The Socio-Economics of Scandals

George M. Frankfurter
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George M. Frankfurter: Lloyd F. Collette Professor Emeritus, Louisiana State University, Network Professor, Sabanci University, Turkey

Homo Oeconomicus, 2002, vol. 19, 257-267

Abstract: In this paper I argue that downsizing, the equivalent of throwing tens of thousand of workers to the street, and scandals, resulting from unsavory, illegal, and often criminal management practices have similar results as far as society should be concerned. Strangely, however, while the former is rewarded by the stock market, the latter is missed until the offender is pushed to bankruptcy. I use Enron debacle, the biggest bankruptcy in the history of American capitalism (also called free markets), to demonstrate my point. I express my hope that society will learn from the Enron case, but skeptical about the possibility of real reforms.

Date: 2002
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