John Searle, one of the leading contemporary American philosophers (particularly in the areas of linguistics, the philosophy of the mind, and social ontology), has exercised considerable inﬂuence not only among his peers but among a broad range of social scientists. As I have indicated in previous chapters, within the accounting community the impact of Searle’s research on social reality has been manifested in Alexander and Archer (2003), Mattessich (2003), Mouck (2004), Lee (2006a, 2006b, 2009), Williams (2006) and, above all, in the doctoral dissertation by Ionaşcu-Monteanu (2008). The latter examines accounting from a semantic-linguistic point of view that applies major insights of Searle’s (1995) social ontology to our discipline. Let us ﬁrst look at the contribution by Alexander and Archer (2003). This study not only concentrates on the Financial Accounting Standards Board of the USA (FASB) but also refers to the conceptual framework of the International Accounting Standards Board (IASB), its International Accounting Standards Committee Foundation (IASCF ), as well as similar quasi-legislations in the United Kingdom (UK). Alexander and Archer (2003) are concerned with the representational faithfulness (RF ) of accounting statements, as well as with the theories of reality that stand behind them. As pointed out in Section 4.3, these authors argue against a theory of correspondence (including Searle’s), and favour a coherence theory of truth. As to the ontological issue, they reject ‘external realism’ (ER) in favour of Putnam’s (1990) ‘internal realism’ (IR). There are two or even three arguments one can make against the view of Alexander and Archer (2003). First, one may accept it, but only under the assumption of an anthropocentric position; from a cosmic-cultural standpoint the preference for IR (Alexander and Archer 2003: 6) has to be rejected because ultimately, human culture (including social constructionism) is no less part of ‘nature (in the wider sense)’ than is, for example, the construction of a beaver dam. In other words, under a cosmic-cultural point of view the separation of ER (external realism) and IR (internal realism) may no longer be tenable. The second argument is that Searle’s position is based on the conviction that all social facts Y are (directly) based on physical facts X. Although B. Smith (2008) has shown that this holds only in some cases; in other cases (where quasi-abstract social facts are involved) he argues, a succession of iterative steps are
required to show that social facts rest, ultimately, on physical facts. I personally prefer to demonstrate this or related arguments on the basis of the ‘cycle of social reality: concrete-abstract-concrete’ (see Chapter 1, and Chapter 9, Prop 4SR). This principle shows that all abstract (including weakly or semi-abstract) social entities are ‘safely sandwiched’ between concrete entities (on both ends, i.e. the origin as well as end-stage) in order to be actualized. Alexander and Archer (2003) at least recognize social, economic and accounting entities as something real (which cannot be said of all accountants; cf. my references to Heath 1987 and Sterling 1988 in Chapter 2). But more importantly, Alexander and Archer (2003) seem to agree that social constructions can be institutionalized (i.e. socially ‘objectiﬁed’) by virtue of such notions as ‘collective intentionality’, ‘imposition of power and status functions’, ‘creation of meaning, rights, obligations, and institutions’ (all contained in Searle’s arsenal). But there is a caveat. The enthusiasm with which Alexander and Archer (2003) embrace Putnam’s IR may lose its lustre when considering that meanwhile Putnam himself abandoned his notion of internal realism in favour of ‘direct realism’ (cf. Wikipedia 2011, 23 July, ‘Hilary Putnam’). As indicated in Chapter 6, during the time-span from 2006 to 2009 the e-journal (of the AAA) Accounting and the Public Interest published a discussion series (see the above mentioned papers by Lee, Macintosh, Mattessich, and Williams) concerned with the apparent indifference of the FASB towards issues of social and economic reality. This refers particularly to the FASB’s effort of constructing and revising its conceptual framework for accounting standards. In these discussions Searle’s notion of social reality has moved into centre stage – although I have some reaction to certain aspects of his approach, as pointed out in Section 5.1, items 1 to 11, as well as Section 6.2. To what extent my criticism will hold, only time can show. After all, it seems incongruous that a humble accountant would dare to presume he could improve the ontological analysis of such a prestigious philosopher as John Searle. Nevertheless, I have always had high regard for John Searle’s work (cf. Mattessich 2003: 449), and am trying to incorporate some of his ideas into an extended OMR (e.g. Chapter 9, items 7SR and 9SR). For this reason, let me offer in the following a succinct account of what I understand to be the essence of Searle’s socially constructed ontology. Overtly, he emphasizes ‘naturalism’ (though B. Smith (2008: 43) raised doubts about this) and believes that there is a continuous uninterrupted line from brute facts to social facts. For him, the two are connected by the famous formula ‘X counts as Y in C’ (intending to represent a ‘constitutive rule’). Thereby X refers to a brute fact (e.g. a piece of green paper) while Y is a social entity (e.g. a US bank note) and C expresses the social (institutional, legal, economic, etc.) conditions under which the function of legal tender is imposed (by collective intentionality) on X to manifest itself as Y. In other words, X and Y are the same objects or facts, but X represents its physical aspects while Y its social ones (or even institutional ones, in this particular illustration). Smith (2008: 43-4) tries to negate Searle’s claim of naturalism by asserting that there are situations where the X item may itself be abstract
as in the case of electronic money transfers or other ‘representations’. But invoking the principle of ‘cycle of social reality (concrete-abstract-concrete)’ – as indicated in Section 1.3 and discussed in Chapter 7, item 4SR – I tried to show that everything must originate from concrete entities, just as it must ultimately return to such concrete entities, even if some social entities (whether weak or strong) are necessary to intermediate. Searle is, of course, correct in regarding institutions (particularly the one of language) as fundamental and indispensable for social reality. So far, I have no objection – where we might disagree is whether we should regard these institutions only as ‘socially constructed’ or also as part of cosmic-cultural evolution. In other words, to put too much emphasis on the ﬁrst part and too little on the second, might create a distorted picture. But there is little doubt that institutional facts exist only because people are willing to accept conventions that impose a certain status function (e.g. a currency system) without which this function could not be fulﬁlled (cf. B. Smith and Searle 2003). On the basis of this institutional and linguistic premise, Searle builds his conceptual apparatus of status functions that impose deontic powers (as well as economic powers, as added by B. Smith 2008: 45, and possibly cultural powers, as I might add) on physical entities in an almost ‘magical’ way. This way of creating social entities is possible through the collective intentionality (as contrasted to individual intentionality)1 as a driving social force. Another important concept employed by Searle (1995) is that of constitutive rules (in contrast to mere regulative rules or conventions) as for him ‘institutional facts exist only within systems of constitutive rules’ (Searle 1995: 28). ‘Constitutive rules, Searle tells us, have the basic form: X counts as Y in context C [footnote omitted]’ (B. Smith 2003: 9). But the distinction between constitutive and regulative rules is often subtle and not always straightforward. Searle (1995: 50), for example, states that ‘the whole point of criminal law is regulative’. But his further explanation leads to the conclusion that ‘Thus the regulative “thou shalt not kill” generates the appropriate constitutive “Killing under certain circumstances”, counts as murder, and murder counts as a crime punishable by death or imprisonment’ (ibid.). In the case of accounting, for example, the question also arises whether its rules are constitutive or merely regulative. There, the opinions seem to be divided or at least confused. According to Ionaşcu-Monteanu (2008: 98-102), Mouck (2004: 536) argues that accounting rules are regulative, and Lee (2006a: 15) seems to follow him (at least to some extent). But Alexander and Archer (2003: 6) deem them to be constitutive (if referring to the generally accepted accounting principles, or GAAP) – and Searle (2005: 7) as well as IonaşcuMonteanu (2008: 101-2) seem to share this opinion. One reason for the confusion around regulative vs. constitutive rules might be that the question ‘constitutive of what?’ has not been sufﬁciently clariﬁed. A further problem is the notion of representation as employed by those who try to extend and improve upon Searle’s theory. B. Smith (2008: 45), for example, in referring to De Soto’s (2000) analysis, suggested that the notion of ‘free-standing Y terms’ requires some kind of representation – since, in such cases, the X and the Y are
no longer identical tangible objects. But if it is representation at all, it would have to be some kind of institutional representation rather than a conceptual one. The difference is important. For example, from an institutional and ownership’s point of view one might argue that a ﬁrm’s total capital is the representation of ownership claim on the ﬁrm’s assets. But conceptually, the representations of both asset and equity values are found in the accounts and ﬁnancial statements. And, to say the obvious, asset values are represented in asset accounts quite separately from the representation of equity values (even on opposite sides of the balance sheet). Those who identify value with capital (cf. Ionaşcu-Monteanu 2008: 71) undoubtedly commit a category mistake. Whoever does so, mixes up two or even three different notions in a completely illogical way, namely the notions of assets, capital, and value. Capital is certainly not the same thing as value; capital may be valued, but need not be so. In a court of law the decision who has title on an asset may be quite independent of the value of the asset or its equity. Besides, capital is the equity (i.e. the legal claim) to an asset or several of them. These assets may ﬂuctuate in value and even reach zero or later bounce back. Does that necessarily mean that those assets and their equity had completely vanished and then magically reappear? They may be idle machinery, but they might still exist, and somebody is likely to have legal claim on them. In general, I consider Searle’s conception of institutional fact (and the many related issues) an important contribution to social ontology. There can be no doubt that the rich conceptual apparatus that Searle developed has been of great inﬂuence – and not only in philosophy but in many social sciences. Where would modern social ontology be without such notions as: status functions; institutional facts; deontic structures, their powers and impositions; personal and collective intentionality; observer relative entities vs. those intrinsic to nature; the performance utterance ‘X counts as Y in the context C’, and many others? Nevertheless, there are a few issues where I cannot agree with Searle. After all, one might admire a scholar but still disagree with some of his views (as I do even in the case of Plato, Kant, and many other eminent philosophers). I would not attempt this critique were I not convinced that, despite the tremendous prestige of John Searle, my viewpoint is a legitimate philosophical supplement or alternative – particularly for the accounting and economic community and, possibly beyond. I also believe that, at least occasionally, it might be worthwhile for philosophers to listen to colleagues from the applied and pure sciences. My major issue with Searle (1995) is the relative neglect of other levels of reality beyond the social one (for details, see next section). Of course, Searle’s is a social ontology but he looks at it, to my mind, too much in isolation from the entire hierarchy of reality. And as far as philosophically oriented accountants are concerned, I think they too might extend their horizon by reading Searle’s book in the light of other ontological treatises, such as Hartmann (e.g. 1940, 1953), Pierre Teilhard de Chardin (1959, 1965), Dooyeweerd (1953-58), and Bunge (1977, 1979, 1983a. 1983b, 1985a, 1985b) – to name just a few. All of them, as well as the renowned biologists like Konrad Lorenz (1973, 1977) and
D.T. Campbell (1974a, 1990) emphasize the entire hierarchy of reality instead of trying to reduce all entities to ‘brute’ facts and their social implications. Each of those scholars is concerned with analysing the entire gamut of reality levels in relation to each other. This ‘pluralistic’ approach not only leads to a richer ontological perspective but may avoid pitfalls of Searle’s ‘dualistic’ approach. A pluralistic approach may be the only reliable path to comprehend the structure and genesis of reality – including its social sphere.