Monday, February 27, 2006

Economics as language

Another intriguing paper in the Post-Autistic Economics Review, looking at the idea that economics (like Lacan's unconscious), is structured like a language.

William Kaye-Blake, of Lincoln University, New Zealand, uses Tony Lawson's Reorienting Economics as a springboard. That book argued that the mathematical and deductive ontology of mainstream economics is fundamentally inappropriate for the complexity of human factors in any actual economy, and recommends critical realism as an alternative (a field in which, unsurprisingly, Lawson specialises).

Kaye-Blake extends this with reference to postmodern linguistic theory, where meaning is produced only by the differences between signifiers:
Every day, people use language to communicate even though the meaning of their utterances cannot be fixed until the end of time. We manage in spite of this linguistic indeterminacy. It is the same in economic behaviour: the value of the products one buys or the goods one produces is contingent. The product might not perform as advertised, it could break, it could be superseded tomorrow by something that works better and costs less. The goods produced might not command a high enough price to cover the cost of production, or demand could exceed projections and profits would be less than they could have been. Certainly, economic tools have been developed to deal with these uncertainties, such as demand management and insurance. However, economics is fundamentally open because the future is unknown; it could surprise us.

The basic argument, if I understand it right underneath the postmodern jargon, seems fairly obvious - that value, in the economic sense, is not fixed nor obvious nor entirely rational, and that there's a big difference between value and price. Unlike mainstream microeconomics, where a transaction is a definitive act, here it is like a brief conversation where the words just ain't enough:
the value of what consumers buy or producers create or traders exchange is not fixed in the present. Certainly, the moment of exchange establishes a price, but the value of goods and services in terms of utility or satisfaction or future profit streams is unknown until the future happens.

Interesting stuff. Not least because of the inclusion of a rather surprising reference while discussing postmodern views of 'openness':
They reflect complexity: multiple forces acting either on the surface of society or surging up from its depths; they are still deterministic. These forces, many though they be, determine the present phenomena. They are thus in fact closed, although complex. The methodological solution for social scientist is to develop better models that account for all the variables and forces, not to respect some notion of openness. This was the problem that Heinlein grappled with in The Moon is a Harsh Mistress: if a computer could gather up more information and make more calculations of potential futures than mere humans could, it could plot a lunar rebellion much more effectively and be better prepared for contingencies. Predicting a complex system of forces requires more information, but it is in theory no different from predicting a simple system.

Robert A Heinlein as postmodern economic theorist? Don't recall that from Starship Troopers, though some of his fans seem to have found some other hidden depths.



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