Economics is Performative
“The neoliberals preach that the market is the unforgiving arbiter of all political action; but they absolve themselves from its rule.” — Philip Mirowski
“homo economicus” — the notion that humans are rational agents that pursue maximum pleasure/gain for minimum sacrifice — is a myth. This is something that sociologists of economics (belonging to the school of performativity theory) have long argued for.
Anthropologist David Graeber in his book, “Debt: The First 5,000 Years” provide historical evidence that suggests that there is nothing “natural” to the existing economic order. He does this by taking us through an extensive and detailed anthropological record, showing how debt is deeply intertwined with certain moral dimensions that are anchored in the religious precept of “primordial debt” –the idea that each one of us is born indebted to our ancestors, god and the nation (p. 26). Graeber argues that this is one of the reasons why our ideas around debt have become so equated with notions of “obligation”, in consequence establishing “the basis of our common-sense assumption about the nature of economy and society” (ibid.). In drawing this distinction, Graeber wants us to realize that debt and obligation are two different things; even though the essence of debt is obligation, Graeber highlights that this doesn’t mean that all obligation is debt. Therefore, in defining “debt”, Graeber posits that debt is simply a quantified obligation that is settled using payment and that “this requires money” (p. 21). With money, as Graeber makes it clear, debt is able to take on an impersonal character that in essence makes it possible to enforce debt through violent mechanisms.
Graeber’s most important argument is that the earliest exchange was in fact credit, not barter, contrary to what is listed in traditional economic textbooks. The idea that earliest societies operated by means of barter has been used by traditional economists to justify the idea that all humans are rational actors; that is, humans will go on to achieve maximum gain for the least amount of sacrifice possible. The notion of homo economicus has been taken for granted and it is time we take a more critical look at what economics really means.
As already mentioned, Graeber debunks the myth of barter by demonstrating how credit systems came much earlier than barter. This contradicts traditional economic textbook teachings which have thus far postulated how monetary exchange is a consequence of barter. By arguing how credit constituted our earliest monetary systems, Graeber suggests that our behaviour was more closely aligned with the notion of the “gift economy” (exchanging things for maintaining relations) rather than “calculatedness” as theorized in the neoliberal tradition.
In arguing this, Graeber puts certain economic assumptions — especially those that date back to the time of Adam Smith — into question. In this way, he is able to disrupt certain economic discourses that have justified the state of our present economic order as “natural”. As mentioned in the beginning, this is also a notion that many scholars of the “economic performativity” school have tried to promote.
Sociologist of Economics, Michel Callon, in his introductory essay in the book, “Laws of the Markets” (1998) argues that economics shapes the social world more so than it actually describes it. Borrowing the concept of “performativity” from the linguistic theorist John Austin, Callon posits that similar to the way language enacts certain social action, economics and its related practices (for example, marketing and accounting) format and reformat markets.
For Callon, markets are “embedded” in economics, meaning that economics plays a constructive role in making them. This happens in two ways: first, using certain calculative tools, economics frames the world in a way that enables for “calculative agencies”. Secondly, these newly framed social worlds are then applied in ways that influence people to behave rationally, making it appear that rationality is somehow innately ingrained into our being. This phenomenon is what has essentially enabled the concept of homo economicus to appear “real”.
As Callon states:
“Yes, homo economicus really does exist. Of course, he exists in the form of many species and his lineage is multiple and ramified. But if he exists, he is obviously not to be found in a natural state-this expression has little meaning. He is formatted, framed and equipped with prostheses which help him in his calculations, and which are, for the most part, produced by economics” (p. 51).
What this is trying to argue is that economic discourses participate in the production of certain arrangements which in essence valorize homo economicus. In other words, this means that there is nothing inherently “real” to homo economicus but that we make its discourses real by operating through its frameworks.
Understanding the history of “economics” can help us better theorize on this.
Timothy Mitchell approaches economic performativity by looking at how specific socio-technical practices and arrangements participate in validating certain economic discourses. Defining the “the economy” as a product of certain socio-technical practices and trends that emerged in the mid-twentieth century, Mitchell describes the birth of “the economy” in the following way:
Before then, economists did not use the word ‘‘economy’’ in its modern sense. From around the 1930s, new forms of consumption, marketing, business management, government planning, financial flows, colonial administration, and statistical work brought into being a world that for the first time could be measured and calculated as though it were a free-standing object, the economy. Economics claimed only to describe this object, but
in fact it participated in producing it. (p. 298)
This quote shows how the notion of “the economy” is a product of recent social circumstances, enabling us to come to better terms with the fact that economics as a field, does not lie outside of social and cultural contingencies (something that often gets dismissed in neoliberal theory).
For instance, Mirowski and Nik-Khan have examined some of the epistemological changes that took place in the postwar era (especially around the validation of truth) and the way these changes have led to significant shifts in the field of economics. For instance, the authors describe how Claude Shannon’s “information theory” and cybernetic theory played an important role in instigating these epistemological changes in economics. “Information theory” became especially influential in the human sciences, making scholars question ideas centred around “knowledge, interpretation and consciousness” (p. 49). This, alongside the projects that were taking place in the field of cybernetics — for example, game theory, mathematical statistics, and the first digital computers — became adopted as organizing frameworks in human science fields and economics was no exception.
Given these epistemological shifts, economists soon realized that orthodox economics — which at the time was modelled after energy physics — could no longer tackle some of the questions that were emerging around “knowledge” in the second half of the twentieth century. When the Austrian school economist, Friedrich Hayek came to the forefront, he reframed the idea of “knowledge” in favour of “information”. With this, he postulated that the market is the only validator of truth that no human subject could ever compete with. In other words, the market was depicted as an “all knowing” processor, which no human actor could compete with due to limited cognitive capacities. This laid the foundation for neoliberalism which treats markets as the ultimate knowledge processor machines that are never wrong.
There is a contradiction inherent in this doctrine however:
On one hand, the market is delegated as the only validator of truth. On the other hand, economists (as human agents) continue to actively participate in the shaping of markets and their design, to which Mirowski and Nik-Khan rightly point out: “If markets indeed validate truth, then the cadre that gets to construct the markets gets the final say on the nature of truth” (pp. 7–8).
Indeed, the active role of economists in market formation is something that the neoliberal doctrine has cleverly masked. In framing the market in such a way — that is, as something that knows “better than any of us what is good for ourselves and for society” (p. 79) — we see how the role of human agency gets diminished while the knowledge of economists perseveres by getting to make economic decisions on behalf of the rest of us.
In other words, “free markets” are not actually free.
This idea has been co-opted into technological spheres like cryptocurrencies and blockchain. Many crypto developers think in these kind of terms, not realizing that they are actually perpetuating the economic divide and inequality that neoliberalization brings with it.
Who are the High Tech Hayekians?
Hayekian economics and its preoccupation with information theory has entered into cyberspace. It has especially been absorbed by Silicon Valley culture. One of the most prominent figures known for being a strong devotee of Austrian school economics is Philip Salin, known for founding the American Information exchange (Amix)- a network for buying and selling information, goods and services, giving birth to e-commerce, and becoming the basis for enterprises like eBay and Amazon.
Devotees of Austrian economics place high emphasis on evolutionary processes and money is also understood in these terms. For example, Carl Menger have described the emergence of money in evolutionary terms. Other Austrian economists have regarded money as a kind of market good created through entrepreneurial experimentation.
The high-tech Hayekians are obsessed with the evolution of ideas in society; this is where the term “marketplace of ideas” emerged from; not the Internet, but in fact, Hayek’s theory of information. High-tech Hayekians therefore recognize that some of the problems that arise in human economic systems are analogous to problems in computational systems.
These ideas have also entered into the Cypherpunk culture. High-tech Hayekians believe that all problems can be fixed with the implementation of proper market solutions. This is a doctrine that many proponents of blockchain also follow. The belief that any political or social problem can be solved via market reconfiguration or market making is problematic; since the market is seen as the perfect information processor (a giant computer), many things tend to fo unquestioned and with that the market itself — which in itself at times like computers, can also fail to perform their intended purpose.
Friedrich Hayek conceived of markets as information processors, presumed to be “all knowing”, essentially smarter than humans. Hayek’s “information as knowledge” theory, eventually get translated into a belief system that increasingly starts to recognize everything as a computational process.
If our cognitive processes function like computers, then our being is reducible to data. If everything is an information product and information is key to leverage and power, then this means that whoever controls the data flow also controls the market (i.e. Google controlling search information). For example, in the 1970s for example, IBM started gathering data to predict, people who had information were making immense amount of money. Information became a commodity. By inference then, as “data beings”, we too are manipulated and controlled. If the market knows more than we do, then we are not free to make our own decisions and decide what we desire; theoretically speaking, this means that these desires are defined by the market and then imposed on us.
However, it is important to take a pause and wonder, are really just data? Even if we are quantifiable, what variables are we leaving out? What are we losing by focusing on one specific set of data and not another? What information intricacies are being filtered out/ejected from this “computation” ? What if the information we strip out/don’t use holds a kind of value that we are searching for?
Are blockchain experts then really in the business of “revolutionizing” markets (as they commonly proclaim), or are they simply following the same trajectory as traditional economists, reinforcing and perpetuating the myth of homo economicus?
