three eras in theories of choice: a few minor ruminations of an ancient mariner james g. march...
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THREE ERAS IN THEORIES OF CHOICE:
A FEW MINOR RUMINATIONSOF AN ANCIENT MARINER
James G. March(Stanford University)
August 11, 2008MOC
Academy of ManagementAnaheim, California, U.S.A.
A FEW PRELIMINARIES
SMALL SKETCH OF A MINOR HISTORY: THE POST WORLD WAR II STUDY OF ORGANIZATIONAL CHOICE
Incomplete
► Annual Review of Psychology 2008 piece on “Cognition in Organizations” by
Gerard Hodgkinson and Mark Healey ► The Oxford Handbook of Organizational Decision Making, 2008, edited by Gerard Hodgkinson and William Starbuck
Parochial (North American)
Enthusiastic
Personal
BACKGROUND:ALTERNATIVE CONCEPTIONS OF ADAPTIVE INTELLIGENCE
Learning: Modifying propensities for particular actions on the basis of experience with them
Imitation: Copying the enduring behaviors of others
Selection: Modifying the mix of rules through differential birth and elimination
Rationality: Choosing among alternatives on the basis of expected consequences and preferences
BACKGROUND:EXPERIENCE AS A BASIS FOR INTELLIGENT ACTION
► Looking for something that might describe reality
► Looking for something that might guide improvement
The search for a frame
Different conceptions of the basic process
► Using experience to improving the estimations of probable consequences
► Developing an understanding of the processes of history through experience
► Replicating the successes of experience
BACKGROUND: ECONOMICS IN THE STUDY OF ORGANIZATIONAL CHOICE
► The framing of studies of information and choice by decision theory and micro-economics
Intellectual
► The migration of organization studies to business schools
► The dominant role of economic theory in business schools
Institutional
Strong in theory, weak in experimental data
BACKGROUND: COGNITIVE SCIENCE IN THE STUDY OF ORGANIZATIONAL CHOICE
Institutional► Merger of psychology, computer science,
and neural biology after World War II
► Focus on experiments, micro phenomena
Intellectual
Strong in experimental data, weak in theory
► Connected to the development of a decision making-based, business school-based effort to create an “organization theory”
BACKGROUND: MANAGERIAL AND ORGANIZATIONAL COGNITION
Two sets of parents: Economics and psychology
► What problems are interesting?
► Where do you publish?
The pursuit of respectability
► Different traditions and methods
► Different aspirations and power
► Part of a discipline (which?) or a new discipline?
Location in business schools as part of organizational studies
BACKGROUND: THE INSTITUTIONAL AND INTELLECTUAL CONTEXT
The context of particular times
► Business schools
► Shifting enthusiasms
The context of particular ideas
► North American prominence
► Cycles in resources, standing, and optimism
► Geographic and disciplinary enthusiasms
The context of particular institutions
► Big ideas and little ideas
THE CONTEXT OF THREE ERAS IN MODERN SOCIAL SCIENCE
1945-1965: An era of optimism, science, and interdisciplinary flirtations
1965-1985: An era of pessimism, postmodernism, and disciplinary monasticism
1985-2005: An era of professionalism and the triumph of individualism, consequentialism, and objectivism
1945-1965POST WORLD WAR II TRANSFORMATION
Growth of North American academic research institutions
Hopes for social science
Commitments
► Science
► Mathematics
► Interdisciplinary, behavioral social science
► Social science applied to improve life
1945-1965THE SPIRIT OF THE TIME
Recognized few boundaries on the possibilities for knowledge
Saw progress in knowledge as produced by an elite cadre of rigorously trained and deeply
motivated scholars who would create an understanding of human behavior that would eclipse all previous understandings.
Saw much scientific knowledge as necessarily interdisciplinary
1945-1965THE ETHOS OF THE TIME
Unquestionably naive
Uncompromisingly protestant
► Intolerant of incompetence
► Intolerant of multiple-mindedness
► Intolerant of sloth
Unyieldingly confident in the triumph of science and truth over ignorance
Unequivocally positivist
1945-1965AN “OPEN” ECONOMICS ELITE
Enthusiasm for mathematics and for interdisciplinary contacts
Cowles Commission, RAND Corporation, Center for Advanced Study in the Behavioral Sciences
The courtship of psychology
►Briefly pursued: Social psychology
►Mostly foregone: Cognitive psychology
1945-1965THE REFORM OF NORTH AMERICAN BUSINESS SCHOOLS
Substantial changes in students, faculty, research, and academic standing
Relevance here
Prelude to a counter-revolution, 1980s & 1990s
Business schools before the Second World War
► Accentuated importance of economics as frame
► Business schools became significant sites for research on choice and organizations
1945-1965THE “REVOLUTION” OF THE TIME
Enormously expanded the scale (in terms of personnel and resources) of the research community in social science
Transformed the nature of social science to make it significantly more committed to the norms
of science
Established basic frameworks for theoretical work that have continued to frame much
subsequent work
Created the conditions for a counter-revolution
1965-1985AN ERA OF DISCONTENT
The deconstruction of social science
The wounding of sociology
►Foucault, Derrida, Heidegger, Habermas
► Marx, Vietnam, and feminist challenges
The differentiation of economics, psychology
► The revolt against the post-war North American establishment and ethos
The end of unlimited resources
► The rediscovery of qualitative methods
1965-1985THE DRIFT OF INTELLECTUAL FASHION
Economics
Sociology► Less mathematical
► Less positivist
► More mathematical► Less empirical► Less interdisciplinary
► Less interdisciplinary
► Less highly regarded as a science
► More highly regarded as a science
1965-1985THE DRIFT OF INTELLECTUAL FASHION (continued)
The recovery of European social science
The case of post-modernism and related ideas
► Growth of universities and resources
► Flowering of social construction
► Conspicuous basis for conflict
► Partial differentiation from North America
► More obvious penetration of anthropology and sociology than of economics and psychology
► Greater penetration of Europe than North America
1965-1985THREE ENDURING MARKS OF AN ERA
Reduced optimism
► About the prospects for scientific understanding of human behavior and institutions
► About using social science to improve life
The isolation and purification of disciplines
The sanctification of economic theories of choice and their export to other fields
► About the romance of research and teaching as a noble calling
1985-2005AN ERA OF MARKETS AND THE GLORIFICATION OF ENTREPRENEURSHIP
The apparent stagnation of economic theory
► Few striking new ideas► Minor lemmas
The counter revolution in business schools and the quest for relevance
The collapse of the Soviet Union and the triumph of markets and entrepreneurship
The counter revolution in social science and the quest for a reconciliation of theories, stories, and data
1985-2005THE ENNOBLING OF A SMALL CORNER OF COGNITIVE SCIENCE
Tversky and Kahneman as prophets and symbols
► Nobel Prize
► Science paper, Econometrics paper
The tension between economic simplicity and psychological reality
The burgeoning of behavioral decision studies
1985-2005A SUCCESS STORY: ECONOMICS
A small connection to cognitive studies
► Legitimizing behavioral finance
► Legitimizing the behavioral foundations of bounded rationality
Endowed intendedly rational actor with somewhat more realistic properties in some domains
► Legitimizing neural economics
1985-2005A SUCCESS STORY: COGNITIVE SCIENCE
Clarified many important aspects of individual behavior in economies and organizations
Laid the groundwork for further work, including extensions into neural biology.
Reestablished individual psychology as a primary basis for understanding choice behavior
modeled as the estimation of consequences
1985-2005ECONOMICS: A THEORY OF AUTONOMOUS INDIVIDUALS
The firm in economic theory
► Classic: The individual rational owner / manager
► Modern: Principals and agents
The firm in evolutionary economics
► Classic: Individual firm selected upon
► Modern: Routines and forms selected upon
Neither takes the organization very seriously
1985-2005PSYCHOLOGY: A THEORY OF AUTONOMOUS INDIVIDUALS
The individual as a coherent, autonomous organism
Social context treated as exogenous and passive
► Coordinated by a central nervous systems► Explicable without reference to history,
institutions, or social context except as those are reflected in current organism
The embedding of individuals in organizations and other social institutions largely ignored
CONTEMPORARY BLINDERS 1: INDIVIDUALISM
The notion that the fundamental building block of social science is the autonomous individual
Relation to reductionism (and therefore to disaggregating to smaller elements of organisms)
► Relation to human conceits
► Relation to economics
A focus on individual choice not organizations► Experiments on individual choice
► Applications to individuals in organizations
CONTEMPORARY BLINDERS 2: CONSEQUENTIALISM
Economic theories of choice and their extension to other disciplines
Overlooks rules (heuristics) and identities
Overlooks emotions
► Investigating estimations of consequences
A focus on consequentialism not rule-following
► Investigating risk preferences
CONTEMPORARY BLINDERS 3: OBJECTIVISM
► The notion that human cognition is to be understood by relating it to a measure of objective correctness.
Two visions of the convergence of adaptation
► Convergence to an objectively correct answer
► Convergence to a socially shared answer
Need to understand the processes and potential failures of social consensus
A focus on objectivism not social construction
TAKING ORGANIZATIONS SERIOUSLY: ECONOMIC THEORIES OF THE FIRM
Boundedly rational choice in organizations► Distributed knowledge and memory► Distributed expectations
► Rules, routines, appropriateness Identities in organizations
► Creation, recognition, and retrieval
► Distributed preferences and evaluations
The social construction of success and failure
The role of emotions
► Rediscovery of institutions
The role of imitation
TAKING ORGANIZATIONS SERIOUSLY: PSYCHOLOGICAL THEORIES OF THE INDIVIDUAL
Theories of organizations are better foundations for theories of individuals than theories of individuals are for theories of organizations
► Problems of coherence, coordination, conflict► The development and use of identities and
routines
In particular, need to bring to more prominence in psychology
► Preference and identity ambiguity and conflict
IN SUM:
An unfinished story
An impressive success story
A role for students of organizations
► A delicate combination of disciplinary rigidity and interdisciplinary tenacity
THE END