Please cite this article in press as: Spencer, D.A. (2013) ‘Barbarians at the gate: a critical appraisal of the influence of economics on the field and

practice of HRM’. Human Resource Management Journal 23: 4, 346–359.