Abstract
It has become increasingly clear in recent years that attempts to methodologically bracket out all substantive features of economic actors, most prominent in mainstream microeconomic theory, lead to crude explanatory misrepresentations of observed practice. While some of these criticisms have a considerably longer history, they started being taken more seriously when professional economists, such as Amartya Sen and Albert Hirschman, began to formulate them in the 1970s. Sen and Hirschman sought to clear the ground for complex reflection about the importance of reflexivity, ethical choice and social commitment for observed market behaviour. The difficulty was how to avoid reproducing the fiction of the radically solitary and instrumentally motivated subject implicit in mainstream economic theories and models. It was Deirdre McCloskey, also a professional economist, who tabled another fundamental question in the 1980s: how might we account for the actual efficacy of abstract and ahistorical economic theory and modelling other than by the scientistic appeal to its capacity to correctly represent a purportedly independent economic reality? In seeking to answer this question she broke a good deal of the ground for what subsequently evolved into discussions of economic performativity by arguing that it is to a species of rhetorical persuasion rather than predictive virtuosity that we must ultimately appeal when answering this question.
Today both of these questions, about how best to characterise the practical grounds of economic agency and the epistemic tools for interpreting it, remain absolutely wide open. They are posed throughout Uncertain Futures in a variety of interesting forms, making this edited volume by Jens Beckert and Richard Bronk an important contribution to current debates on these fundamental economic issues that deserves to be widely read and constructively criticised. This is not least because Beckert and Bronk firmly link questions of agency to a prior set of assumptions about economic knowledge right from the outset and, in different ways, the contributors all keep this connection in sight.
A pivotal conceptual point of departure is established by the editors’ mention of the distinction between uncertainty and risk that Frank Knight famously posited. The latter signifies relative statistical certainty and calculability, while the former indicates a state in which future outcomes are radically unknowable in most important respects. Beckert and Bronk essentially seek to know what happens to our understanding of economic decision-making when this conceptual pivot is knocked away and we instead assume that economic life in capitalist societies is always uncertain in the Knightean sense of being stubbornly resilient to probabilistic calculation.
For Beckert and Bronk, the ineradicable uncertainty of the future forces economic actors to make decisions ultimately based on nothing more solid than imaginatively constructed expectations. These ‘fictional expectations’, when structured and communicated through narrative, nonetheless have an empirical reality of their own and can be studied in their capacity to more or less competitively coordinate action on a wide scale and to motivate actors to act even in the face of uncertainty. The authors of the book’s remaining chapters attempt to extend the existing discussion of how this works in practice by inquiring into the complexities of historically situated economic decision-making.
In the book’s first section, Robert Boyer (chapter 2) argues that, because the performative power of ‘hegemonic imaginaries or grand narratives’ (p. 39) to act as self-fulfilling prophecies is always imperfect, such narratives themselves require constant refinement by assimilating insights from auxiliary, localised narratives that better track and adapt to unfolding events closer to the ground of everyday life. Crises result when such detailed narrative tracking of events radically fails to correct grand narratives due to the propensity of grand narratives to suck localised narratives into their powerful orbit. Like Boyer, David Tuckett (chapter 2) finds a whole series of nested narratives, what he calls ‘sub-narrative plots’ (p. 67) or ‘narrative chunks’ (p. 68), to be an essential element of economic decision-making. But while Boyer takes such insights in the direction of an attempt to periodise large-scale ‘expectation regimes’ (p. 41), Tuckett’s focus is more squarely on the individual. Extrapolating from his observation of fund managers, he is interested in the manner in which these sub-narratives can be construed as vehicles for intuitive responses to the ineliminable element of economic hazard that Keynes famously gestured at when speaking of ‘animal spirits’. Jenny Andersson’s chapter (chapter 3) looks at the narrative construction of economic and geopolitical claims on the Arctic that already anticipate a ‘de-iced future’ (p. 84), using this case to explore how the narrative mediation of expectations is often tied up with the projection of power by private and state actors.
The articles by Werner Reichmann (chapter 5), Olivier Pilmis (chapter 6) and Andrew G. Haldane (chapter 7) in the book’s second section are all concerned with macroeconomic forecasting. Reichmann draws attention to the deeply interactional nature of such forecasting, with forecasters conventionally conferring with scholars and with decision makers who wield significant political and economic clout as well as with other forecasters. Pilmis addresses a question that will possibly have baffled many outsiders: how economic forecasters succeed in imbuing their predictions with an aura of validity that serves as a buffer from reproach when their predictions go wrong – which to some extent they always do. He shows how immunity to criticism is mostly constructed through a valorisation of fidelity to esoteric procedural rigour rather than final outcomes, an emphasis on the narrative identification of causal mechanisms underpinning change rather than change as measured in econometric data and a widespread tendency to denigrate the quality of the externally produced raw data that forecasts rely upon. In the light of the recurrent failures of existing economic prediction, Haldane’s chapter advocates a shift from mechanical forecasting models to agent-based models, with the former remaining in use but the latter bearing the brunt of predictive work. This boils down to very little more than negating the heuristic reliance on a single representative agent – such as the model household and firm in the dynamic stochastic general equilibrium models that form the basis of most contemporary forecasting systems – as the assumed economic subject from which to extrapolate future events, even if the methodological implications of doing so are highly complex.
The book’s third section shifts the focus to the place of narrative construction and imaginatively mediated planning techniques in central banking. Douglas R. Holmes (chapter 8) does so with a view to indirectly addressing the broader question of ‘how markets, particularly financial markets, operate as a function of language’ (p. 174). He argues persuasively that central banks are fundamentally reliant on the performative power of linguistic persuasion in a range of interactive settings rather than either detached prediction or the performative influence of sequestered academic thinking of the sort influentially discussed by Michel Callon and Donald MacKenzie. In ways that complement Reichmann’s article, Holmes argues that, without the constant co-construction of narratively mediated action-expectations between central bankers, state actors, major market players and the broader public central bank, manipulation of interest rates and regulation of money and credit would not achieve their goals. This interest in performativity also informs Benjamin Braun’s contribution (chapter 9), which ambitiously surveys 30 years of central bank policy making in the euro area and elsewhere. Among other things, Braun shows how the performative management of expectations by central bankers following the latest crisis has been ramped up along with the simultaneous return of indirect, ‘hydraulic’ methods through quantitative easing (QE). The latter presents the novelty of monetary authorities seeking to manipulate interest rates over a significantly longer term than in the past through intervention in fiscal balance sheets by means of purchasing slow-yielding securities. The end results of QE for eventual gross domestic product growth and employment are still hard to discern, but the approach may well prove self-defeating by undermining the broad confidence that the shorter-term performative interventions of central banks require.
The articles by Elena Esposito (chapter 10) and Natalia Besedovsky (chapter 11) about the nature of contemporary finance capitalism are gathered into the book’s fourth section. Esposito’s article looks at what the great expansion of structured finance from the 1970s onwards, primarily through derivatives markets, has come to mean for the uncertainty that lies at the heart of financial exchange. While some ingenious tools, like the so-called Black–Scholes formula, have been developed for roughly quantifying and effectively commodifying this uncertainty, they can themselves always feed into the broader problem of exponentially ramifying financial volatility, thereby setting in motion a potentially aggressive ‘counter-performativity’ (p. 226) that suggests that prudential calculation will never dispel uncertainty in the domain of finance. Besedovsky takes up similar concerns based on her observation of calculative practices in credit rating agencies. She shows how, even if (as both she and the book’s editors assume) uncertainty rather than risk is the inescapable ontological grounding of structured finance practices, the belief (on these assumptions, invalid) in the real convertibility of uncertainty into risk has to be factored in if we are to make sense of objectively existing practices of coping with financial uncertainty through risk assessment such as those proffered by credit rating agencies.
In the book’s fifth and final section, the focus shifts to how major investment decisions are made in business. Through a case study of the American Research and Development Corporation in the early post–Second World War period, Martin Giraudeau (chapter 12) looks into how business plans are formed by entrepreneurs and venture capitalists. He argues that the process demonstrates neither great creativity nor rigid adherence to managerial systems but rather a sort of middle way involving a pragmatic feeling through in relation to both imagined future states and fairly rigorous methods of decision-making grounded in an equally important interpretive orientation to the present. Liliana Doganova (chapter 13) similarly explores the complexities of investment in an uncertain world, looking at discounted cash-flow analysis to make a wider point about evaluation in the present. She provides yet another way of seeing how the epistemic assumptions made in the present about the imagined future values of commodified objects – in this case, forest land and pharmaceutical drugs – can help to make those objects eventually approximate their anticipated value. In the book’s final chapter (chapter 14), generalising from a study of investment policies in energy in the United States during the 1970s and 1980s, Timur Ergen looks at the complex dilemmas of how to balance investment in commercially harnessing present technologies against the potential benefits of pioneering new ones. The former requires that expectations be aligned and can lead to unproductive lock-in of investments, while the latter requires a diversification of expectations but can eventuate in futile expenditure. He argues that, while the recent literature tends to come down strongly on the side of open-ended experimentation and diverse expectations, there is in fact no general approach that can resolve this dilemma ex ante. Even though retrospectively such solutions can appear obvious, in practice both processes feed off of each other to such an extent that one can at best establish rules of thumb for different categories of technology but must accept that these will never be proof against failure.
This is a highly informative book that deserves to be widely read, but it should not be read uncritically. A lot could be said about the individual chapters, but here I will limit myself to two more global observations. Firstly, the book as a whole is excellent for illuminating how contemporary economic life is shot through with interpretative and communicative practices. Conceptually, it is therefore a tonic against the implicit or explicit reification of economic life that is still surprisingly common even in contemporary social theory, as seen in ahistorical, politically tendentious claims about market-driven social equilibrium or market-driven crisis being the natural tendency of capitalist societies. Nonetheless, the basic theoretical concepts for throwing this communication into relief are exceedingly broadly construed. This is especially true of the narrative ordering of experience, which as discussed here could be applied to practically any form of minimally historically alert interpretation and communication. Being so unbounded, its explanatory power is proportionately diminished.
A second issue to be aware of is that the research almost never hazards any rigorous interpretation of why some narratives win out over others. There are some exceptions to this, most notably the Andersson article, which gets into issues of geopolitical and economic power manoeuvring, but in general such questions of power are near to invisible in the book despite being flagged by the editors in the introduction and occasionally receiving a passing nod in the empirical chapters. Reducing uncertainty has often been achieved not just through the collision of localised narratives and diffuse loci of power but also through the establishment of large-scale sociopolitical forces constituted by common norms, institutions, legal codes and political will that ensure that some economic narratives are manifestly far more likely to win out over than others in given times and places. The Boyer article probes into the sociopolitical backdrop to the narrative coordination of experience in uncertain markets, but the other contributors seem largely disinterested in such essential historical questions. The deeper issue here is that what might be called the existential, sociopolitical and economic drivers of uncertainty – the first universal, the second and third historically peculiar – are never clearly distinguished. There is consequently a certain fuzziness about the broad historical premises of the entire research project, and therefore its historical generalisability. This is moderated by the fact that a number of features of modern capitalism or modernity as a whole are clearly identified by the editors and some of the contributors as propellers of uncertainty. Still, this is done so impressionistically that one seldom knows whether these conditions are themselves taken to be inherent to all forms of capitalism or the contingent outcome of broader sociopolitical trends shaping the varieties of capitalism and of mixed economic systems that exist or have existed in modernity.
Despite these criticisms, the work discussed here contributes in an original way to deepening our understanding of economic actors as something altogether distinct from the ‘rational fools’ that Sen famously believed populated neoclassical economic theory. It also charts a new way around the opposite extreme of ideologically duped automatons that critical social theory has yet to entirely dispense with. At the same time, it helps to greatly expand our understanding of the myriad epistemic quandaries and coping techniques that market actors employ in times of uncertainty. This is no small achievement.
