Capitalism and Society, Volume 12, Issue 1

Putting Integrity Into Finance: A Purely Positive Approach” by Werner Erhard and Michael C. Jensen Ph.D. Published by Columbia University’s Center On Capitalism and Society in their Journal: Capitalism and Society, Volume 12, Issue 1.

ABSTRACT: The seemingly never-ending scandals in the world of finance, accompanied by their damaging effects on value and human welfare, make a strong case for an addition to the current paradigm of financial economics. We summarize here our new theory of integrity that reveals integrity as a purely positive phenomenon with no normative aspects whatsoever. Adding integrity as a positive phenomenon to the paradigm of financial economics provides actionable access (rather than mere explanation with no access) to the source of the behavior that has resulted in those damaging effects on value and human welfare, thereby significantly reducing that behavior. More generally we argue that this addition to the paradigm of financial economics will create significant increases in economic efficiency, productivity, and aggregate human welfare. Because integrity has generally been treated as a virtue (a normative phenomenon) the actual cause of the damaging effects of out-of-integrity behavior are hidden, resulting in assigning false causes to those effects. This keeps the actual source of these damaging effects invisible to us. As a result, in spite of all the attempts to police the false causes of these damaging effects, the out-of integrity actions that are the source of these effects continue to be repeated. This new model of integrity makes the actual source of the damage available for all to see, and therefore to act on. Integrity as we define it (or the lack thereof) on the part of individuals or organizations has enormous economic implications for value, productivity, and quality of life. Indeed, integrity is a factor of production as important as labor, capital, and technology. Without a clear, concise, and most importantly, an actionable definition of integrity, economics, finance and management are far less powerful than they can be.


Erhard, Werner and Jensen, Michael C., Putting Integrity Into Finance: A Purely Positive Approach (2017). Capitalism and Society, Vol. 12 [2017], Iss. 1, Art. 1.

Financial Times on Werner Erhard and Michael Jensen

FINANCIAL TIMES, April 28, 2012

Excerpts from: The only way is ethics: Andrew Hill on where Erhard and Jensen are coming from

“Werner Erhard and Michael Jensen look an unlikely pairing but their leadership teaching fits into a broad stream of business education and research about ethics and integrity. ”

“In ‘A Positive Theory of the Normative Virtues’, the draft introduction to their forthcoming book, they write that their desire to confront their own “personal contributions to the mess generated by out-of-integrity behaviour” was one trigger for their research. But it was the Enron scandal of 2001 that prompted business schools to refocus attention on this area. The financial crisis of 2008-2009 gave this effort new impetus, as management schools realised they had to bear some responsibility for the bad corporate behavior of their alumni. ”

“Jensen and Erhard’s latest work shifts the emphasis away from external incentives and structures to leaders’ internal motivation, encouraging self-examination and personal action. Whatever the strengths and weaknesses of this approach, managers seem to have an appetite for it. Another eminent Harvard professor, Clay Christensen – one of whose HBS classmates was the disgraced Enron chief executive Jeff Skilling – is about to publish a book, How Will You Measure Your Life?, offering advice on how to build a successful life and career that avoids ethical compromise. The 2010 Harvard Business Review article on which it is based is one of the best-read in the journal’s history.”

Andrew Hill is the FT’s management editor

Werner Erhard and Michael Jensen’s book on integrity is forthcoming from Cambridge University Press

Read the full article in the Financial Times