The Theory of Reflexivity by George Soros
http://www.geocities.com/ecocorner/intelarea/gs1.html
Delivered April 26, 1994 to the MIT Department of Economics World Economy Laboratory Conference Washington, D.C.
When Rudi Dornbusch invited me to speak at this conference, he gave me a totally free hand in deciding what I wanted to talk about. Well, I want to discuss a subject which fascinates me but doesnt seem to interest others very much. That is my theory of reflexivity which has guided me both in making money and in giving money away, but has received very little serious consideration from anybody else. It is really a very curious situation. I am taken very seriously; indeed, a bit too seriously. But the theory that I take seriously and, in fact, rely on in my decision-making process is pretty completely ignored. I have written a book about it which was first published in 1987 under the title The Alchemy of Finance; but it received practically no critical examination. It has been out of print for the last several years but demand has been building up as a result of my increased visibility, not to say notoriety, and now the book is being re-issued. I think this is a good time to get the theory seriously considered.
I was invited to testify before Congress last week and this is how I started my testimony. I quote: I must state at the outset that I am in fundamental disagreement with the prevailing wisdom. The generally accepted theory is that financial markets tend towards equilibrium, and on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it. In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy. I did not have time to expound my theory before Congress, so I am taking advantage of my captive audience to do so now. My apologies for inflicting a very theoretical discussion on you.
The theory holds, in the most general terms, that the way philosophy and natural science have taught us to look at the world is basically inappropriate when we are considering events which have thinking participants. Both philosophy and natural science have gone to great lengths to separate events from the observations which relate to them. Events are facts and observations are true or false, depending on whether or not they correspond to the facts.
This way of looking at things can be very productive. The achievements of natural science are truly awesome, and the separation between fact and statement provides a very reliable criterion of truth. So I am in no way critical of this approach. The separation between fact and statement was probably a greater advance in the field of thinking than the invention of the wheel in the field of transportation.
But exactly because the approach has been so successful, it has been carried too far. Applied to events which have thinking participants, it provides a distorted picture of reality. The key feature of these events is that the participants thinking affects the situation to which it refers. Facts and thoughts cannot be separated in the same way as they are in natural science or, more exactly, by separating them we introduce a distortion which is not present in natural science, because in natural science thoughts and statements are outside the subject matter, whereas in the social sciences they constitute part of the subject matter. If the study of events is confined to the study of facts, an important element, namely, the participants thinking, is left out of account. Strange as it may seem, that is exactly what has happened, particularly in economics, which is the most scientific of the social sciences.
Classical economics was modeled on Newtonian physics. It sought to establish the equilibrium position and it used differential equations to do so. To make this intellectual feat possible, economic theory assumed perfect knowledge on the part of the participants. Perfect knowledge meant that the participants thinking corresponded to the facts and therefore it could be ignored. Unfortunately, reality never quite conformed to the theory. Up to a point, the discrepancies could be dismissed by saying that the equilibrium situation represented the final outcome and the divergence from equilibrium represented temporary noise. But, eventually, the assumption of perfect knowledge became untenable and it was replaced by a methodological device which was invented by my professor at the London School of Economics, Lionel Robbins, who asserted that the task of economics is to study the relationship between supply and demand; therefore it must take supply and demand as given. This methodological device has managed to protect equilibrium theory from the onslaught of reality down to the present day.
I don't know too much about the prevailing theory about financial markets but, from what little I know, it continues to maintain the approach established by classical economics. This means that financial markets are envisaged as playing an essentially passive role; they discount the future and they do so with remarkable accuracy. There is some kind of magic involved and that is, of course, the magic of the marketplace where all the participants, taken together, are endowed with an intelligence far superior to that which could be attained by any particular individual. I think this interpretation of the way financial markets operate is severely distorted. That is why I have not bothered to familiarize myself with efficient market theory and modern portfolio theory, and that is why I take such a jaundiced view of derivative instruments which are based on what I consider a fundamentally flawed principle. Another reason is that I am rather poor in mathematics.
It may seem strange that a patently false theory should gain such widespread acceptance, except for one consideration; that is, that all our theories about social events are distorted in some way or another. And that is the starting point of my theory, the theory of reflexivity, which holds that our thinking is inherently biased. Thinking participants cannot act on the basis of knowledge. Knowledge presupposes facts which occur independently of the statements which refer to them; but being a participant implies that ones decisions influence the outcome. Therefore, the situation participants have to deal with does not consist of facts independently given but facts which will be shaped by the decision of the participants. There is an active relationship between thinking and reality, as well as the passive one which is the only one recognized by natural science and, by way of a false analogy, also by economic theory.
I call the passive relationship the cognitive function and the active relationship the participating function, and the interaction between the two functions I call reflexivity. Reflexivity is, in effect, a two-way feedback mechanism in which reality helps shape the participants thinking and the participants thinking helps shape reality in an unending process in which thinking and reality may come to approach each other but can never become identical. Knowledge implies a correspondence between statements and facts, thoughts and reality, which is not possible in this situation. The key element is the lack of correspondence, the inherent divergence, between the participants views and the actual state of affairs. It is this divergence, which I have called the participants bias, which provides the clue to understanding the course of events. That, in very general terms, is the gist of my theory of reflexivity.
The theory has far-reaching implications. It draws a sharp distinction between natural science and social science, and it introduces an element of indeterminacy into social events which is missing in the events studied by natural science. It interprets social events as a never-ending historical process and not as an equilibrium situation. The process cannot be explained and predicted with the help of universally valid laws, in the manner of natural science, because of the element of indeterminacy introduced by the participants bias. The implications are so far-reaching that I cant even begin to enumerate them. They range from the inherent instability of financial markets to the concept of an open society which is based on the recognition that nobody has access to the ultimate truth. The theory gives rise to a new morality as well as a new epistemology. As you probably know, I am the founderand the funderof the Open Society Foundation. That is why I feel justified in claiming that the theory of reflexivity has guided me both in making and in spending money.
But is it possible to come up with a valid new theory about the relationship between thinking and reality? It seems highly unlikely. The subject has been so thoroughly explored that probably everything that can be said has been said. In my defense, I did not produce the theory in a vacuum. The logical indeterminacy of self-referring statements was first discussed by Epimenides, the Cretan philosopher, who said, Cretans always lie, and the paradox of the liar was the basis of Bertrand Russell's theory of classes. But I am claiming more than a logical indeterminacy. Reflexivity is a two-way feedback mechanism, which is responsible for a causal indeterminacy as well as a logical one. The causal indeterminacy resembles Heisenbergs uncertainty principle, but there is a major difference: Heisenbergs theory deals with observations, whereas reflexivity deals with the role of thinking in generating observable phenomena.
I am thrilled by the possibility that I may have reached a profound new insight, but I am also scared because such claims are usually made by insane people and there are many more insane people in the world than there are people who have reached a profound new insight. I wonder whether my insight has an objective validity or only a subjective significance.
That is why I am so eager to submit my ideas to a critical examination and that is why I find the present situation, where I am taken so seriously but my theory is not, so frustrating. As I have said before, the theory of reflexivity has received practically no serious consideration. It is treated as the self-indulgence of a man who made a lot of money in the stock market. It is generally summed up by saying that markets are influenced by psychological factors, and that is pretty trite. But that is not what the theory says. It says that, in certain cases, the participants bias can change the fundamentals which are supposed to determine market prices.
I ask myself, why did I fail to communicate this point? The answer I come up with is that I tried to say too much, too soon. I tried to propound a general theory of reflexivity at a time when reflexivity as a phenomenon is not even recognized. In retrospect, I think I should have started more modestly; I should have tried to prove the existence of reflexivity as a phenomenon before I tried to revise our view of the world based on that phenomenon. It can be done relatively easily, and the financial markets provide an excellent laboratory in which to do it. And that is what I should like to do here today.
What I need to do is to demonstrate that there are instances where the participants bias is capable of affecting not only market prices but also the so-called fundamentals that market prices are supposed to reflect. I have collected and analyzed such instances in The Alchemy of Finance, so all I need to do here is simply to enumerate them. In the case of stocks, I have analyzed two particular instances which demonstrate my case perfectly; one is the conglomerate boom and bust of the late 1960s, and the other is the boom and bust of real estate investment trusts in the early 70s. I cite may other instances, such as the leveraged buyout boom of the 1980s and the boom/bust sequences engendered by foreign investors. But these cases are less clear cut.
The common thread in the two instances I have mentioned is so-called equity leveraging; that is to say, companies can use inflated expectations to issue new stock at inflated prices, and the resulting increase in earnings per share can go a long way to validate the inflated expectations. But equity leveraging is only one of many possible mechanisms for transmitting the participants bias to the underlying fundamentals. Consider, for instance, the boom in international lending which occurred in the 1970s and led to the bust of 1982. In the boom, banks relied on so-called debt ratios, which they considered as objective measurements of the ability of the borrowing countries to service their debt, and it turned out that these debt ratios were themselves influenced by the lending activity of the banks.
In all these cases, the participants bias involved an actual fallacy: in the case of the conglomerate and mortgage trust booms, the growth in earnings per share was treated as if it were independent of equity leveraging; and in the case of the international lending boom, the debt ratio was treated as if it were independent of the lending activities of the banks. But there are other cases where no such fallacy is involved. For instance, in a freely-fluctuating currency market, a change in exchange rates has the capacity to affect the so-called fundamentals which are supposed to determine exchange rates, such as the rate of inflation in the countries concerned; so that any divergence from a theoretical equilibrium has the capacity to validate itself. This self-validating capacity encourages trend-following speculation, and trend-following speculation generates divergences from whatever may be considered the theoretical equilibrium. The circular reasoning is complete. The outcome is that freely-fluctuating currency markets tend to produce excessive fluctuations and trend-following speculation tends to be justified.
I believe that these examples are sufficient to demonstrate that reflexivity is real; it is not merely a different way of looking at events; it is a different way in which events unfold. It doesn't occur in every case but, when it does, it changes the character of the situation. Instead of a tendency towards some kind of theoretical equilibrium, the participants views and the actual state of affairs enter into a process of dynamic disequilibrium which may be mutually self-reinforcing at first, moving both thinking and reality in a certain direction, but is bound to become unsustainable in the long run and engender a move in the opposite direction. The net result is that neither the participants views nor the actual state of affairs returns to the condition from which it started. Once the phenomenon of reflexivity has been isolated and recognized, it can be seen to be at work in a wide variety of situations. I studied one such situation in The Alchemy of Finance which was particularly relevant at the time the book was written. I called it Reagans Imperial Circle. It consisted of financing a massive armaments program with money borrowed from abroad, particularly from Japan. I showed that the process was initially self-reinforcing but it was bound to become unsustainable. A similar situation has arisen recently with the reunification of Germany, which eventually led to the breakdown of the European Exchange Rate Mechanism. The ERM operated in near- equilibrium conditions for about a decade before the reunification of Germany created a dynamic disequilibrium.
What renders reflexivity significant is that it occurs only intermittently. If it were present in all situations all the time, it would merely constitute a different way of looking at events and not a different way for events to evolve. That is the point I failed to make sufficiently clear in my book. I presented my theory of reflexivity as a general theory in which the absence of reflexivity appears as a special case. I was, of course, trying to imitate Keynes, who proposed his general theory of employment in which full employment was a special case. But Keynes proposed his theory when unemployment was a well-established fact, whereas I proposed the theory of reflexivity before the phenomenon has been recognized. In doing so, I both overstated and understated my case. I overstated it by arguing that the methods and criteria of the natural sciences are totally inapplicable to the study of social phenomena. I called social science a false metaphor. That is an exaggeration because there are many normal, everyday, repetitive situations which can be explained and predicted by universally valid laws whose validity can be tested by scientific method. And even historical, reflexive processes have certain repetitive aspects which lend themselves to statistical generalizations. For instance, the trade cycle follows a certain repetitive pattern, although each instance may have some unique features and there is a lot more to be gained from understanding the unique features than the repetitive pattern.
I have also understated my case by presenting reflexivity as a different way of looking at the structure of social events rather than a different way in which events unfold when reflexivity comes into play. I made the point that, in natural science, one set of facts follows another irrespective of what anybody thinks; whereas in the events studied by social science, there is a two-way interaction between perception and facts. I also drew a distinction between humdrum, everyday events in which the element of indeterminacy introduced by the reflexive connection can be treated as mere noise, and historical events where the reflexive interaction brings about an irreversible change both in the participants' views and the actual state of affairs. All this is very profound and very significant, but the really interesting undertaking is to study the difference between humdrum and historical events and to gain a better understanding of historical processes.
I have done a lot of work in that direction since I wrote The Alchemy of Finance, not so much in the financial markets as in the historical arena. I have come to distinguish between normal conditions and far-from-equilibrium conditions. In normal conditions, there is a tendency for the participants views and the actual state of affairs to converge or, at least, there are mechanisms at work to prevent them from drifting too far apart. I call these conditions normal, because that is what our intellectual traditionsincluding philosophy and scientific method have prepared us for. I contrast them with far-from- equilibrium conditions, where the participants views are far removed from the actual state of affairs and there is no tendency for the two of them to come together. I have always found the far-from-equilibrium conditions much more fascinating, and I have studied them both in theory and in practice.
There are two very different kinds of far-from-equilibrium conditions: one is associated with the absence of change, and the other with revolutionary change. These two opposite poles act as strange attractorsan expression with which has become familiar since chaos theory has come into vogue.
So we can observe three very different conditions in history: the normal, in which the participants views and the actual state of affairs tend to converge; and two far-from- equilibrium conditions, one of apparent changelessness, in which thinking and reality are very far apart and show no tendency to converge, and one of revolutionary change in which the actual situation is so novel and unexpected and changing so rapidly that the participants views cannot keep up with it.
Interestingly, the rise and fall of the Soviet system presents both extremes. During Stalins time, reality and dogma were very far apart, but both of them were very rigid and showed no tendency to come together. Indeed, the divergence increased with the passage of time. When the system finally collapsed, people could not cope with the pace of change and events spun out of control. That is what we have witnessed recently.
But the two extremes can also be observed in totally unrelated contexts. Take, for instance, the banking industry in the United States. After the breakdown of the banking system in the Great Depression, it became closely regulated and very rigid; but when the restrictions were relaxed, the industry swung to the other extreme and entered a period of revolutionary change. I can locate the transition point with great precision: it was on that evening in 1973 when the management of First National City Bank held an unprecedented meeting for securities analysts in order to promote the stock as a growth stock. The pattern in the rise and fall of the Soviet system closely parallels the pattern in the fall and rise of the American banking system.
These three conditions are perhaps better explained by using an analogy. The analogy is with water, which also can be found in nature in three conditions: as a liquid, a solid or a gas. The three historical conditions I am trying to describe are as far apart as water, ice and steam. In the case of H2O, we can define exactly the three conditions; it has to do with temperature. Can we establish a similar demarcation line among the three conditions of historical change? I believe we can, and it has to do with the values that guide people in their actions. But I am not yet ready to give a firm answer. That is the problem that I am currently working on. But I feel rather exposed in dealing with such an esoteric issue. I need to know whether what I have said so far makes any sense; that is why I have imposed on you by giving you this rather heavy theoretical lecture, and I would welcome your comments either here or on another occasion.
--George Soros.
Critical Social Theory - For Prof. Larry J. Ray
Habermas's Critical Theory: Rationality, Reflexivity and Its Limits
by Joo Hyoung Ji
MA in Contemporary Sociology, Department of Sociology, Lancaster University, UK
TABLE OF CONTENTS
I. Introduction: Critical Theory and Reflexivity
II. Habermas's Theory of Communicative Rationality
1. Communicative Rationality: Intersubjective and Comprehensive
2. A Theory of Argumentation
3. Types of Argumentation and Universal Validity Claims
III. Reconstruction of Habermas's Theory of Communicative Reflexivity and its Critique
1. The Theory of Communicative Reflexivity
2. The Limits of Communicative Reflexivity
IV. Concluding Remarks
I. Introduction: Critical Theory and Reflexivity
Jurgen Habermas, one of the forerunners of critical theory in the second generation of the Frankfurt School, criticizes his seniors, Adorno and Horkheimer that their critique of modernity leads to a cultural pessimism, which blind the "unfulfilled potential of Western Modernity" because of their attachment to the philosophy of consciousness that fails to distinguish between two types of rationalization: instrumental rationality and communicative rationality. (Ray, 1993: 11-12) Habermas believes that modernization and rationalization involves not only purposive rationality but also communicative rationality which is oriented towards consensus that can be the basis of critique and progress. However, to my impression, it is questionable if Habermas's critical theory is fully critical. To be sure, Habermas's theory has been criticized by many theorists including post-colonial theorists and feminists (interestingly, one of their critical article was titled "What is Critical about Critical Theory?" (Fraser, 1985)). Indeed Habermas's theory tends to attach to western notion of rationality, and neglect so-called "politics of difference" which draws attention to the categories of "the other." This is because Habermas's theory is based on the notion of rationality, which presuppose an agreement or consensus, and rule-following. It looks like a significant departure from the conventional Marxism which emphasizes conflicts between different social factions [classes] to a kind of socio-pathological approach which originated from the Durkheimian tradition and has developed through Parsonsian functionalism. As a result, whereas Habermas's theory has an implicit theory of "communicative reflexivity," he also lacks a significant portion of the notion of reflexivity which is struggling against others or, more importantly, which is both critical and hermeneutic in that while in the given context, it thinks beyond the given contexts. The problem of Habermas's theory of communicative rationality is not only that it neglects the context, but also that it fails to show how to transcend the context in spite of his effort because he fails to see the coexisting another contexts of action; actors does not fully share their contexts. The purpose of this paper is to clarify and reconstruct a Habermasian theory of communicative reflexivity and then to point to its limits.
II. Habermas's Theory of Communicative Rationality
1. Communicative Rationality: Intersubjective and Comprehensive
Habermas's The Theory of Communicative Action (hereafter TCA, vol. 1, 1984; vol. 2, 1987; 1981 in German) is primarily concerned with the problem of rationality: "how rationality can be defined?" Against the concept of cognitive-instrumental rationality, which is monological and only deals with subject-object relation, Habermas suggests the notion of "communicative rationality" which is intrinsically dialogical and primarily concerned with intersubjective relation.
This concept of communicative rationality carries with it connotations based ultimately on the central experience of the unconstrained, unifying, consensus bringing force of argumentative speech, in which different participants overcome their merely subjective views and, owing to the mutuality of rationally motivated conviction, assure themselves of both the unity of the objective world and the intersubjectivity of their lifeworld. (TCA 1: 10)
First of all, it should be noted that Habermas emphasizes the role of consensus in defining rationality. As many critics labels (Thompson, 1981; Giddens, 1985; Outhwaite, 1994), Habermas suggests a kind of "consensus theory of truth." Habermas states, "The condition for the truth of statements is the potential agreement of everyone else" (Vorstudien und Erganzungen zur Theorie des kommunicativen Handelns, 107, in Outhwaite, 1994: 41) It can be said that Habermas's notion of "truth" refers to agreement or consensus reached through critical discussion. In TCA 1, Habermas's position leads to the notion of "communicative rationality." Habermas maintains that what is rational means what is communicatively, i. e. intersubjectively justified or justifiable as rational. In other words, what is rational is what succeeds to give an intersubjectively well grounded argument, and what is irrational is what fails to do so: "The rationality of those who participate in ... communicative practice is determined by whether, if necessary, they could, under suitable circumstances, provide reasons for their expressions." (TCA 1: 17) As a result, the notion of communicative rationality is comprehensive. Firstly, as we have seen, Habermas considers the subject-subject relation of communication as well as the subject-object relation of cognition and appropriation: "There are internal relations between the capacity for decentered perception and manipulation of things and events on the one hand, and the capacity for reaching intersubjective understanding about things and events on the other." (TCA 1: 14) That is, the notion of cognitive-instrumental rationality derived from "the philosophy of consciousness, " which only assumes the subject-object relation is too narrow, and has to be incorporated into more comprehensive notion of communicative rationality since the former is mediated only through the latter: constative (cognitive) speech acts[1] as well as instrumental action is rational only in so far as it is communicatively constructed. This also accounts for why Habermas proposes the notion of communicative rationality.
...we give up the paradigm of the philosophy of consciousness-namely, a subject that represents objects and toils with them-in favor of the paradigm of linguistic philosophy-namely, that of intersubjective understanding or communication-and puts the cognitive-instrumental aspect of reason in its proper place as part of a more encompassing communicative rationality."(TCA 1: 390)
Secondly and accordingly, communicative rationality, or rationality inherent in communicative practice extends over a much broader spectrum. Habermas applies the concept of communicative rationality to other types of action and statement: normatively regulated actions, self-presentations, evaluative expressions.[2] For these actions are also open to argumentation, i. e. justification and critique as Habermas puts it, "we can say that actions regulated by norms, expressive self-presentations, and also evaluative expressions supplement constative speech acts in constituting a communicative practice." (TCA 1: 17)
2. A Theory of Argumentation
Habermas develops his idea of communicative rationality so that it relates to a theory of argumentation, which is an extension of his earlier work on "universal pragmatics," an attempt to "identify and reconstruct universal conditions of possible understanding [Verstandigung]." (Habermas, 1979: 1) In so doing, Habermas clarifies the conditions of rationality, i. e. possible intersubjective understanding. Argumentation refers to "the type of speech in which participants thematize contested validity [of an expression] and attempts to vindicate or criticize them through argument," and an "argument contains reasons or grounds that are connected in a systematic way with the validity claim of a problematic expression." (TCA 1: 18) Validity claim is equivalent to "the assertion that the conditions for the validity of an utterance are fulfilled." (TCA 1: 38) That is, in uttering a sentence, the speaker, implicitly or explicitly, makes a validity claim of which the form might be one of: "It is true that p (proposition)," or "It is right that a (description of action)," or "I mean what I say when I here and now utter s (a first-person sentence)."(TCA 1: 38). Every utterance implicitly raises validity claims. And when the speaker raises a validity claim implicitly or explicitly, the hearer has only the choice of accepting (yes) or rejecting (no), i. e., validating or invalidating it in the end. Under suitable circumstances, the hearer is expected and required to assess the claim with proper grounds that can be accepted by others including the speaker. Habermas expects that in a given context, the soundness of the reasons (validity claims), which is able to convince the participants in a discourse, would give the argument "strength." For this purpose, Habermas elaborates the logic of argumentation through an examination of three analytical aspects of argumentative speech: argumentation as process, procedure, and production of cogent argument. (TCA 1: 25) Firstly, he maintains that, as a process which presupposes the general symmetrical conditions of "ideal speech situation," in which any constraint is allowed except the force of better argument, argumentation is conceived "as a reflective continuation with different means, of action oriented to reaching understanding." Secondly, Habermas insists that argumentation, as a procedure, has to do with "a form of interaction subject to special rules." The argumentative discourse is normally regulated by the thematization of a problematic validity claim, hypothetical attitude free of the pressure of action and experience, and the test of the problematic claim only with reasons. Finally, argumentation aims to produce cogent arguments, which brings about intersubjective recognition of the validity claim and transforms opinion into knowledge. In brief, Habermas requires of argumentation to involve 1) an equal and open chance of participation 2) reasonable treatment of validity claim, and 3) production of argument; none of these requirements can be neglected. Each aspect can be respectively said to aim at "the assent of a universal audience, "the attainment of a rationally motivated agreement," and "the discursive redemption of a validity claim." (TCA: 26) In short, Habermas suggests a discursive and argumentative process, which presupposes a symmetrically structured "ideal speech situation," in which people can equally raise a claim on the validity of a certain action or statement,: they can suggest a good argument, ground or reason to justify or criticize it, and are expected to reach a rational agreement. Thus, for Habermas, the rationality of social action is and should be assessed in relation to the validity claims and the possibility of reaching agreement in critical discourse, and thus rationality is conceived as inherent in communicative practice which is intrinsically oriented towards consensus.
3. Types of Argumentation and Universal Validity Claims
Habermas suggests five types of argumentation, [3]which is oriented towards rational consensus-conclusion, and their corresponding types of validity claims (TCA 1: 19-23; 38-40): (a) "theoretical discourse" about cognitive-instrumental actions and expressions, (b) "practical discourse" about moral-practical expressions or normatively regulated actions, (c) "aesthetic criticism"[4] about evaluative expressions, (d) "therapeutic critique"[5] about expressive expressions, and finally, (e) "explicative discourse" about comprehensibility of symbolic expressions.[6] Such differentiation of argumentation is related to the differentiation of validity claims. That is, each type of argumentation is based on the corresponding type of validity claim, of which the grounding is in the establishment of correspondingly differentiated reference points (TCA 1: 19-23; 38-40): (a') the claims to the truth of the proposition or efficiency of teleological action, (e. g. here the validity claim takes the form of "His description is true/false" or "His action was efficient/inefficient"), grounded by establishing through the existence of states of affairs (e. g. because it does/does not fit to the reality" or "because it succeeded/failed to achieve its goal."); (b') the claims to the rightness of norms of action, (e. g. "His behaviour is right/wrong"), by establishing the accceptability of actions or norms (e. g. "because it is morally acceptable/unacceptable."); (c') the claims to the adequacy of standards of value, (e. g. "His painting is a rubbish"), by establishing the preferability of values (e. g. "because it does not show appropriate aesthetic understanding."); (d') the claims to the truthfulness or sincerity of expressions (e. g. "He is insincere"), by showing the transparency of self-presentations (e. g. "because his behaviour looks inconsistent.")[7]; and (e') the claims to the comprehensibility or well-formedness of symbolic constructs (e.g. "The statement is intelligible/unintelligible"), by establishing that the symbolic expression is produced correctly (e. g. "because its grammar is right/wrong). The utterances in each argumentation is understandable only in connection with discursively redeemable validity claims, but it is the context what kind of validity claim is involved in argumentation. (TCA 1: 36) However, Habermas asserts that "the forms of argument are differentiated according to universal validity claims." Although the latter are often recognizable only in connection with the context of an utterance, they are not first constituted by contexts and domains of action. That is, the external (for example, institutional or contextual) differentiations build on internal differentiations between various forms of argument and their corresponding universal validity claims. (TCA 1: 37-38) In short, context helps to select a validity claim and the validity determines the type of argumentation. The following figure shows how the universal validity claims and the particular context play their parts in selecting the type of argumentation.
What Habermas attempts is to identify and reconstruct "the rational internal structure of processes of reaching understanding"[8] in terms of "the validity claims of propositional truth, normative rightness, and sincerity or authenticity"; "the concept of rationally motivated agreement, that is, one based on the intersubjective recognition of criticizable validity claims"; and "the concept of reaching understanding as the cooperative negotiation of common definitions of the situation." Here Habermas maintain that "if the requirement of objectivity is to be satisfied, the structure would have to be shown to universally valid in a specific sense." (TCA 1: 137)[9] According to Habermas, "all arguments require the same basic form of organization," which contributes to developing intersubjective conviction by the force of the better argument. (TCA 1: 36) To be sure, it seems that nobody can ultimately say something other than either 'yes' or 'no' about validity claims: "I would ... make allowance for weak transcendental connotations and speak of 'general conditions' that have to be satisfied if a communicative agreement is to be achieved." (TCA 1: 310) Concluding this chapter, it would be helpful for the reader to quote Habermas's own concise and clear summary of the notion and theory of communicative rationality.
Rationality is understood to be a disposition of speaking and acting subject that is expressed in modes of behavior for which there are good reasons or grounds. This means that rational expressions admit of objective evaluation. This is true of all symbolic expressions that are, at least implicitly, connected with validity claims... Any explicit examination of controversial validity claims requires an exacting form of communication satisfying the conditions of argumentation. (TCA 1: 22)
III. Reconstruction of Habermas's Theory of Communicative Reflexivity and its Critique
1. The Theory of Communicative Reflexivity
Habermas has the notion of reflexivity/reflection, for Habermas explicitly relates communicative action and rationality to reflexivity when he refers to the "closedness of mythical world views":
the insufficient differentiation among fundamental attitudes to the objective, social, and subjective worlds; and the lack of reflexivity... Mythical worldviews are not understood by members as interpretive systems ... connected with validity claims-and thus exposed to criticism and open to revision. (TCA 1: 52-53)
Habermas assumes that rational actors with modern world views, unlike mythical actors, can take a reflexive attitude in rationally consensus-oriented communicative action: from Habermas's description of the mythical world, we can expect that to be reflexive, i. e. critical or revisional, rational actor has to differentiate her fundamental attitude to the three worlds, and understand the world as connected with [universal] validity claims. Not surprisingly, what we have seen in the previous chapter is these conditions. That is, we can say that Habermas's theory of communicative rationality is based on the two levels of differentiation. One is the differentiation of universal claims which transcends the contexts, and the other of the differentiation within the universal claims: on propositional truth, rightness of norms, sincerity or truthfulness of expression, and comprehensibility. However, Habermas does not clearly and concretely show how reflexivity is possible with these two preconditions in TCA. In this section, I will reconstruct a Habermasian theory of communicative reflexivity. Before entering the discussion, I would point out that just as Habermas's theory of communicative rationality is based on intersubjectivity, that of reflexivity is also related to intersubjectivity-reflexivity is not individual property, rather it is intersubjective communal property. Actually his theory of reflexivity seems parasitic upon that of communicative rationality. At first, Habermas relates a specific type of argumentation to a specific type of validity claim. Suppose that the specific argumentation, for example, a theoretical discourse and its corresponding validity claims are determined by the context as we have seen before. If once they are determined, the theoretical discourse appears to have to only refer to the truth proposition about the state of affairs as its validity claims. Here we can only find a very limited version of reflexivity which cannot go beyond the given context because the discourse are only within the context/interest of seeking the truth. I suggest that as and only as an ideal, reflexivity should, first of all, refer to critical reflection on the broad context which surrounds and conditions the actor, that is, something equivalent to "paradigm" (Kuhn: 1970) rather than mere reflection within the given context. Thus it would be better to just call this first notion of communicative reflexivity 'reflection' rather than 'reflexivity'-in this paper, I would only call critical reflection on hermeneutic background or context "reflexivity."[10] The first version of reflexivity i. e. reflection can be enlarged so that it can go beyond the given context/interest by introducing other types of validity claims. Then the argumentation which was theoretical discourse would be the multiplicity of argumentation, in which other types of argumentation proceeds. This is possible because "in contexts of communicative action, speech acts can always be rejected under each of the three aspects... an agreement... achieved simultaneously at three levels." (TCA 1: 307) For example, when a professor request to a seminar participant, "Please bring me a glass of water," the participant can reject this request under all of three validity aspects: (a'') "No. You can't treat me like one of your employees" (against the professor's implicit validity claim to the rightness of her utterance); (b'') "No. You really only want to put me in a bad light in front of the other seminar participants" (against her claim to truthfulness) ; (d'') "No. The next water tap is so far away that I couldn't get back before the end of the session." (against her experiential presupposition) (TCA 1: 306)[11] Habermas argues that "with every speech act oriented to reaching understanding exactly three validity claims are raised" (TCA 1: 310) It is because, the validity claim is universal i. e., differentiated from the context, and thus every kind of claim is understood as inherent in the language by members unlike those with mythical worldviews.[12] Here we can see that the argumentation transcends the give context of discussion, and engage with another discussion. For example, a discourse about the propositional truth can be soon related to normative rightness. In other words, differentiated validity claims and argumentations are, surprisingly, dedifferentiated in the course of actual discussions and debates. Habermas himself has already showed this kind of reflexive work in Knowledge and Human Interests (1978). He notices that the "language community constituted by reflecting scientists can only become a focus of reflexion within the limits of the concepts of objectivating science itself... it [the scientific community] must not perceive itself as the subject of reflexion" (Habermas, 1978: 355), suggests Freud's psychoanalysis as an example of reflexive critical theory, the synthesis of empirical-analytic sciences and historical-hermeneutic sciences. Here I would suggest a more radicalized interpretation (or strong version) of Habermas's theory of reflexivity although Habermas may not agree as it may have a relativistic implication: it seems that for Habermas, the types of discourse are rigorously and analytically distinguishable, and thus that he seems to allow for no argumentative connection between different types of validity claim and ground. However, the multiplication of discourses is an important resource of reflexivity and indeed much closer to the reality of discussion. If as Hesse (1974) suggested, science develops through "metaphor and analogy," I guess that there is no good reason to delimit the reference of discussion only to the original validity claims. Another kinds of validity claims (on norms of action and sincerity) can be raised towards theoretical discussion on the theoretical discourse, and they can stimulate an "epistemological break" (Althusser, 1970) or at least the emergence of a "competing paradigm." For example, there have been the theoretical debates about Marxian theory of exploitation (of surplus value in labour process), and irreconciliable disagreement: Marxists accept exploitation, but non-Marxists deny it. However, in and beyond this methodological debates, we can raise claims about ethical value or the rightness of the theoretical utterances, and actually such claims sometimes appear as essential elements of the discourse; as a result, we may expect another programme of research. (cf. Roemer, 1986)[13] Likewise every concept is actually value-laden to a certain extent, and thus theoretical discourse should legitimately lead to moral-practical, aesthetic criticism, and therapeutic critique; we can even raise validity claims crisscrossing the original types of them: "it is not true that p because it lacks aesthetic value" or "the painting is beautiful because it describes the state of affairs." That is, we can sometimes become reflexive by raising absurd validity claims as reflexivity is a kind of absurdity.[14]
2. The Limits of Communicative Reflexivity
As mentioned, in Habermas's theory, reflexivity is intersubjective property, and the theory of reflexivity is parasitic upon the theory of communicative rationality in which rationality is assessed in terms of consensus. Accordingly, Habermas's theory of communicative action is predicted upon the expectation about possible understanding and agreement.
the concept of communicative action refers to the interaction of at least two subjects capable of speech and action who establish interpersonal relations.... The actors seek to reach an understanding about the action situation and their plans of action in order to coordinate their action by way of agreement. The central concept of interpretation refers to negotiating definitions of the situation which admit of consensus. (TCA 1: 86)
For Habermas, the term "reaching understanding" [Verstandigung] means that "at least two speaking and acting subjects understand a linguistic expression in the same way." (TCA 1: 307) Processes of reaching understanding are aimed at a consensus that depends on the intersubjective recognition of validity claims, and these claims can be reciprocally raised and fundamentally criticized by participants in communication. (TCA 1: 136) I think that there are two conditions for reaching understanding about speech acts through the consensus regarding validity claims: that (1) intersubjective recognition of validity claims as such, i. e. context-free recognition-literal meaning of speech acts without reference to the contingent context should be possible so that the actors reach common understanding; or that (2) the context in which the speech acts are made should be shared and identical so that the actors reach common understanding. Habermas's problem is not only that both conditions are impossible to fulfill but also that even though possible, it undermines some aspects of reflexivity. Habermas's theory explicitly assumes the condition (1). Habermas is obsessed with the universality of meaning and rationality in order to provide a firm basis for critique and critical theory. Thus for him, it is very important to maintain literal meaning of speech acts including validity claims as "context free." Though Habermas refers to empirical analysis, it is not done in terms of "indexicality" (Garfinke, 1967) but of "standard conditions"[15] (cf. TCA 1: 297): "So far, I have also construed the meaning of speech acts as literal meaning in this sense [by virtue of the rules for using the expressions contained them]... if formal pragmatics is not to lose its object, knowledge of the conditions under which speech acts may be accepted as valid [i. e. how validity claims are established] cannot depend completely on contingent background knowledge." (TCA 1: 335-6) Then can we expect to reach an agreement in ideal speech situation-like discourse? Here I do not intend to object to the universality of validity claims, but it should be noted that such universality does not provide all the sources of meaning." That is, we can expect an effective agreement only when we are concerned with "validity" of claims-only in the context of validity however universal it is. Although only one of two answers, i. e. yes or no is possible in relation to the validity claims, we should also look at very emotional--in a sense, aesthetic--type of "reflexivity against rationality" however it looks trivial: "Yes, all of the claims are valid and rational, so what?" "Yes, professor, your request is valid, why me?" "Yes, it is true that 1x1=1, but I am not still satisfied with it," "Yes, your claim is absolutely valid, but anyway I don't agree." The subject in Habermas's theory seems very abstract, logical, ideally rational, and linguistically oriented-it acts with and only with reason/ground, and thus it seems to lack body, emotion, etc.; perhaps Habermas would criticize the above suggested sentences as merely irrational. But the latter are indispensable in social theory because understanding and agreement is not only the matter of language and logic but also of practice and empathy, and irrationality or emotionality legitimately constitutes the social world; thus reflexivity does not only stem from rational process. I do not here defend irrationalism; rather, I suggest that rationality realizes itself not only through rationality itself, but also through irrationality; and that "reflexivity" is another name of such rationality which encompasses both rationality and absurdity. In turn, we can see that the universality of validity claims and its role are, in fact, constituted or exaggerated in the specific context. In other words, Habermas's theory of communicative rationality can be, in fact, said to assume a shared context in which validity claims plays an universal role of deciding meaning of the sentences(cf. condition (2) above); or it is only concerened with the context in which the validity of a claim is in question. However, understanding the literal meaning of speech act cannot help but to refer to a specific context as Bogen states, "what is produced as the 'literal meaning' of a sentence ... is itself seen as a context-specific piece of work involving the implicit assumption of some particular ... context within which" it appears as literal meaning." (1989: 68) That is, no expression in a natural language can have any comprehensibility without a context. Thus we can think that Habermas's theory of reflexivity ultimately fails to explain reflection on one's own theoretical context because it could not look at the possibility of other reflexivity beyond validty claims, for example, "reflexivity against rationality" suggested above. However, apart from Habermas's theory, how to reflect on one's own context is a controversial problem given that the context is composed of implicit background knowledge. Here, in addition to the conventional ethnomethodological theory of meaning which can be summarized as "indexicality" and "context-dependence," I suggest that the actors, in their action, should not be assumed to fully share their contexts; rather we only find the interfaces of different contexts. Of course, we would say that if their actions are coordinated well, they share background assumption and practices. However, when we observe the interpretation of interaction changes as time goes on, we can easily find that the change is not only due to the change of viewpoints or perspectives, but also the realization of "potential disagreement" within the interface of participant's contexts in interaction. To be sure we can expect a consensus only in the same context we share. Thus if we are shown to reach consensus despite different cultural and personal contexts, it would be, in fact, misunderstanding, partial agreement or practical mis/understanding in which the conclusion or behaviour would be effective enough to practically satisfy the concerned parties' intention, but the detail (e. g. ground, means, purpose, etc.) would be different from each party's intention. Then it would be natural that reflexivity emerges where the interpersonal contexts, which overlaps more than two persons's context, show a potential cleavage of misunderstanding. Here people frequently reflect on oneself and others. This subtle disagreement exists because social actors do not always calculate before action, and even though they calculate, they cannot implement it perfectly. Rather, their action is dependent upon socially and personally structured disposition and habits. (cf. Bourdieu, 1990) If so, communicative action would be guided by habitual and practical mis/understanding, of which the transparency is fragile, rather than formal pragmatic agreement.
IV. Concluding Remarks
In sum, Habermas's theory of communicative action involves a theory of communicative reflexivity which is based on intersubjective discussion. Here firstly reflexivity works through the examination of validity claims and the contexts of interest. Moreover, the universality of validity claims makes possible the multiplicity of argumentation in which various validity claims and argumentation cross over each other. Through this multiple discourses, reflexivity can be amplified so that it can virtually transcends the narrow context of interest. However, Habermas's theory of communicative action and rationality is based on the expectation about reaching understanding or agreement; that expectation leads to the assumption about the universal meaning of sentences in relation to validity claims, and as a result, Habermas's notion of reflexivity fails to go beyond its own context in a broader sense that emphasizes empirical particulars rather than interests of inquiry. Thus for a better explication of reflexivity, the meaning of sentences should be interpreted in connection with the specific context so as to encompass a broader range of reflexivity than Habermas's reflexivity on validity. And to complete this theoretical project, the interactional context should not be understood as homogenous but heterogeneous, i. e. the multiple interfaces of various people's different contexts, which makes possible actor' reflexivity on the world in relation to difference they can find in their life.