In 1920, he emigrated to Germany, eventually ending up as a research chemist at the Kaiser Wilhelm Institute for Fiber Chemistry in Berlin. There, he married Magda Elizabeth in a Roman Catholic ceremony. In 1929, Magda gave birth to a son John, who went on to win a Nobel Prize in chemistry. With the coming to power in 1933 of the Nazi party, Polanyi accepted the offer of a chair in Physical Chemistry at the University of Manchester. Because his interests later shifted from chemistry to economics and philosophy, Manchester created a new chair in Social Science (1948-58) for him.
In 1921, Polanyi laid the mathematical foundation of fiber diffraction analysis.
In 1934, Polanyi, at about the same time as G. I. Taylor and Egon Orowan, realised that the plastic deformation of ductile materials could be explained in terms of the theory of dislocations developed by Vito Volterra in 1905. The insight was critical in developing the field of solid mechanics.
Polanyi argued that positivism encourages the belief that science ought to be directed by the State. He pointed to what happened to genetics in the Soviet Union, once the doctrines of Trofim Lysenko were deemed politically correct. Polanyi, like his friend Friedrich Hayek, supplied reasons why a free society is preferable.
Polanyi embraced the existence of objective truth (Personal Knowledge, p. 16). However, he criticised the notion that there is something called the scientific method which enables science to supply us with truths in a mechanical fashion.
Instead, he argued that all knowing is personal, and as such relies upon fallible commitments. Our skills, biases, and passions are not flaws but play an important and necessary role in discovery and validation. Observers cannot remove themselves from their observations and judgements, nor should they; it is enough that we act in accordance with the consequences imposed upon us by our beliefs. What saves this claim from relativism is his belief that our tacit awareness connects us with realities, although as our tacit awareness relies upon assumptions acquired within a local context, we cannot simply assume that they have universal validity; we must rather be open to the possibility of error while seeking to identify objective truths. Any process of articulation, however, inevitably relies upon that which we have not articulated. Indeed, reliance upon what we have not articulated is how words become meaningful, i.e. meaning is not reducible to a set of rules; it is grounded in our experience of the world - where experience is not something that can simply be reduced to collections of sense data.
Polanyi acknowledged the role played by inherited practices (tradition). The fact that we know more than we can clearly articulate contributes to the conclusion that much knowledge is passed on by non-explicit means, such as apprenticeship (observing a master, and then practicing under the master's guidance).
Polanyi's philosophical ideas are most fully expressed in the Gifford lectures he gave in 1951–52 at the University of Aberdeen, published as Personal Knowledge. These ideas later influenced the thought and work of Thomas Kuhn and Paul Feyerabend.
Polanyi noted that scientists cooperate with each other, or "self coordinate," in a way similar to the way in which economic agents coordinate their activities in a free market. Even though each scientist pursues his own goals, the scientist reacts to the limited available knowledge produced by nearby, relevant actors. However, the dedicated communities of scientists are formed by a commitment to truth that transcends the market. Other examples of dedicated communities is the pursuit of justice within the legal community as an end which transcends the rewards of the market. Because ends such as truth and justice transcend our ability to wholly articulate them, a society which gives these communities the freedom to pursue these ends is desirable. Scientists, like entrepreneurs, require the freedom to pursue discoveries and react to the claims made by their peers. In The Republic of Science, Polanyi thus urged societies to allow science to be pursued for its own sake:
"...[S]cientists, freely making their own choice of problems and pursuing them in the light of their own personal judgment, are in fact cooperating as members of a closely knit organization. ...
"Such self-co-ordination of independent initiatives leads to a joint result which is unpremeditated by any of those who bring it about. Their co-ordination is guided as by an "invisible hand" towards the joint discovery of a hidden system of things. Since its end-result is unknown, this kind of co-operation can only advance stepwise, and the total performance will be the best possible if each consecutive step is decided upon by the person most competent to do so. ...
"We may conclude that just as there is no proof of a proposition in natural science which cannot conceivably turn out to be incomplete, so also there is no refutation which cannot conceivably turn out to have been unfounded."
"Any attempt to organize the group ... under a single authority would eliminate their independent initiatives and thus reduce their joint effectiveness to that of the single person directing them from the centre. It would, in effect, paralyse their cooperation."
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