TSElosophers meeting on 04.05.2018, Katja Einola, Kari Lukka, Jonathan Mumford, Eriikka Paavilainen-Mäntymäki, Otto Rosendahl, Milla Wirén

“Economics Language and Assumptions: How Theories Can Become Self-Fulfilling”, Ferraro, Pfeffer, Sutton 2005, AMR

“Social Reality, the Boundaries of Self-Fulfilling Prophecy, and Economics”, Felin and Foss 2009, Org Science

“How and Why Theories Matter: A Comment on Felin and Foss (2009)”, Ferraro, Pfeffer, Sutton 2009, Org Science

“Performativity of Theory, Arbitrary Conventions, and Possible Worlds: A Reality Check”, Felin and Foss 2009, Org Science

This time the TSElosophers read four articles discussing the issue of performativity of theories from two philosophically different vantages. As such, the quartet of articles provided not only ample insights into the issue itself, but highlighted also the impact and importance of the underpinnings we ground our thinking on, and the lenses through which we view whatever it is we’re thinking about.

To begin with, in their 2005 article, Ferraro, Pfeffer and Sutton (hereafter FPS) addressed the potential embedded in even (by some definition) false theories to shape the external world in ways that make the theories self-fulfilling prophesies; the performativity of the theories. The focus was especially on the impact of economic theories (and their underlying assumptions) on the subsequently emerging behavior of the economic agents because of the society shaping (political) power that economics currently wields. As an example, they discuss how Black-Scholes formula for predicting stock prices that economics developed in the 1970’s, only started working properly after the practitioners started using the Black-Scholes formula as a rule of thumb in their daily trading operations.

Ultimately, FPS identify three mechanisms to make performativity happen: institutional design, norms and language. In essence, they question to what extent people have become the agents described by the economic theories because of the performativity of those theories. And furthermore, to what extent is it the responsibility of us scholars to fashion and frame our theories in a way that promotes a constructive form of practitioner reflectivity – rather than for example simplistically reducing the historically multifaceted (e.g. Adam Smith, Theory of Moral Sentiments) concept of self-interest to its dimensions that promote human selfishness to an unruly degree?

The first article by Felin and Foss (hereafter FF) engaged the FPS article in a debate from the perspective of economists: firstly they stated that as the more sociologically oriented organization theorists and economists seldom discuss in the same arena, it is pertinent to raise to the defense of the validity of economics. Secondly, and more poignantly, they pointed out that it is necessary to explore the boundary conditions of when can (and do) the theories become performative, and suggested that only the theories that are more “true” can become such. The main example here was hyperrationality: as one strawman of economic theories posits that humans are self-interest seeking and hyperrational, the reason why the first can be perceived as performative is because it’s possible, whereas becoming hyperrational is impossible – no performativity can change that. Overall, FF insist for a ‘reality check’ for performativity arguments.

In the ensuing retort by FPS, they addressed the weaker arguments of FF through enlisting a plethora of sociological and philosophical performativity discussions, in addition to picking apart the example of incentives introduced by FF: turned out that the application of incentives in the firm in question had actually resulted in less than ideal performance. Subsequently, in the final response of FF, they outright addressed the different philosophical underpinnings of FPS, blaming them for the sin of being on the wrong side of the realist-constructionist debate, and as such undermining the whole validity of science as an endeavor to uncover extant realities.

This final sentiment in the last paper by FF recapitulated the underlying tensions of the discussion aptly: if science is indeed about following the correspondence theory of truth, with the assumption of there being a stable reality with scientific progress approached (the viewpoint of FF), taking into account the ability of the humans to reflect and by reflection change their actions constituting the reality (in contrast with the objects of the natural sciences lacking the ability to reflect and by reflection change) does threaten the assumption of the stability of the underlying (social) reality. On the other hand, focusing only on the agentic powers of the individuals and collectives to construct and shape the social reality (for example by performative theories, as FPS suggest), the correspondence theory of truth is hard to apply, as there simply isn’t a stable reality to which a theory could correspond. The question that FF then ask is, does this mean that anything goes, are there no solid boundaries for our theorizing? To sum, the debate captured a fundamental arguing point is social sciences: are there solid underlying realities that shape and bind the social reality, or are all perceivable social realities just about the phenomenologically flowing chaos we at times structure through language, the actions of the individual agents and collectively emergent social forces and practices?

This series of articles struck a resonating chord in the TSElosophers, as one of the enduring streams of our conversations has been the need to embrace the potential of both realist and constructionist approaches. We see value in understanding the power of social construction and in assessing the potential existence of something somehow definable as “real” – expressed in the call for approaches where moderate constructionism meets moderate realism, heeded with pragmatism in accounting and international relations, and with critical realism in international business and information systems, to name few examples. In regards to the four papers, we deemed it valuable to both acknowledge the performative potential of theories, especially as accompanied with a sense of societal responsibility, and to critically analyze the boundary conditions that define that potential. Why and how do some theories realize that potential of performativity?

However, while both sets of viewpoints and resulting views were eloquently expressed in the papers, we lamented the fact that both approaches were too firmly entrenched in the opposing philosophical trenches – like in the famous ‘Science Wars’ of the 1990s – to actually enable the debate to rise above the battle field in a joint effort of solving the puzzle of performativity. We thought that the four articles highlighted the issue of performativity from several angles, and that without the underlying battle field, the joint effort of these brilliant minds could have resulted in a genuinely relevant understanding of the focal questions about the boundary conditions, potential scope, and mechanisms of performativity. As things now stood, the need of the authors to stand their respective philosophical grounds dominated with the result of select insightful seeds meticulously sown but not cultivated to bear fruit.

Maybe we in TSElosophers should nurture these seedlings further…?