The Nature of Man Analysis

The Nature of ManMichael C. Jensen and William H. MecklingPublished in 1994Understanding human behaviors and reactions has become essential for both profitable and non-profitable organizations. As the result, scientists, economists and researchers aimed at analyzing the models and concepts of human behavior in order to create theoretical framework for understanding human nature and its role within organizations. Summary Much policy disagreements derive from the substantial differences in the views on human nature including individual strengths, weaknesses, intelligence, honesty, etc. To explain and understand human behavior, scientists and researchers created a wide range of models. Jensen and Meckling in their article argue that the usefulness of such models depend primarily on their ability to explain a wide range of social phenomena. The authors analyze the following alternative models: the Resourceful, Evaluative, Maximizing Model (REMM), Economic (or Money Maximizing) Model, Psychological (or Hierarchy of Needs) Model, Sociological (or Social Victim) Model, and the Political (or Perfect Agent) Model.Having scrutinized major assumptions and postulates of five alternative models thoroughly, the authors concluded that REMM model is the most useful, as it explains systematically rational part of human behaviors. REMM is based on the postulate that individual is always willing to substitute small amount of any good with a larger amount of other good. The authors argue that any person is ready to make trade – offs and as the result, there is no such thing as ‘need’. REMM incorporates the assumptions of other models in order to form a universal concept explaining human behaviors. Thus, for instance, REMM’s assumption that people are resourceful and self – interest maximizers is derived from the economic model, while the assumption that the society imposes costs on individuals for violating social norms is taken from the sociological model. Consequently, REMM summarizes the assumptions and postulates of models explaining human behavior in order to form universal framework explaining human nature. In conclusion, the authors argue that every individual is a resourceful and evaluative maximizer. People use opportunities presented by the environment and as the result, the goal of each organization is to direct individual’s creative energy in way to increase the effectiveness of use of scarce resources. ReferencesJensen, M.C., Meckling, W.H. (1994).The Nature of Man. Journal of Applied Corporate Finance, 7(2), 4 – …