Frankenstein economics

I’m preparing, slowly and steadily, to give the Tanner Lectures at Brasenose College, Oxford in May, on ‘The public responsibilities of the economist’. One of the issues I’m reading about is the question of the ‘performativity’ of economics – I mentioned it in my talk last week to the Stiftervervand/Handelsblatt conference on Rethinking Economics. This is a term from linguistic philosophy, originating with J.L.Austin, and it refers to phrases whose utterance forms the action they describe – for example, to say ‘I’m sorry’ is the act of apology.

Just a few social scientists have thought about this, and they feature in a book called

, edited by Donald Mackenzie and others. He argues very persuasively that the model of the options market has been performative, as the prices that enable the market to exist could not be calculated before there was a model. Other authors in the volume take the theme more broadly. The introduction starts in an attention-grabbing way with the young Jeff Sachs flying from Harvard to La Paz to advice the Bolivian Government on a shock therapy to counter hyper-inflation. It was only much later, Sachs realised, that the fact that Bolivia is mountainous and land-locked plays a lead role in explaining its persistent poverty. Despite gasping for breath at the altitude of La Paz, his original analysis of the economy was entirely abstract.

The books comments: “Economics is at work within economies in a way that is at odds with the widespread conception of science as an activity whose sole purpose is to observe and study, that is to ‘know’ the world.”

Hence (and with a nod to John Quiggins’ excellent book

) my thought about
economics. Has the nature of the subject itself shaped the way the economy works and thus caused the crisis?

[amazon_image id=”0199537151″ link=”true” target=”_blank” size=”medium” ]Frankenstein: or `The Modern Prometheus’: The 1818 Text (Oxford World’s Classics)[/amazon_image]

The contributors to the Mackenzie et al volume have no doubts. But they’re all academics, and are looking only at the effect of academic economics on the world. I’m beginning to conclude that there has been a low-profile but rather serious drifting apart in the past decades between academic economics and practical economics as carried out in regulatory agencies, consultancies and business. The kind of abstract Bolivia of the mental model that Jeff Sachs had in mind when he first landed there in 1986 would have differed importantly from the Bolivia of a Foreign Office analyst. The practical economists have certainly adopted the models of the academic economists but – I hypothesise – didn’t take them so seriously.

If so, we practitioners did wrong to ignore them. Dr Frankenstein’s monster seems to have been on the rampage….

[amazon_image id=”0691138494″ link=”true” target=”_blank” size=”medium” ]Do Economists Make Markets?: On the Performativity of Economics[/amazon_image]


2 thoughts on “Frankenstein economics

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