chapter  4
Social reality: its manifestation in accounting and management
Pages 16

No moment passes without reality staring into our face; and yet, most accountants are reluctant to ponder issues of reality. A good deal of present-day accounting research is concerned with ever-increasingly complex statistical techniques, mathematical models, and their surface structures, but only marginally with foundational issues. Just as observations are naught without good theories, so theories are naught without sound philosophical foundations. However, we have seen in Section 2.4 that even during the recent phase of ‘positive accounting theory’,1 a few academics have found it worth their while to concern themselves with problems of reality. But the subsequent concern about accounting reality was less of speculative-metaphysical than of methodological, semantic, epistemological, and ontological nature; it was partly dictated by the need to clarify which variables are purely conceptual and which are backed by reality – and what kind of reality? Only empirical variables will be either directly or indirectly observable (including legal evidence, etc.), and hopefully measurable. Indirect observability, in turn, leads to the question about what some accountants call ‘proxies’ or ‘surrogates’ and ‘surrogate relations’ (cf. Ijiri 1967: 3-13, 27, 121) or what in modern science are known as ‘indicators’ and ‘indicator hypotheses’ respectively (see Bunge 1983a, 1983b, 1985a, 1985b). Indeed, the concern for observability and its lack or difficulty pervades the contemporary empirical accounting literature, and this may open the door to a new respectability for reality issues in accounting. For example, Patell (1979) has been much concerned with the distinction between observable and unobservable variables in accounting. Dyckman and Morse (1986: 7, 81, 83, 89), for example, repeatedly emphasized how difficult it is to find the appropriate observational variables for certain theories of accounting and finance. For the sake of sound empirical research, a clarification of the reality problem and the elimination of inconsistencies have assumed some urgency. However, as some accountants may pay little heed to the difference between concepts and phenomena, it seems opportune to state at the beginning three simple prerequisites crucial for understanding this chapter:

1 A clear distinction between empirical (including social) phenomena and the concepts by means of which accountants represent them;

2 An awareness that some concepts are empirically empty, and the need for a keen eye to distinguish those that are not backed by phenomena from those that are;

3 An admission that empirical reality is not confined to physical phenomena but engulfs a hierarchy that includes social, biological, psychological, cultural, and other phenomena.