LESSON 1

Since the Management Studies are mainly based on human behaviours and their relations intra-
groups, it could be important to link this field with Humanities, all of which in their own way deal
with human behaviour and patterns of interaction. Both Economics

and Psychology as well as being human sciences make direct contributions to the study of
Management. Therefore, in this course we will see the contribution of Humanities, or better
Philosophy, to Economics, Psychology and Sociology as the major conduits of this influence from
humanities to management.

Science in general is the systematic study of phenomena through reasoning aiming ultimately to
arrive at a rational explanation of the phenomena in question. We should not focus only on the
natural sciences like physics, but also on the human sciences.

Indeed, the starting point of all specifically human science is the recognition that human being are
are self-conscious thinking and (perhaps) freely choosing beings: at the very least they can think
about and be aware of what they are doing. This point can be strictly related to ethics, therefore
considering that individuals are self conscious, does it mean that it is strictly egoistic?

Sciences, especially the natural ones are based on the correlation of variables, more specifically
science is based on cause-effect relationship. Indeed, In order to have a scientific theory you
should have an explanation of how systematically one variable influence others. Science depends
on rational explanation, not only correlations.

The system to find these explanations is very simple, and was the one adopted by Carl Popper:
You start to make a conjecture (make a guess) that needs to be tested empirically, so it can be
corroborated (not verified) or falsified.

As we previously said, humans are freely choosing beings, but they still follow some common
path that determine their outcomes, like the self fulfilment process, the striving to seize your
ambitions and hopes without investigating the reason behind. On the other hand you can have
self-destructive predictions that exist because people want to be prepared in case the worst
scenario happen. In addition, the freedom of choice is influenced by many factors like the genetic,
background or culture.

Historical origins.
Maybe the origins of human sciences are not entirely in the thoughts of Plato or Aristotle.
Certainly there are elements of psychology and political science in Plato. He stated that human
persons and their characters are the reflection of the 4 elements:

- Earth : this is the representation of phlegmatic, so the thoughts

- Fire : representation of hangry

- Water : representation of sadness

- Air : representation of optimism.

He basically said that everybody has a dominant element, and so that your features might be
more affected from one element resulting in a completely different mix of thoughts and emotions.

Considering Aristotle, that said : “man is a political animal” and he made the analogy between
human affairs and bees, that emphasise interaction. From this interactions he also developed an
important concept of share value and social purposes. This is significant as ethical concerns
have reappeared nowadays. This is also related to the definitions of marketing of Porter, where a
a company should be contributing to social progress not only profit.

From the late 16th century the natural sciences had experienced a spectacular flowering with the
application of a systematic empirical observational approach in astronomy and in physics
epitomised in the works of Copernicus, Kepler Galileo and Newton. We notice here the difference
with the theological explanation, trying to explain a phenomenon by the purpose and so god.

After the 17th century the empirical approach became the universal method. It is also known as
Inductivism meaning that scientific theories should be practical for predictions regarding
observable phenomena. These predictions should be tested and controlled trough laboratory
experiments.

Therefore, from the time of Galileo’s experiment observation became a general methodological
principle. The basis of the translation from the results of this new science into the practical
technologies resulted in the Industrial Revolution.

But then it comes Hume that pointed out how human sciences should be reinvented, especially
psychology basing it on experimental methods. Indeed he defined logical laws as a description of
tendencies of the human mind. Hume said that we can not prove theories through induction. He
wanted to apply the experimental method of natural sciences to psychology and all the human
sciences. He also began to apply the empirical analytical method to questions of Economics and
actually developed already the essential building blocks of classical international trade theory
through his analysis of the specie-flow mechanism of the balance of payments under a gold
standard. Then he developed a theory on the balance of payments related to flows of gold in the
transactions. This method was also used by Adam Smith to understand economy. The theory of
the invisible hand (lassoer faire), meaning that if everybody on the market act in his own interest,
through the law of supply-demand, you will achieve equilibrium which maximise well being. This
requires perfect competition, it doesn’t work in monopoly.

LESSON 2 : THE OBJECTIVIST- BEHAVIOURIST APPROACH.

The objectivist-behaviourist approach, the anglo-american tradition in human
science.
It would be hard to underestimate the widespread influence of this conception in Anglo-
American human science and in resultant policies and therapies. That’s why it can be
considered crucial to describe along the journey of the evolution of human Sciences this
approach labelled as Objectivis-Behaviourist approach and its extreme version:
positivist.
The manifesto of this “doctrine” can be consider “Modelling human science like natural
science (physics and chemistry) through restricting the environment analysis only to
what is empirically observable and quantifiable. In this period has been coined the
concept of quantitative analysis”.
You can’t observe subjective feelings, you can see only the effects. 

This explains how thinkers of that time promoted a new approach to human beings
aiming to understand human behaviour focusing on the chemical reaction in their brain.
Y
This materialist conception embodies the thesis for which human are the most
complicated object of studying. Development of theoretical explanations of human
interaction starting through animal behavioural patterns and treating psychological
depression with drugs is the perfect explanation of this time.

Positivism



Positivism can be considered as an extreme version of empiricist epistemology.
In accordance with the thought of the time Positivists strongly sustained the “verification
principle of meaning”. Every valid knowledge must be either tautological (how to use
words) or empirically verifiable, everything else is entirely meaningless. Ex: “god doesn’t
exist because you can’t observe it” or “philosophy has been dismissed as meaningless”.
One of the main actors of this way of thinking can be found in Alfred Ayer, which
introduced the abovementioned “verification principle of meaning” concept. 



“God talk is evidently non-sense”. Cit: Alfred Ayer.
All the normative discourse about how the world ought ideally to be , had been declared
as meaningless and useless because they don’t respect the causal principle of
empirical verification and they relate after all to an ideal world which actually does not
exist.
*(epistemology is the theory of knowledge, how we
understand the things, how we reach knowledge)

It stop scientist to ask normative questions -> how the world can be better? -> no
policies to improve the world. It is an epistemology (= theory of knowledge) that has a
big influence on objectivism and on management sciences. For positivists you can't
have rational discussions on "what policy to adopt or how society should be", it is non-
sense. At the end positivism becomes contradictive.
At the end of the day, Positivism has been proven neither tautological nor empirically
verified.
It says "all the meaningful propositions are either tautologies or empirically tested". Is the
verification principle proposition itself meaningful? The proposition is not tautological, but
if it is not we have to test it empirically. It is circular, you are assuming what you want to
prove. A good definition of meaningful is something that other people can understand.

Positivism has at least two key implications for the objectivist-behaviourist approach to
the human sciences.
1. Firstly by insisting that only the empirically testable (or purely definitional) can be
meaningful, Positivism provides a powerful justification for the reductionism of the
objectivist-behaviourist approach to methodology in human science: for an
approach based strictly on objectively observable aspects of human behaviour
and a quantitative statistical analysis of such observations. 


2. Less remarked but highly significant is the ban on normative or ethical discourse
of any kind from the human sciences. Under the influence of Positivism any
discussion of such issues has been explicitly proscribed as meaningless
This last key point has been put even more in practice in Economic by Milton Friedman
in his methodological writings in the 1950s. 

At that time economists enjoined to banish all discussion of normative questions such
as “what macroeconomic policy ought to be adopted to tackle unemployment” from their
discipline. To Friedman and to large swathes of economists questions based on “what
economic policy ought to be” are a matter of one’s ultimate political values/tastes and
cannot be a matter of strict economic science.
Positive economics uses objective analysis in the study of economics. Most economists
look at what has happened and what is currently happening in a given economy to form
their basis of predictions for the future. This process of investigation is positive
economics. Conversely, a normative economic study will base future predictions on
value judgments.
Economics is “in principle independent of any particular ethical position or normative
judgments” and is “an ‘objective’ science, in precisely the same sense as any of the
physical sciences”.

Using Friedmans’ words:

 “and then when the really crucial question of praxis arose, “what concretely should we
do about this or that social problem”, the scientist is supposed to abandon rationality and
descend into a squishy world of feeling and emotion where nothing is clear and where we “can
ultimately only fight”.

Critiques of the positivism:

1. The Subjectivist-interpretative approach
Hermeneutics, Kant epistemology emphasise the active role of the human mind in every
active cognition and perception and argued that when we perceive things, we are not
entirely passive, the thinker contributes on what he sees and influence the reality. 

When we perceive the world, we construct it and this explains the concept of active
consciousness. The work of art (i.e. qualsiasi opera d’arte) has the meaning that you
attribute to it and highlight the concept of multiple interpretation (ex. Religious texts).

Generally speaking, when we look at an action, we have to understand the subjective
meaning of the action for the agent -> every human action can be unique (Dilthey).

LESSON 3 : ALTERNATIVES TO OBJECTIVISM.

Today we will see some critiques of the subjective - interpretive approach.

Immanuel Kant introduced the theory of Hermeneutics where the we have a fundamental and
active role of the human mind in every act of perception so the reality we perceive is a
constructed phenomenon. Considering that the element is perceived by the mind in its simplest
form, all the more will be the true acts of interpretation. Indeed, beauty will be in the eye of the
beholder. Indeed, things this will mean that there can and will be multiple possible interpretations.

As better of fact, his thoughts differ from the previous ones because of two elements :

- That it is subjectively constructed, meaning is not something which is empirically observable

to an outside observer

- The explanation of actions is based on a teleological explanation, so based on a specific

purpose that the agent is considering taking that action. So we need to understand that
purpose.

This method can be applied to human sciences only. But Dilthey argues that human sciences are
distinct from other natural sciences.

For the germans, we also need to say that if people can have different interpretation also the
motivation and the goal of any action will be entirely unique. It follows that the subjectivist human
sciences are in effect to become interpretive history; each and every human action needs to be
understood in its unique context and in the light of the unique personal motivations and goals of
the agents. For the German Historical School of Economics (Schmoller etc) this meant precisely
that the study of Economics must become the study of Economic History.

In contemporary human sciences it created the so called qualitative research.

In another strand of development it is argued that over large areas human agents share the same
or very similar goals and therefore we can build some integrative teleological generalisations.

So we can distinguish two strands for the subjectivism :

1) Austrian school of economics : this school was founded by Carl Menger and believed that
course of actions that derive from the self consciousness and the freedom of choosing of
individuals should be explained in terms of goals. But there could still be the possibility of
generalisations (theological generalisation, like the fact the consumers tend to maximise
 their utility functions). This strand differs itself fro the neoclassical mainstream also regarding
the risk and uncertainty, where the neoclassical believed in a near perfect informed
market instead Austrians were closer to behavioural economics.

2) German school : all you can do is to interpret every action on its own merit therefore, you
shouldn’t be seeking theories in economics but just analysing history

An important author of this period is Max Weber and his Agent Theory : accounting.

Critical social theory.

Another very distinctive approach to the human sciences was based on the beliefs of Karl Marx.
Its theory is very important in the human sciences and is called Critical Social Theory.
Marx was hugely influenced by Hegel and Feuerbach .

Hegel : he developed an all embracing teleological account of the whole of human history. He
believed that

Feuerbach : said that Hegel had things upside down meaning that human beings were the heart
of reality. In this material world human beings suffered from alienation because we live in a world
where there is evil, disease and death. Animals doesn’t have self consciousness and they don’t
have problems of self esteem. Humans are self consciousness, they can conceive the infinity but
they will still suffer and die. In this material world she are surrounded by limitations, therefore
people postulate an afterlife in order to make their life bearable. Therefore religion and indeed also
the whole Hegelian philosophical edifice Feuerbach thus dismisses as fans consciousness. He
argued that it is not Absolute Reason (for Christians God) which is at the heart of human
history but rather Man. Man is who makes human history.

Marx : he introduced a whole new dimension into economics and the human sciences: the
critique of ideology. Marx said that we need social economic interactions or relations, more
especially he said that the material conditions of life evolved over life, because of technology, and
this development will determine chances in the social interactions within production. He basically
based on production and so the material aspect of life. human history is not so much a struggle of
ideas but an interaction between the development of material forces through the technological
process and the superstructure of social relations of production. Societies are organised to
produce the goods and services, but to transfer resources into output we need social
relations. Another aspect was the recognition that capitalism brings revolution, meaning that
capitalism made possible a huge increasing in economic growth, but on the other hand changes
on the social relations of production means changes on the power relations that leads to class
conflicts. In this Marx argued that certain class would use religion to justify their position, and so
Marx sees a kind of super-construction of fall consciousness consisting on political and religion
beliefs and its role is to defend or justify the position of power of whatever group is on top.

This for example was a very convent justification of the power of the King that was directly
chosen from god. He thought that also the liberal system is a false stream of consciousness.

In other words he believe that there was a tendency to the inequality could lead to a social
revolution and the solution was a communist world were everything was equally divided and none
could ever live in poverty. You can find no poverty in the Nordic welfare states.

Who did concrete efforts to reduce poverty are the social market states.

The tendency of create inequality of the capitalism system is true prediction of Mrs.

The Gini coefficient is something that measures inequality, if it is zero it means that there is no
inequality. Looking at it for the world, in 2008 it was 0,66.

Looking at the percentage of the wealthiest men in USA, so we are talking about the 1% of
people who together earned the 20% of the total revenues in the country. This number increased
after 1980 because of the deregulation of the market.

Looking at the social market like Japan or Germany, this number has been reduced from the
beginning thanks also to Marx not giving all the power to few people.

The digital transformation is also begin to have some interest implications like remote workings.
This version of working is leading to a specific relations of powers, like leading to no boundaries.
The workers are having more workloads, so there has being a reassignments of power in the
employee-boss relation.

This era is also effecting the political aerea, just think of social medias or mass medias. Where it
will go ? Who knows, but it is changing their power over our lives. And then the final aspect of
Marx is the political ideology, that is a convent rationalisation of the power os some people.

The Frankfort school is so called because is based on a group of thinkers that initially were
located in the Frankfurt Gothe university. In the 1930 in Germany there was quite a debate
between communist party and other free thinkers. In particular they rejected Marx economic
system. They were taking over some particular key take ways f Marx like inequality. The Frankfurt
theory also have taken something from previous exponents. This school have taken over from the
subjective approach the emphasis of the human being as a self consciousness to be free to
choose.

Meaning that they were against about the thought that there is no alternative, so the status quo is
inevitable. Indeed, they believed that there was the possibility for a better society. The Frankfort
beloved that there were always alternatives for created human beings. Their goal was to make
people aware of this.

Habermas wrote knowledge of human history, that starts from the concept that when people look
at the world they see what they want to see. What we can do is be honest about our interest and
that is the key of critical social theory, that states that unmasking of these special interest
becomes the main concern to really understand the human world.

Thinking of Brexit, different medias will talk about the same thing with a little differences, these
differences are what really interest various medias. See different positions can help us understand
the real world.

LESSON 4 & 5 :
SESSION 4-5

The Normative challenge

We have seen seen the great and most influential streams in the historical
development of the human sciences. 

Now we have to examine some the most significant points of controversy in the
contemporary human sciences.
There a three major approaches to human science

- Objectivist Behaviourist approach

- Subjectivist Interpretive approach
- Critical Social Theory of the Frankfurt school

And two main additional approaches to human sciences that can be considered
present inside each one of the three above, in a peculiar way.
Institutionalism studies the influence of institutional structures on human action and
focuses on the interaction inside the society between people and and norms that
define an institution as it is.
Post-modernist approach takes on from the basic consideration that “homo
oeconomicus”– calculator, completely rational – is unrealistic and this thesis had
affected the understanding and the comprehension of human reality.

The post-modernist can be, somehow, incorporated into the three major approaches.
How?

- In the objectivist behaviorist approach is difficult to see correlation with the

post-modernist because of different periods, for the objectivist is the
Enlightenment (17-18 centuries).

- In the subjectivist-interpretive approach instead can be enhanced by post-

modernist which emphasize a similar perspective: the central importance of a
subjective meaning. The irrational, emotional component of the human being
can have an influence in the reality and how this reality it perceived shapes
the reality itself.

- A similar point applies to the fundamental insight of Habermas and the

Frankfurt school: the “human interests” which underpin ideology and indeed
all human cognition may of course be significantly tinged with the emotional
and irrational.

Now let’s move to analyze the 3 current, specific, topics influenced by philosophy
and psychology.

1. Value-Neutrality
2. Ethics and sustainability
3. Systems thinking

Value-Neutrality

Milton Friedman under the influence of Positivism as we saw enjoined the human
scientist to adopt a strictly positive value-neutral approach in which any form of
normative discourse, that is discourse involving “value judgements”, would be
banned from rigorous human science. That is positivist conclusion, for them ethic is
useless, and Friedman is a straight positivist which do not take into consideration
debating about an ideal world.
As far back as the late 1950s this stance had been subjected to a searching critique
by another great economist from Sweden: Gunnar Myrdal.
G. Myrdal attacks the positivist consensus which was prevalent in the west society
economic with “Value in social theory” arguing that Friedman position was logically
incoherent: value judgment (normative proposition) is present in every human
science; we cannot avoid value judgment. Furthermore, Myrdal tackles the positivist
thesis which postulate how Economics and all the human or management sciences
have to confine themselves to purely positive discourse and refrain from any
normative comments on policy or therapy. Myrdal argued that this was not only
undesirable but actually impossible.
As regards the impossibility Myrdal pointed out that value judgements and so
normative propositions are inevitably present in any human science even before any
discussion of practical application through policy or therapy is considered. 

This can be seen in two distinct ways:
1. Selection of which topics to research is a judgment of what is important for the
society.

In the selection of which topics to research value judgements are inevitably made if

not by the researcher himself at least by those who are funding it. 

Research projects are not selected in a random lottery but in accordance with value
judgements about which ones are important in society in a given era. Research
direction in other words is selected within the framework of a set of normative
judgements about what is good for or can improve a society at a given time. For
example research on AIDS in the late 1990s or on better systems of banking
regulation since 2008; or today on Covid19 vaccines.
2. Value judgements are also inescapably present in the fact that any science must make
abstractions. In the case of Human Sciences this involves abstracting for purposes of
theorising from aspects of human and social reality. Such abstractions can and often
do involve implicit value judgements.
When we do scientific theorising, we make abstraction, because otherwise you would be
overwhelmed by details reproducing the world society, when we abstract from aspects of
human reality, we implicitly may make value judgment (such as considering labour and
capital as equal resources in the production function, it is value loaded).
Therefore, neither Economics can be considered devoid of normative judgements:
the example of it can be found taking into consideration the implicit value judgement;
human sciences are irretrievable value-laden because of the dilemmas you have to
deal with.
When considering possible efficiency gains a business may treat reduction of
necessary labour inputs as part of a cost reduction programme in exactly the same
way as a reduction of machine usage: it is all part of “downsizing”.
Yet throwing people out of a job patently raises moral issues which leaving a
machine idle does not. At the risk of stressing the blindingly obvious people have
feelings and families whereas machines have not.
There is here an interesting convergence with the critical theory approach of the
Frankfurt school which sees as a central role of all social theory the unmasking of
hidden implicit ideologies which purvey narrow class or other human interests.
If Myrdal has shown us that a purely positive human science is impossible and that
normative elements are inescapably present we can also go further to argue against
the positivists that it is not only possible but also highly desirable that the human
sciences should be capable of making normative pronouncements on policy and
therapy.
Human sciences should develop normative recommendations.
It is highly desirable that science make contributions to society as well. 

If we open the door to the normative judgments, there is a hoe question of
responsibility of companies and ethics. 

This can be highly strongly correlated with the concept of sustainability intended as a
process process that is capable to repeat itself indefinitive in the future, matched with
“ecological” you mean sustaining the natural environment.
Looking at the sustainability concept we are talking about making a business able to
sustain itself over time. What is the link with ethics: if we ignore the natural
environment we are ruining people wellbeing and so this is unethical.


EXCURSUS : Positive economics and normative economics are two standard branches of

modern economics. Positive economics describes and explains various economic phenomena,
while normative economics focuses on the value of economic fairness or what the economy
should be.

To put it simply, positive economics is called the "what is" branch of economics. Normative
economics, on the other hand, is considered the branch of economics that tries to determine
people's desirability to different economic programs and conditions by asking what "should" be
or what "ought" to be. Positive economics is a stream of economics that focuses on the
description, quantification, and explanation of economic developments, expectations, and
associated phenomena. It relies on objective data analysis, relevant facts, and associated figures.
It attempts to establish any cause-and-effect relationships or behavioural associations which can
help ascertain and test the development of economics theories. Normative economics focuses on
the ideological, opinion-oriented, prescriptive, value judgments, and "what should be" statements
aimed toward economic development, investment projects, and scenarios. Its goal is to
summarise people's desirability (or the lack thereof) to various economic developments,
situations, and programs by asking or quoting what should happen or what ought to be.

Normative economics is subjective and value-based, originating from personal perspectives,

feelings, or opinions involved in the decision-making process. An example of a normative
economic statement is: "The government should provide basic healthcare to all citizens.”

Normative premises come from sources like religion, culture, modern political philosophy and not
from natural sciences like physics.

Something natural is what is in accordance with the harmony of the universe.

LESSON 6

Basic concepts:

Ethics in general set out rules for right or morally good conduct.
The business ethics focuses on rules of good conduct in respect of business
practices.

In order to be able to draw normative conclusions about business activity, how

businesses ought to act in certain situations, we cannot just rely on a purely positive
description/analysis of the situation.
Rather we must recognise that to draw normative conclusions we need to draw on at
least some set of normative principles.
Such normative principles may be readily found in various sorts of conventional
social ethical codes, in cultural traditions or in religions.

The ethical study and their foundation is studied by the Moral Philosophy.

Moral Philosophy seeks to establish universal moral values valid for all mankind.
An example today is the Natural Rights in the UN declaration of Human rights.
We do not need to simply take ethical codes at face value in cultural context, we
need to go beyond cultural codes to see the universal ethic behind it, looking for
Moral Philosophy.

Child labor can be the first example:

Today we talk about moral concept, like child labour. When you do multinational
business, in respect of things like safety standards, should we put the same
standards ? Yes.
For example, back in 1984 one American company had a gas leak and large quantity
of toxic gas escaped. A lot of people died immediately and other suffered from
respiratory damaged.
But the plants were in accordance with the standards of India.
If you are a chemical industry and you have plants in USA that has very high safety
standards and also in India which has lower safety standards, but does this mean
that Indian people are less important ? Is this ethical ? In a multinational context and
you want to be ethical you should threat the human life everywhere in the same
method.

Today is not acceptable to threat safety standards differently in the world because
human life is involved. Here it comes the difference between Ethics and Law. They
are not totally different because most laws are inspired by ethical expirations. There
are areas of ethics that the law stays away from them. For example, lies. All the lies
are unethical but not every one breaks the law.
What a business is legally permitted to do is not the same of asking if the Business is
acting in accordance with ethical behaviours, in fact the questions are different:

What a business is legally permitted to do?

What would be the morally/ethically right way for a business to behave?

We know what a stakeholder is. Stakeholder theory can be used to think about the
impact of companies on society. Business isn’t just operating in a sort of profitability-
obsessed moral vacuum, it has an impact on society and sometimes those impacts
are ethically significant.

The idea of the legitimacy of government derives from an hypothetical social

contract. Without this contract, as Hobbes said, there would be a state of war where
everyone fights and kills each other.
As we are talking about guaranteed rights, we need to talk about responsibilities.. All
individual citizens will have social responsibility and companies will have corporate
social responsibility so we can talk of a corporate citizenship

The moral responsibility in business

The oxymoron view:

The positive oxymoron says that there is no ethics in business, the normative one
says that there ought not to be ethics in business. Positive oxymoron overlooks the
normative part of business ethics, that is looking at questions like : how the ideal
world would be ?
For the normative business ethics considerations of how business actually behave
are very largely irrelevant. The main purpose for normative business ethics is to
understand how to behave.

Therefore this version of the oxymoron argument fails completely to obliterate

business ethics. In fact there is ethics in business, just looks at some companies like
Patagonia that does a lot of environmental friendly things and so ethical.

An other view other than oxymoron view is that business ethics does not exists or is
irrelevant because what happens in the business ought not to be a matter for moral
evaluation in the first place.

In fact, for many proponents of free market capitalism, the free-for-all from any kind
of morals is the most beneficial for societies. These proponents are:

“Ultraliberalisme economique”/Market fundamentalism -> because they want to

maximise profit so best service to the society

Friedman epitomises this position. The only thought of Friedman was that social
responsibility is solely maximising profits for shareholders, overlooking the existence
and the interest of the stakeholders. The only one who could manage this situation is
the sState, who can intervene and protect the interest of the stakeholders. At the
same time, supporting a ultraliberalisme economique the government needs to have
a minimal role in the economy.

Then Friedman argues about the relation between moral responsibility of managers
and the shareholders. In fact, if the shareholders are solely interested in the profits of
a business, then managers sole responsibility is to maximise the profits, and this is a
“legal” responsibility because the managers need to manage the company in the
best interests of the shareholders.

Hence in the end he is arguing that businesses should concentrate on maximising

profits and thus shareholder wealth.

Of course, the approach of Friedman and his ideas of companies, based only on
shareholder wealth maximizations is manifestly inconsistent with the ideas of social
contract and corporate citizenship.

Friedman argument is not acceptable, because it is not true that today’s

shareholders interests are only profits.
There are many institutions or individuals who wants to invest money in ethical
manner.

There are many defects in Friedman’s argument since he had an immense influence.
Micheal Porter and Mark Kramer told that not only Friedman is inconsistent with the
idea of social contract, but the idea that business should focus only on profits
ignoring the stakeholders has contributed to an increasingly bad reputation for
business as socially dysfunctional and crudely exploitative.

Thomas Piketty would add also that it has contributed

to greater inequality in wealth and income.

In the 1990s and 2000s, many businesses began to admit and pursue social
responsibility, but it was used only in terms of philanthropy and sponsorship and then
as a core business.

The initiatives that were taken in the early days of CSR awareness were largely
greenwashing. And therefore Porter and Kramer argue a more serious approach to
CSR which will integrate social responsibility rather than an afterthought. This
approach is called creation of shared value = CSV.

Profitability and CSR are no longer seen as opposed but complementary. This can
be explained by continuing profitable activities and also contributing to social
progress in the society, acting ethically and responsibly, publicizing it and
contributing to sales this is purely the CSV.

There are many examples of business where they apply the CVS approach. The
actions to create shared value is not only for shareholders but also for stakeholders,
contributing to social progress in the community.

Some critics of course suggest that this thinking of a cooperative effort to shared
value is too optimistic as human societies are always conflictual and antagonist,
connecting to capitalism and the war between people for the economic power this is
called economic war

In any case Porter and Kramer see the human societies capable to cooperate in the
pursuit of social progress, calling the economic peace oppose to the economic war.

For them, this switch to CVS is essential for capitalism to survive, as a result in the
private sectors businesses we can see many scandals as the financial crisis of 2008,
pharmaceutical scandals and etc.

In the face of such a growing challenge to its legitimacy Porter and Kramer hold that
if private enterprise capitalism is to survive it must begin forthwith to base its strategy
on creating shared value and thus in effect to bring CSR into the very heart of
strategy formation.

LESSON 8 : INTRODUCTION TO GENERAL SYSTEM THINKING

System thinking is not so much a methodology that differs in conceiving complex social realities.
While there is a certain resemblance with institutionalism.

In general the System Thinking is an approach we can use when we try to understand complex
systems with some philosophical insights. It was born through the merger of subjective and
objective approaches.

System theories actually come from natural sciences. Ludwig Van Bertalanffy is not officially the
author of this theories, but for sure one of the firsts. He developed this concept from this work in
the field of biology, and then he decided to extend this approach used in other disciplines arguing
that all systems have certain structural properties in common, hence the General System
Theory.

He basically argued that everything was strictly based on a mathematical relationship or equation,
developing a resolutive - compositive method. He based himself on Poincare that put the
evolution of biological spices that Dawning couldn’t prove mathematically in a rigorous model or
system.

Indeed to understand complexity we should first break down the complex phenomenon into small
simple elements which can be readily understood. Especially when these elements are
interdependent. Indeed, we can see the all picture as the sum of the parts that are not static but
they evolve. those simple parts are themselves evolving within the system and shaped by its
overall behaviour.

Hence in a system approach we will have a connection in which all the parts are influence by the
path of development of the system as a whole whole through a variety of feedback loops. We can
not risk to make it too simplistic. To understand how systems interact with environment the
feedback loops are very good example.if you call a callcenter, when the music is playing you
might decide to hang up and try again, this process creates a loop.

Leet’s see the difference between Balancing and Reinforcing loops.

Balacing loops occur in system that are self regulating. The system has a goal and when the goal
isn’t met, intense pressure is applied to reach it. Like your refrigerator that has the goal to keep the
food cold and if something hot enters it, it decreases the temperature to make it cold.
Reinforcing loops occur in system that steadily grow and/or collapse over time. Lie the nuclear
arms race between US and Russia.

Therefore, Van Bertalanffy and others first developed the conception of systems with multiple
feedback loops in the study of biological organism growth and evolution. But one of their key
insights was that the same general conceptual approach together with its related mathematical
modelling of feedback loops could actually be applied to systems well beyond the field of biology;
to other areas of natural science and engineering and even to the human sciences and social
policy. This is General Systems Theory.

When applied to the human sciences General System Theory allows us to integrate and
understand complex systems, but especially It also allows us to model and develop a more
rigorous understanding of something of which economists have long been aware:
unintended consequences of myriad individual actions.

We cannot discuss the origins of Systems theory without mention Cybernetics. This is like an
evolution of system theory when a mathematical model is applied. For example AI uses the
Adaptive Learning Loop, that sets a goal of correction. The robot indeed will do something and if
it’s wrong will correct himself until he reaches the main goal.

Another application of System Theory is the Complexity Theory. In Complexity theory once again
natural or human phenomena are studied as interrelated systems with multifarious positive and
negative feedback loops present: and the eventual state to which the system tends can in certain
systems be highly sensitive to the initial conditions from which it starts.

Another fascinating aspect of the system theory is the butterfly effect that basically states that
The evolution of a system is dependent by initial condition, little differences at the beginning can
have huge effects on the outcome.

We could do an example with Economics and Feedback loops, when the noise will raise the price
of a stock and so people will buy more, leading to an increase in supply, and therefore an increase
in price and so another increase in supply. But this loop is not explained by a specific condition,
only for the self-fulfilling prediction.

LESSON 9 : SYSTEM THEORIES IN THE HUMAN SCIENCES.

Systems theory and its approaches even if they originated in natural sciences can be applied to
the human sciences. Indeed this methodology can be applied to all the theories we have studied
like objectivist, subjectivist or in critical theory. Furthermore, this approach enable us to see the
social phenomena as wholes which are more then the sum of parts including their feedback loops
given as the results of social interactions.

Let’s see some examples in human and management sciences.

Economics.

In the basic theory of demand and supply the adjustment process to equilibrium will generate
feedback loops oscillation that will lead to the equilibrium point. Furthermore, these oscillations
might be explosive, meaning that the market will tend to diverge even further from the equilibrium
or damped.

Feedback loops are also very clearly present in the theory of asset price bubbles that are usually
dynamically unstable. (bubble of 2009).

Another application of the System theory in economics is the consequence of micro action to the
overall macro picture. Focusing on the intentions of actors we can elaborate a connection with the
subjectivist interpretive thinking.

Indeed one of Hayek masterpiece was the the study of the unintended consequences of multiple
individual intentional actions. This idea can not be understand as the sum of parts, indeed when
they tried to do this the fail in understanding the concept of systematic risk. Meaning risks at
macro level that were being produced by myriad individual lending and asset purchase decisions
but which the actors neither intended nor understood. (BETA).

Think about mortgage back securities: the banks knew that they were lending to subprime
borrowers, so they sought to move the borrowing from their portfolio creating mortgage back
securities. If you sell it to somebody else and put different mortgages together it seems to be
“diversified”, so nobody understood the systemic risk.

Another human science is the organisational theory, that is based on the interactions of micro
systems. Thinking of System Theory, the first one introducing them in this human science was
Peter Senge. He thought that organisations made by human beings that can adapt and evolve,
they follow their process within the development of the company and so we can not use static
approaches. Think about companies that also change their organisations and strategy
because of the interaction with the environment and its feedback. Indeed organisations are
adaptive organism that need to change to survive.

Also medical sciences consider the human body as a whole, composed by various parts. Also
here we have the echo of Hayek’s unintended systemic consequences of myriad individual
actions.

Finally in our own day, we can apply the system thinking for the Cover 19 virus and its
spread. Everything was connected, and needed to be observed as a loop. (Density populated
cities are more incline to spread viruses, not only for the density but also because little space of
movement decrease the immunity defences, so there are effects from the system to the people)

System theory can finally be applied to practical problem solving.

As good systems theorists we need to be aware that social realities are not simple, and should
not be considered in the light of single disciplines and so inevitably in single dimensions. Hence a
first insight from a systems approach is that our attempts to resolve social problems must first
and foremost be multidisciplinary in approach. For example the management of an airline involve
logistic, chemistry, environmental impact -> even valid for politics, because the impact are various
-> you need to think to all the various aspect -> avoid “silo thinking” (thinking only about one
aspect) -> not a good way to approach complex system.

Practical advice to be a good system thinker -> habits of a system thinker:

1. Seek to understand the big problem -> see the forest in the threes.

2. Observe how elements within systems change over time, generating patterns and trends.

3. Recognizes that a system’s structure generates its behaviour -> how the part interacts and
feedback to each other -> how the structure impacts the behaviour.

4. Change perspective to increase understanding. -> in particular with human systems

5. Considers an issue fully and resist the urge to come to a quick conclusion.

6. Check results and changes actions if needed “successive approximation”.

7. Recognizes the impact of the time delays when exploring cause and effect relationship.

8. Use understanding of system structure to identify possible leverage points. -> where can
we have the least impact for the less effort.

9. Finds where united consequences emerge.

10. Consider how mental models affects the current reality -> Kant -> people observe the
world in a framework -> in order to understand the way people interact in the system has to
understand how they see the world.

11. Surface and tests assumption -> different people with different backgrounds, what are
their backgrounds.

12. Identify the circular nature of complex causing and effect relations -> see the feedback
loop in everything -> idea of circular economy: expression of system thinking.

LESSON 12.
Scepticism of all kind is linked with conspiracy theories. This situation and a higher
grade of scepticism can be corrosive and lead to a new dark age, where instead of
science we use superstition.
Since the most ancient times human beings have applied their rationality in order to
understand the world to transform and improve it and the way we interact with it
(through technology)
Since (Socrates and Plato), as we can see in the Greek medicine and political theory
and in roman engineer.
The purpose of scientific reflection is to obtain truth, what’s really going on in the world,
going beyond the common sense views of the world -> we should go through the doxa
(it is a Greek terminology, it means opinion or unfounded common sense views of the
world) and work to understand in a rational manner what is going in the world, to obtain
the truth (epistémé, this is how the Greeks called it).

The fearless critical search for truth became less during the Middle Ages in Europe
under the influence of all embracing religious but came back during the Enlightenment
in Europe, until now.
This as we have seen led the world to the born of the natural sciences and later of the
human sciences from 17th century, until now.
But today there is still a widening skepticism regarding science: POST MODERNINSM
Postmodernism -> the rationalism of the Enlighenment brought to the 20th century a
whole range of disciplines from art to literal to philosophy to epistemology and into
natural and human science, but the idea of truth by reason was challenged by
epistemological and cultural relativism.
Rising scepticism for natural and human science as example vaccines can be culturally
relative or have “alternative facts” -> and so no scientific theory should be preferred over
any other empirical evidence. Creation narrative are at the same level with evolutionary
biology -> social media allow that and echo-chamber effect = if a people is looking for
information, we have a tendency to notice the information that reinforces our view
(people believe what they want to believe).
Post modernism is a huge challenge for science -> how can we defend science? If
science is not as perfect as its portraits itself. The attainment of scientific truths is
actually elusive, there are few thrust that have been established.

Science does not produce absolute truths, it can get things wrong.
If there’s a few truths established, it means that science can get things wrong, we
should not put blind fate in science methods -> scientist needs to be aware also of the
limitations of what can be established by science, as Socrates thinking.
Methodology of Popper Attempt to solve the logical problem of inductivism (Hume) -
(where in phenomena there should be a necessary connection with explanation ) - In
order to have an explanation, the theory should work for an infinite set of phenomena.
This rule is made on observation because our empirical test is made on a finite set of
data, so it should be proved wrong every day, can not be about the future (if I’ve never
seen a monkey fly, tomorrow it can happen and my rule would be wrong) empirical test
can not conclude that the theory is valid for an infinite set of data you can have a
millions of data, but that doesn’t mean that the generalization is right you can not
make inductive inferences, that are never acceptable!
The solution for Popper is falsification if you can find the falsifying case, you can
prove the theory wrong, so that proof is always valid science should seek to falsify their
theory so science can progress through falsification.
In this case for every falsification science need a reformulation or perhaps even
abandonment.

At the very most extensive testing we may accept the theory as corroborated, in sense
that we take it true and we can use it for practice but never as a certainty.
This means that instead of seeking confirmation of the theories, the scientists should
look for falsification.
The classic Popperian conception of science is a continual process of Conjectures and
Refutations.
This can provide the basis for a balanced skepticism, in order to prevent scientist to
consider themselves as supplier of truth.
Science is good and pull forward, but we should not put too much blind fate in it.

Clinical trial for the vaccine:

1. Full blown clinical trial -> we can not infer on a limited number of tests.
2. Extensive clinical trial: half of the trials are given a placebo, and the other half are
given the real medicine/vaccine , to see if it’s really the vaccine that works or if
the test falsifies the theory.
3. We can end with a provisional acceptance of a theory as useful for practice ->
don’t be surprised if the problem shows up later.
 ASTRA ZENECA CASE
In the light of point 3 it is interesting to consider the recent pronouncement of the
European Medicines Agency regarding possible serious (blood clotting) side effects of
the Astra Zeneca vaccine. After review of data on many millions of cases of
administered vaccine and reported cases of clotting, they concluded that while there
have been a small number of such cases no causal link has been established. They
were wisely circumspect in announcing that that does not mean that there is no causal
link: but we can provisionally accept in practice that there is no such link.

Popper suggest Critical Rationalism -> be aware of the extent of our ignorance (as
Socrates)
“A rationalist is simply someone for whom it is more important to learn than to be proved
right; someone who is willing to learn from others - not by simply taking over another's
opinions, but by gladly allowing others to criticize his ideas and by gladly criticizing the
ideas of others”
KARL POPPER