Financial Crises and Earnings Management Behavior by Bruno Maria Franceschetti

Author:Bruno Maria Franceschetti
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

3.2 Critical Realism as an Alternative to Positivism

Positivism is an extremely objectivist perspective of a single reality where anything that can be perceived through the senses is real (Bisman 2010). It “sets up a certain model of science as value-free, atomistic, discovering causal laws of a ‘constant conjunction’ model (whenever A happens, B happens) and able to express its results mathematically” (Collier 2005, p. 328). However, these are considered to be features of the natural sciences that have made them so popular (Collier 2005).

Bhaskar (2008a) “provides a comprehensive alternative to the positivism, which, since the time of Hume, has fashioned our image of science” (p. 1). Bhaskar (2008a) observes that “central to the positivist vision of science is the Humean theory of causal laws” (p. 1) and adds that the “weakness of the Humean concept of laws is that it ties laws to closed systems, viz. systems where a constant conjunction of events occurs” (p. 3).4

Critical realism begins by attacking the assumption that the external world can be accurately described and causally explained, i.e., natural science produces laws such as “whenever A happens, B happens” (Collier 2005). Even in nature, constant conjunctions rarely occur5 and in society, constant conjunctions do not occur. Critical realism rejects the existence of causal laws of a “constant conjunction” type in the social world (Ackroyd and Fleetwood 2005). Constant conjunctions may occur in a closed system, i.e., a laboratory. In closed systems, “a definite quantity of heat is applied to a definite quantity of water under carefully controlled conditions, and it boils exactly 5 min later. In the kitchen, it is not so. Polly puts the kettle on, but Sukey takes it off again, and the water never gets to boil” (Collier 2005, p. 328). Critical realists argue that event regularities generally occur during closed conditions “where other mechanisms that are not being tested will not affect the outcome” (Collier 2005, p. 329). It is only by isolating one mechanism that is responsible for a certain outcome that we eventually observe regularities. It is the role of the experimental scientist to exclude countervailing or offsetting causes and trigger the generative mechanism6 so that it is active (Bhaskar 2008a). Then, the “mode of operation” or activity of the isolated generative mechanism is described in the statement of a causal law. Only in the laboratory do “these enduring mechanisms of nature, whose operations are described in the statements of causal laws, become actually manifest and empirically accessible to men” (Bhaskar 2008a, p. 36). Closed conditions result in “a one-to-one relationship between the causal law and the sequence of events” (Bhaskar 2008a, p. 36).

However, extra-experimental reality is largely an open system (McWherter 2012a). In open systems, in which constant conjunctions of events do not occur, “one would have to conclude that there are no laws” (Fleetwood 2001, p. 208) and that “nothing causally governs events” (Fleetwood 2017, p. 42). However, it is undeniable that a certain degree of order and stability exists in open systems; therefore, “something other than constant event conjunctions must be at work here” (Fleetwood 2011, p.

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