Philosophy of Science 5

Ghoshal article

- The negative image of economic theory and agency theory combined with the pretence of absolute knowledge in management (incl. positivism and determinism) creates economic failures
- people use scientific models to understand business. However models that are developed for specific situations might not be generally applicable. We study human choice which is not rational.
- Negative assumptions that managers are self serving make managers validate this theory due to self fulfilling prophecy.

Two theories on negative image of mankind

1. Economic theory: assumes that people make rational choices and are selfish
2. Agency theory: making decisions and taking responsibility are separated tasks

Determinism

Implicit model of natural sciences. If we know all laws of nature and the initial conditions that apply at beginning of time then everything that will follow is perfectly predictable. Everything is determined and choice don't matter.

Positivism

the view that science should be conducted by examining the facts and that all scientific theories should be based on fact alone

types of science

natural sciences
- of inorganic matter can be explained following a causal explanation eg physics
- of organic matter can explained following causal and functional explanation eg biology
humanities
- social sciences can be explained following intentional explanation but may also be explained by causal and functional explanation eg management
- aesthetic fields can't be explained following a specific mode eg arts

Causality

Explaining an outcome Y in terms of the necessary and/or sufficient conditions (X) for Y to take place. Causality has a strong connection with determinism. Determinism is the ontology of natural sciences and underlies the idea of causal explanation. Very powerful but constrained.

Counterfactual understanding of causation

Dominant view in the social sciences. An outcome Y is caused by X, if and only if when X occurs Y would also occur. Lab experiments operationalise this in behavioural research: One group subject to the experiment and the other is a control group with a randomisation process. Group must be similar in all ways except for the variable being measured.

Ontology

a theory about reality and the world.

Epistimology

the theory of knowledge and how we can get knowledge that is reliable and causal from reality. How should people study reality?
Types of epistemology:
- positivism: we should study reality by only examining the facts. It has a theory to world direction of fit. Scientific knowledge is based on observation which needs to be interpreted through logic and reason.
- normativism: justify the world as it ought to be. World to theory direction fit (you try to change the world, not your opinionated theories)

Social reality

Some things exist because we think they exist eg markets and profits or because they originated by men eg organisations. This includes self fulfilling prophesies and double hermeneutics (start behaving as if assumptions are true which makes them true). While laws of physics are stable and hardly change, laws or assumptions of business theory can change because of mens actions

Can organisations really act?

Attribute behaviour to the firms even though its people inside the firm that make it act. In US, corporate criminal liability exists. Thus, corporation is treated as a human being in front of the law.

Types of explanation

- causal explanation
- intentional explanation
- functional explanation

causal explanation

multiple causes determine the outcomes so causal explanation is linked to determinism.

intentional explanation

behaviour is explained by intentions and a certain state of mind

functional explanation

things are explained by their consequences and functions

functional vs causal explanation

We tend to explain things with a functional explanation but it could turn the order of causality upside down.
example: giraffes have a long neck in order to have a higher chance of survival (functional), because giraffe has a long neck he is able to live longer (causal)

ideal of positive science

Can science be based on facts alone? (epistemological question)

logical positivism

afterWW1, logical positivists believed that science could lead the way out of misery and be the building blocks of society. Ban all religions and metaphysics from social reality that could not be proven by facts

metaphysics

belief that there is some deeper reality behind what we see. Abstract theory with no base on reality.

three grand theories of knowledge (logical positivism)

- rationalism
- empiricism
- idealism

rationalism

assumes that knowledge does not need observations. Thinking determines what knowledge is because observations are non reliable.
Limited by the fact that wrong assumptions/premises will lead to wrong outcomes

empiricism

knowledge comes from observation or experience.
Limited by the fact that not everything can be observed. Problem of induction: we cannot generalise from a couple sets of observation. Empiricism is against determinism because it assumes people have their own will and their actions are not already determined.

idealism

knowledge comes from thinking and observations, with focus on observations. Need theories to organise observations so observations will end up in knowledge. Idealism is very metaphysical (theory of what reality is like independent of what we can observe).

mathematical language

in general having a mathematica language is useful as it makes communication easier since it is universally accepted and efficient.

linguistic turn

assumes that logic is an objective way to organise observations non-metaphysically. Focuses on relationship between logic and reality

language

- truth is a property of language that we create to describe reality, without humans true and false wouldn't exist. Sentences can be by definition true or untrue. When you rule out all logical nonsense and metaphysics the set of possible statements in a language is left (synthetic and analytic statements)

logical nonsense

eg a married bachelor is a contraction in itself because a bachelor by definition is unmarried

logical truth

the circle is round; this is true because in its definition a circle is round

synthetic statement

statements to describe our observations. Empirical truth; truth of a statement depends on matters of fact. Method of verification is observation. eg the circle has a 10 meter diameter

analytic statements

logical truth: truth of statement depends on the logical structure of the statement. Method of verification is logical analysis. eg the circle is round.

analytic and synthetic statements, induction and deduction

- people want to put observations into language, therefore it is a synthetic statement (observations are used to describe reality or make laws). Uses induction.
- Analytic statement uses definition to describe an object. Uses deduction as we use law to describe and then observe.

Parsimony

=describe with the fewest number of symbols. All observations are converted to sophisticated statements through the elaboration of model or theories and used to describe the world we live in.

The unity of science ideal

The vision that all sciences are unified together in a single system. All statements subject to one system requirement and deduce all other statements from this core. All knowledge based on same consideration. Everything can be derived from knowledge except for logic. every discipline brings observations while knowledge is needed to organise them.

Criticism of logical positivism

- theoretical concepts: concepts that remain invisible and can't be reduced to observations (e.g. force). Theoretical concepts are allowed in a system of knowledge is they lead to new knowledge or explain something in facts that is not apparent by observation alone (pragmatic concession)
- dispositional concepts: concepts that refer to latent attitudes of something. dispositional concepts are only applicable under conditions when latent attributes become manifest and observable
- problem of induction

latent attitudes

statements that are true for something but cannot always be observed (only under certain conditions) e.g. flexibility, don't know if something is flexible until we manipulate it.

deduction

- when a theory is applied to a certain observation. e.g. all ravens are black, X is a raven, X is black.
- new information cannot change the truth value. conclusion is given once the premise are given, we assume the premises to be true regardless of observation moment and conclusion is reached through logical arguments. New information should be incorporated in the knowledge in order to change the conclusion. Only known info can determine the conclusion.

induction

- when a theory is derived after multiple observations. We see something many times and therefore conclude that is the case for all things. e.g. Raven 1 is black, raven 2 is black, raven n is black, all ravens are black.
- new information can change the truth value. New info will be added to the other observations. There is never a full certainty but probabilities can be determined

empirical extension

set of all real life phenomena a concept refers to

theoretical intension

general properties that define a concept

adjustments to logical positivism

- allow theoretical and dispositional concepts but make distinction between theoretical and observational language in the system of knowledge
- allow induction but make distinction between statements that are true and statements that are likely to be true

the empirical cycle

induction is never fully certain because we cannot observe all possible cases. We can determine the theoretical and observational language in the cycle. We can also determine truth and truth likeliness. truth is in the observations part because they are in itself true. However as they are elaborated and generalised it becomes only truth likeliness.

critical rationalism (Popper)

a reaction to logical positivism. Problems in logical positivism were too fundamental for adjustments so he created new model of science. Model is also applied beyond science.

Problems of standard view with adjustments in critical rationalism

- observational language cannot be theory independent: Observation is always infected by theory because concepts in our mind somehow affect observations. Observations can take place only once there is an idea of the phenomenon being observed. Thus search light theories help by determining what we see and what we are looking for.
- problem of induction has not been solved at all. The degree of confirmation will approach 0 since all possible cases of X is an infinite number: Degree of confirmation=Number of observed cases X/All possible cases X.
- striving for the highest truth likeliness will lead to undesirable results, thus we end up with statements that tell us nothing. We should strive for very unlikely statements

search light theories

theories that infect our observations. Indicate us what to look for.

Problem of induction

The more you say about reality the less likely it is to be true. The less you say about reality, the more likely it is to be true but this tells you nothing. Induction is wrong as a matter of principle because you cannot infer conclusion when all possible cases haven't been observed. However, we can say something about the falsity of general laws about X based on observed cases of X. Popper said we should falsify things we tend to believe.

elements in critical rationalism

- rationalism element: develop theories that say as much as possible about reality (max empirical content.
- critical element: we should empirically test through falsification

The open society and its enemies (Popper)

views with high empirical content are dangerous and can lead to totalitarianism. In totalitarianism people are not willing to adjust their visions as they neglect counter evidence. Thus people should have an open society which evolves on trial and error basis

Khan's theory of paradigms

Science is not philosophy as scientist don't immediately dispose of a theory. If they know theory is false or has limitations they still hold on until they find something better. Knowing something is better than knowing nothing. Science has evolutionary aspect and punctuated equilibrium.

punctuated equilibrium

when species develop over time until a rapid change when the process must start all over again.

Origin of school of thought

beginning of research, scientists collect data and facts without any attempt of building theory. At some point theory is developed and helps make new predictions making school of thought. Schools of thought answer different questions in a radical different way. Schools of thought emerge until one of those schools of thought finds something important that proves what they believe. Other scientists die out in old schools of thought or switch to a proved school of thought. Different schools of thought co-exist until one of them has a major achievement (exemplar) and becomes dominant.

Paradigm

Winning school of thought. Characteristics of paradigm:
- symbolic generalisations: concepts that translate observations into reality e.g. definitions inflation
- exemplars: discoveries that make a theory very famous. Create authority for theory and examples of how to correctly apply it
- scientific values: the social institutional dimension of the paradigm. Determine what is good research. Human value comes in.
- methodological prescriptions: think about rule of science before doing science.

Paradigms continue being dominant until an anomaly (something that doesnt make sense from the perspective of the paradigm). Paradigm is not discarded right away (as popper would). Just a difficult puzzle piece which will fit into theory after thinking.

scientific crises

when there are too many anomalies. people come up with new schools of thought to explain them leading to new paradigm which will come across more anomaly. Thus scientific revolutions replace old theories with new ones.

Kuhn: 2 types of science that existed through history

1. Normal science: scientists always try to make new discoveries that contribute to theory. Science within the constraints of a paradigm. Steady cumulative growth of knowledge
2. Revolutionary science: Change in paradigms. Revolutionary growth of knowledge

Kuhn vs Popper

- Kuhn describes how things happen as a matter of fact, positive theory. This theory can change.
- Popper describes what we should be doing, "normative theory". Theory does not change.

Quine

- there is no fundamental difference between analytical and synthetic sentences. It is impossible to test individual sentences as we test them according to a whole system of sentences (theory or language).
- every sentence (also analytical) can be given up if there is a conflict between theory and observation but not until we have ruled all other sentences out.
- which sentences you give up in case of falsification is a pragmatic matter

Duhem

when testing a hypothesis, background info is also needed e.g. searchlight theories. When hypothesis is falsified we should determine if it is really the hypothesis that is falsified or background info, thus we test a whole system of hypothesis. When there is conflict between theory and hypothesis we don't know which one is false

Conflict between theory and observation solution

Proposition 1: the definition is false- we protect the observation and discard the theory
proposition 2: the observation is an error (we were not observing correctly)
- pragmatic considerations help determine what solution to choose
- by definition we protect the theory by insisting on definitions

theories of truth

- correspondence theory of truth: assumes that statement is true when it corresponds to reality/observations.
- coherence theory of truth: statement is true when it is consistent with other statements we hold true
- consensus theory of truth: statement is true if we all agree on it
- pragmatic theory of truth: statement is true because it is important to us. Truth is a convenient assumption. Assume something is true until proven opposite.

Summary of ideal of positive science

- main question: can there be science based on observation and logic alone (logical positivism)
- NO, because of theory and induction
- can we solve problems by making adjustments to the model?
Popper: no, we can never confirm theory because we can't prove all cases but we can falsify
kuhn, quine, duhem: we cannot even falsify theory as we can always give up observation to make theory true. We don't give up on theory unless we have a better one (pragmatism)
conclusion: there will always be a theory that can neither be verified nor falsified: meta theory. there cannot be a theory based on facts alone. We should take observations seriously

meta-theory

a theory that has other theories as its subject. Highest level of theory and recently take form of taxonomies

taxonomies

classifications of concepts. Include underlying principles of such classification that allow us to differentiate between alternate explanatory strategies. Allow us to do comparative exercise.

objectives of metatheory

- identify the schools of thought theories
- unveil underlying assumptions of theories by comparing them
- create linkages between theories and their political, sociocultural and historical context

two main metatheoretical questions (ontological)

e.g. What is the nature of social reality?, Is social reality a social construction?
Unit of analysis: is social reality individualist or social holist in nature?
- Individualism: causal accounts of phenomena are linked to actions of individuals. Doesnt allow for trait based difference between individuals. Behavioural differences explained by situations.
- social holism/collectivism: social systems should be seen as wholes rather than collective parts. Created by interactions between individuals. Focus on emergent properties.

two main metatheoretical questions (epistemological)

How should we research social reality?, Should and can science be valued neutral? Determine whether the issue needs explaining or understanding:
- explaining: hypothesis that describes facts in a way that clarifies the antecedents, context and consequence of the fact. Aims to discover laws that generalise towards related situations.
- understanding: appreciation for parts of knowledge about social reality. Aim to develop deep appreciation for unique situations (not about generalising). Created through interpretation of social relations.

Meta-theoretical perspectives

- social systems and functions (holism, explaining)
- rational choice (individualism, explaining)
- social meaning (holism, understanding)
- hermeneutics (individualism, understanding)

Theory of resource partitioning article by Carol&Swaminathan

- in many industries where there is conspicuous consumption e.g. fashion, consumer demand is heterogeneous
- industries are not immune to economies of scale which leads to much power in the hands of generalists
- resources are freed for specialist producers who want to identify themselves
- this leads to partitioning of the market across generalists and specialists
When there is market concentration, dissatisfied customers will search for different products by special producers

- article is social holist because actors are heterogeneous. Explanation found in interactions. Properties are emergent.
- aims for explanation because it develops propositions to describe antecedents. Aims for generalisation towards other industries.

Theory of resource partitioning is metatheoretical perspective: social systems and functions

social systems and functional explanations

- a functional explanation is a form of explanation in which a property of the social system is explained based on its function

two common explanatory errors

- reverse causality (endogeneity): you should look at causal relationships in both ways
- Omitted variable bias: we only focus on one variable and neglect the others. Model specification error: as we see Y as dependant on X we do not consider that both Y and X could have been caused by another factor Z

functional explanation

look at how a lower order part of the system fits within the lager whole of the higher order. Explanans->explandum. A functional explanation is only accepted when there is a causal feedback mechanism (feedback loops)
functional explanations only work in wider systems
example: to meet the demand for beer (function in social system) there will be a craft brewery movement (phenomenon to be explained)
- additional preconditions are added as the existence and influence of some kind of regulative system is assumed to be present. System operates in some higher order regulative system (e.g. industry)

mis-specifying directionality

when cause and effect are confused because it could be the other way around

3 issues with functional explanation

- functional explanations confuse cause and effect leading to wicked disjunction: when causal mechanism is identified that connects explanandum with explanans, functional explanation becomes redundant. When no causal mechanism is identified to connect them, functional explanation becomes invalid
- functional explanations assume that higher order social systems exist and influence the mechanism: ontological issue as we don't know if these social systems really exist. What kind of empirical evidence do we need?
- functional explanations see the explanans (that which is necessary for some higher order affairs) as a necessary condition: there may still be some functional equivalents (problem of induction). In management science equifinality (configurational approach) is a better assumption

functional explanation in management (economic theories)

- general equilibrium theory
- transaction cost theory
- property rights theory

functional explanation in management (organisational)

- functionalist sociology
- structural contingency theory
- resource dependance theory

summary of social systems and functional explanation

- functional explanation can be used at holistic, not at individualistic level because they only work at a system level including feedback- functional explanations should be part of a broader search
- functional explanation only useful in developing causal theory

Rational choice theory

the rational choices of individual agents explain their behaviour. Meta-theory that encompasses agency theory and game theory

3 assumptions of rational choice theory

- explanations should always start from the choices of individual choices: methodological individualism
- agents are perfectly rational
- agents are fully self interested

rational choice theory assumption: methodological individualism

- ontological individualism: assumes that only individual agents really exist, not social phenomena. Social phenomena are only the sum of actions of individuals
- methodological individualism: social phenomena (e.g. rules) do really exist but need to be explained by the actions of individuals. Social phenomena are somewhat tangible.

rational choice theory assumption: rational agents

- rational agents have complete referencing oder allowing for transitivity property. Have all info. Perfectly function in costless way, comparing all choices.
- two forms of rationality:
Parametric rationality: assumes choices of others are known in advance and that we can make decisions given a fixed set of conditions. There are some parameters when we make decision.
Strategic rationality: individual takes other pals rational choice into account who take individuals rational choice into account and try to anticipate these actions. Form of interdependent decision making. Moving targets (targets that shift under pressure of competition) are dealt with.

rational choice theory assumption: self interest

- agents maximise their own welfare. Welfare of other is is only relevant if its good forget.
- rational choice theories differ in terms of the extent of opportunism that agents are expected to demonstrate

agency theory

-about the fault lines that can arise from human cooperation.

agency relationship

a separation between decision making (by the agent) and being exposed to consequences of these decisions (the principle). Exist because of: formal delegation (legal mandate) and de facto delegation (information asymmetry.

agency problems

- metering problem: difficult to measure how hard the agent will work
- adverse selection: by controlling agent he can be pushed to do unwanted things
- moral hazard: the risk that an agent no longer works that hard after she is officially hired
- holdup: agents get resources but not willing to return them

agency costs

- monitoring costs: borne by principal
- bonding costs: borne by agent
- incentivising costs: borne by principal
- residual loss: borne by principal
Goal: minimise agency costs because they are deadweight in welfare

problems with agency theory

- if managers are selfish mofos the oil of corporate design is to contain managerial opportunism however it can make managers overly selfish
- double hermeneutics: act the way they are assumed to behave

agency theory as rational choice

- do not pay attention to character differences across CEOs
- assumed that CEOs are rational
- differences are explained with reference to situational factors

game theory

- explaining behaviours of individuals from interdependent rational choices.
- design institutions to prevent suboptimal outcome, must coordinate for best outcome
- strategic rationality is assumed
- coordination and motivational problems with and without conflicts of interest

payoff matrix

- key instrument in game theory which allows to gain perspective on interactive decision making
- defines the structure of a strategic interaction between 2 players

4 characteristics of game theory

- action is a reaction: decisions influence each other
- only partial control: actors are interdependent
- gain seekers: seek to improve your own
- empathy: necessary to force moves affecting you

game theory in business

- understand conflict and cooperate
- weigh the risk
- gain bargaining power
- use info in strategic way
- design contracts and incentives

game theory as rational choice

- individualistic because don't pay attention to differences, rational, outcomes explained by rational behaviour
- explaining because aims to describe outcomes and identify laws that could be generalised

problems with rational choice theory

- false behaviour assumptions: don't hold in real life since agents aren't rational
- risk of self fulfilling prophesy (double hermeneutic). People will act more selfish if we treat them like that. Caused by selection and adjustment effects
- does injustice to complexity of human behaviour
- can social reality be reduced to individual behaviours?

social meaning theory

larger cultural practices and symbols at the societal level and their effect on human actions

ontological position in social meaning theory

social holism/collectivism: social systems are not a simple combo of different parts but rather viewed as whole. Existence of emergent properties.
Social norms can only be changed through collective action

epistemological position of social meaning theory

understanding: appreciation of specific categories of knowledge. Not about finding general laws. Principles are contextual and unique.

why do we tip?

- appreciation
- redistribution
- avoid agency problem (ensure good treatment)
- social expectation: avoid social costs
ultimately, tipping is a meaningful action which become meaningful against the background of social norms

4 characteristics of meaning

- meaning is socially given and thus exogenous
- can never be purely subjective. social norms are shared meanings constructed by group of people that interact with each other (intersubjective)
- meaning derives from interpretation of acts
- there is a difference between hermeneutics which focuses on how individuals interpret norms and social meaning theory which focuses on origin and change of these norms

social construction of meaning: social norms derive from various processes

1. externalisation: societal groups form mental representations of each others behaviours resulting in expectation about others actions
2. objectivation: behaviours become habituated into reciprocal roles. Norms get incorporated into social reality- norms become objectives. Various roles are connected to that social norm
3. internalisation: these roles are made available and can be taken on by others in society

socialisation

the process of learning roles and norms.

Types of norms

- primary socialisation: norms that form the basis of all your general knowledge of every category in the social world. Early childhood within core family esp. Norms are unchangeable
- secondary socialisation: norms that are not universal. Specific to certain communities. Happens continuously and builds on primary socialisation

norms

any form of belief or deeply held conviction that guides your behaviour