According to the Aristotelian epistemology, knowledge (gnosis) is gener- ated as a result of human activities and is manifested at three distinct and
yet interconnected levels: thinking (theoria), doing (praxis), and making (poı¨e´sis). In addition, the Aristotelian knowledge trilogy categorizedpraxis in terms of good “eupraxia,” and bad “dyspraxia” usage and manner.
Ancient philosophers argued that good and bad practices have a direct bearing on the organization of activities (polis) and the life and destiny of citizens (politeia). In ancient Greece, knowledge of “making” and knowl- edge “doing” was believed to be an integral part of the rules of public constitution and an essential practice the good governance.
Individual and collective knowledge have an important bearing on the theories and practice of decision-making and collective action. In a posthu- mous article, Ghoshal (2005) underscores the problems encountered in management research, teaching and practice. Ghoshal’s diatribe against fal- lacious management theories points to postpositivist age ideologies, most of which have permeated the management and economic corpus. In review- ing mainstream economic theories, Ghoshal challenges the claim that theories are intrinsically “value-neutral” but increasingly permeated by ideological discourses that extol economic performance and praise the shareholder value. Ideologies are value-impregnated beliefs that contain biases and propagate dogmas and as such, seek to magnify certain dis- courses and conceal certain facts about performance, efficiency, expediency, transparency, fitness, and ethics. Corporate scandals that led to the demise of Enron, Tyco, and Arthur Andersen have resulted from an analogous ideological pattern. Corporate executives are all too often busy with the economic imperatives and consequently pay little attention to adverse social effects that their decisions are likely to engender.
Ghoshal pinpoints the ambivalence of certain theories: “theories are valid because of their explanatory and predictive power, irrespective of how absurd the assumptions may look from the perspective of common sense”
(Ghoshal, 2005, p. 76). Consider the “Efficient Market Theorem” postulate (Jensen, 1978) which posits that the existence of information of an asset’s current price provides the best estimate of its future price. One should be reminded that in the absence of symmetrical information, the strong, semi- strong, and weak hypotheses formulated by Fama’s statistical tests can only hold under specific subsets of available information (Fama, 1970, pp. 413416). In other words, theories cannot establish the accuracy of the predictions they are supposed to verify in the first place. Another example can be provided by different economics and management theories that are taught in business schools. A performative conception of science (Callon, 1998, 2006;Callon & Muniesa, 2005) posits that scientific devices used to study the world transform the world in a way that can validate these 9 Society at the Crossroads: The Path to a Sustainable Economy
devices and the theories that underpin them. For instance, numerous finan- cial algorithms that are developed to optimize investment portfolios under different market information assumptions are considered as performative devices. Similarly, the use of Black and Scholes equation for forecasting options prices and hedging against call and put price fluctuations constitu- tes a performative mechanism that is supposed to eliminate financial risks altogether. In the day-to-day practice of financial intermediaries and busi- ness practitioners, the Black and Scholes formula has a concrete interpreta- tion in accordance with a stochastic random process that evolves over time (Hull, 2008). In contrast to a fair game assumption, most investment strate- gies exhibit a pattern of behavior based on the presumption that future returns can be predicted by knowledge of past events.
The reflection on performativity cannot be dissociated from the study of management as an actionable discipline. The use of optimization tech- niques has been widely commented in both academic and professional circles. Faulhaber and Baumol (1988) affirm that most of the ideas debated in academia and beyond have “emerged from analyses based on the premise of optimizing behavior in what was intended as descriptive the- ory” (Faulhaber & Baumol, 1988, p. 578). In some cases, economists were instrumental in providing the invention formula, while in some other circumstances their role was limited to either providing an optimality formula or as disseminators of ideas put forward by others. Friedman’s (1962) assertion that economic theory is “an engine to analyze” is a proclamation of the fact that not the theory and its assumptions per se but the testing of its implications matters the most. The predictive power of a theory, its expediency and practicability cannot be dissociated from its constitutive assumptions and ontological foundations. The central epistemological query in management teaching and research, that of
“common sense” and “truth,” is often viewed as transient and extraneous to the practice of management. The question of pedagogy and impact of management research on management education and practice has been widely debated in academia (Ghoshal, 2005;Ghoshal, Batlett, & Moran, 1999; Pfeffer & Fong, 2002; Porter & McKibbin, 1988). In particular,
“truth” and “action” dichotomy calls for an extension of management epistemology rejecting fallacies and dogmas and integrating ethics of action as its central research foci. The question of managerial decision and performance needs to be placed within the broad canvas of collective actions with an emphasis on experiments that explore and engender alternative forms of management. Hatchuel (2005) explores different modes of collective action in management “not as a closed repertoire of
organizational forms and rationalities but as an expandable field where criti- cisms and research allow for revision and invention” (Hatchuel, 2005, p. 37). Different forms of innovation, organizational, social, and techno- logical, are contingent upon agents’ experiments, choices, narrations, and actions in pursuit of superior social and economic goals. It is equally important to distinguish the difference between what Clegg and Ross- Smith (2003) describe as science of subjects as opposed to science of objects: “corporate managers need to be aware of the need for a context free science of objects and a context for stable object relations, artfully contrived so that the object has no effect other than that sought experimen- tally” (Clegg & Ross-Smith, 2003, p. 87). Ghoshal reminds his readers of the much noted Hayek’s Nobel lecture on the pretense of knowledge as “it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed” (Von Hayek, 1974).
Designed and tailored by business schools in search of academic legiti- macy, name recognition, and power, most business curricula are centered on analytical methods and optimization concepts and tools. There is little information about the relevance of knowledge dispensed by professors and instructors as programs tend to confound research methodologies and disregard different axiomatic operators such as emotions, symbols, senses, ties, order, power and hierarchy (Hatchuel, 2005). A substantive theory of management can therefore shed light on the competing concep- tions and interpretations of theoretical constructs in economics, manage- ment and social sciences studies. The agency, transaction cost, and rational choice theories embody a certain organizational and hierarchical order and rationale to control and perform. The combinatory effects of control and performance lead to a certain form of power relationship that is characterized, as noted by Ghoshal (2005), by a “ruthlessly hard-driving, strictly top-down, command-and-control focused, shareholder-value- obsessed, win-at-any-cost”attitude (Ghoshal, 2005, p. 85). By reproducing and reinforcing a distinct form of power relationship, business schools contribute to creating a habitus, a culture manifested by shared beliefs and common practices (Bourdieu, 1977). A business school habitus is best exemplified by intellectual, social, and cultural activities that reinforce values and dispositions of dominant social groups. Mintzberg and Gosling (2002)argue that the MBA programs teach little in terms of prac- tice of management other than providing some analytical decision-making tools. This results in graduating “individual specialist, not collaborative 11 Society at the Crossroads: The Path to a Sustainable Economy
manager, many of whom go into consulting and investment banking”
(Mintzberg & Gosling, 2002, p. 64).
While economics builds and extends on knowledge-based models, research in sociology, psychology, and anthropology relies on knowledge- based and relational models of action. While management studies have benefitted from research findings in economics, sociology, and psychology, little has been given back to these disciplines by management scholars.
Admired and worshiped by some, distrusted and despised by others, managers are pressured to cope with numerous complexities in an ever- changing social environment. Yet, the power of ideas, whether they are proven right or wrong and whether they lead to faulty presumptions, falla- cious predications, or erroneous judgments cannot be ignored. That is why corporate managers and decision-makers need to be reminded of their social responsibility and ethical engagement beyond the profit-maximizing goals.