“Cents and Sensibility” is less a critique of economics than a critique of using “only” economics. It is especially relevant in the presence of ethical doubt. Should there be a limit to prescription drug prices? Is it right for universities to mislead the public about SAT scores, or about why they give financial aid? Such questions indeed require sensibility as well as cents. This is a bracing, original work, reminding us that economics was never supposed to be about the math but rather about the stories it tells about our lives.
Author: Jo Lindsay Walton
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A prose poem by Mairéad Byrne.
Listening to Robert Shiller’s online lectures, I’ve often half-written him an email in my head on some point. I distract myself and have to rewind. If you go to the “Drafts” folder in my brain, a third of them are to Robert Shiller.
Essentially, I wanted to tell him something about the humanities. I’m not sure what. Maybe just that the humanities exists. Professor Shiller can be quite perplexing. On the one hand, he’s a hugely influential figure in behavioral economics, and behavioral economics is the field with a great track record in confronting the more brutal absurdities of mainstream economics. On the other hand Shiller still is, frustratingly, very much an economist. Although behavioral economics may ameliorate some of the features of scientistic finance and economics which humanities scholars tend to find so frustrating, it never goes nearly far enough.
So I’m happy to see this article from him!
Behavioral economics was economics with an input from the psychology department. Every department has its own tool kit for approaching research; we were very much influenced by psychology. Maybe a little sociology, maybe a little anthropology, but nevertheless all social-science fields.
I’m starting now, with my more recent work, to think that we have to look at the humanities as well. There is something difficult to formalize about human beings, but something that we nonetheless have to understand, and I think one way to do that is with an approach that I’m calling “narrative economics”: taking economics and adding the study of the narratives that people transmit.
If Shiller is serious about narrative economics, he may want to give poststructuralism a whirl, and see if he can shake the set of intellectual habits that make “human instinct for storytelling” seem like an appropriate way of introducing an endeavor of this kind.
But it’s another step in the right direction …
See also: Shiller’s ‘Narrative Economics’ paper (2017).
In one form or another and in varying degrees, Marxists have generally adopted modes of analysis which, explicitly or implicitly, treat the economic ‘base’ and the legal, political, and ideological ‘superstructures’ that ‘reflect’ or ‘correspond’ to it as qualitatively different, more or less enclosed and ‘regionally’ separated sphere.
This is most obviously true of orthodox base-superstructure theories. It is also true of their variants which speak of economic, political and ideological ‘factors,’ ‘levels’ or ‘instances’, no matter how insistent they may be about the interaction of factors or instances, or about the remoteness of the ‘last instance’ in which the economic sphere finally determines the rest. If anything, these formulations merely reinforce the spatial separation of spheres.
Other schools of Marxism have maintained the abstraction and enclosure of spheres in other ways – for example, by abstracting the economy or the circuit of capital in order to construct a technically sophisticated alternative to bourgeois economics, meeting it on its own ground (and going significantly further than Marx himself in this respect, without grounding the economic abstractions in historical and sociological analysis as he did). The social relations in which this economic mechanism is embedded – which indeed constitute it – are treated as somehow external. At best, a spatially separate political power may intervene in the economy, but the economy itself is evacuated of social content and depoliticized. In these respects, Marxist theory has perpetuated the very ideological practices that Marx was attacking, those practices that confirmed to the bourgeoisie the naturalness and eternity of capitalist production relations.
Bourgeois political economy, according to Marx, universalizes capitalist relations of production by analysing production in abstraction from its specific social determinations. Marx’s approach differs from theirs in his insistence that a productive system is made up of its specific social determinations – specific social relations, modes of property and domination, legal and political forms. This does not mean simply that the economic ‘base’ is reflected in and maintained by certain ‘superstructural’ institutions, but that the productive base itself exists in the shape of social, juridical and political forms […]
- The gold and silver trees in C.S. Lewis’s The Magician’s Nephew (1955).
- Clifford D. Simak, ‘The Money Tree’ (1958).
- Leaf currency on primordial Earth in Douglas Adams’s The Restaurant at the End of the Universe (1980).
- The money tree in Nalo Hopkinson’s ‘Money Tree’ (1997).
- Leaf currency on the planet Rain in Adam Roberts’s Stone (2002).
You can read more about leafy and other organic currencies at Economic Science Fiction and Fantasy.
The not-for-profit organisation Positive Money have used the recent chatter about magic money trees as a teachable moment. Money does grow on branches: bank branches. More here.
F.A. Walker’s maxim that “money is what money does” is frequently cited within the fairly scanty literature that orthodox economics devotes to the nature of money. (Although in some respects, of course, orthodox economics is all about money).
Walker’s quotation usually comes into play to help join the dots between the question, “What is money?” and an answer enumerating the three or four major functions of money (as a medium of exchange; as a unit of account; as a store of value; sometimes as a standard of deferred payment). Some critics (e.g. Geoffrey Ingham) complain that the functional “definition” actually fails to specify money: saying what money does doesn’t really tell us what it is, and furthermore, doesn’t money do a few other important things that are mysteriously left out of the canonical three or four functions of money?
When Walker’s quotation is invoked, the implication is often that we should be open-minded in definitional matters. Otherwise we risk being blindsided by the dynamism and adaptability of money. If something doesn’t strike us as money, but one day starts acting as a medium of exchange, a unit of account, and a store of value, then we had better sit up and start taking it seriously as money. (A piece of advice that seems all the more pertinent with the rise of cryptocurrency and other forms of digital value). The precision yet flexibility we get from the concentric, increasingly permissive stipulative measures of the money supply (M0, M1, et al.) support the same attitude. It is fascinating, therefore, to see Walker’s words in their original context.
When Walker wrote “money is that money does,” what kind of money did he have in mind?
Walker is arguing for an extremely narrow definition of money by modern standards, distinguishing it from bills of exchange and checks. He would perhaps not think of it as narrow himself, since he was still tacitly tussling with theorists who thought fiat paper money was not really money. Walker is also explicitly leaving out bank deposits, which nowadays are usually held to constitute the bulk of the middling-to-narrower measures of the money supply. For Walker, bank deposits do not perform the function of money, but “save the use” of money.
Walker is not rigidly dogmatic: he recognizes that treasury notes may be more money-like or less, depending on whether they actually circulate (which he suggests, on the next page, in turn depends on whether they are issued in big or small denominations, and whether or not they are interest-bearing). And bank-notes, “from the ill repute of the issuers, might conceivably become of such slow, difficult and limited currency, as to fall out of the category of money” (p.401).
But Walker is certainly not saying, “I can’t offer you hard-and-fast rules for what is or isn’t money; money is whatever fulfills the functions of money.” What he’s actually saying is something more like, “if it discharges debts and purchases things just like money, don’t be hasty! We shouldn’t really say it’s fulfilling the functions of money unless it actually is money.”
So what actually is money? The phrase “from hand to hand” is key for Walker, and he does not count the “mutual cancellation of vast bodies of indebtedness” as something passing from hand to hand (nope, not even invisible ones). Money must not only discharge debts and purchase things, it must circulate.
This might be pushing it a little, but you might even interpret him to be saying the very opposite of what he is supposed to have said. It is not that money is intricate and multifarious and adaptable and difficult to identify with confidence, whereas the functions of money are abstract and easy-to-identify things, so that anything we find fulfilling those functions has every right to be called money. Rather, it is the functioning of money that is a bit tricky to identify — Condy Raguet and Amasa Walker seem to have got it wrong — whereas there is at least some money that is very easy to identify: the coins that everyone knows and uses. To determine if some borderline phenomenon is actually functioning as a medium of exchange or merely ‘saving the use’ of a medium of exchange, we compare it with what we already know is money. (Of course, this isn’t mere morphological fetishism: coins that came in huge denominations, and were interest-bearing, just like treasury bills with those features, would presumably be less valid as money for Walker).
The notion of the ‘algorithm’ is now taking on its own force, as a kind of evocative shorthand for the power and potential of calculative systems that can think more quickly, more comprehensively and more accurately than humans. As well as understanding the integration of algorithms, we need to understand the way that this term is incorporated into organisational, institutional and everyday understandings. The discourse surrounding algorithms may then provide a focal point for analysing broader political rationalities and modes of governance. In this stream of work, the interest might not be in understanding the social powers of the technical systems, but in understanding how the notion of the algorithm itself has a kind of social power. The algorithm is now a cultural presence, perhaps even an iconic cultural presence, not just because of what they can do but also because of what the notion of the algorithm is used to project. This means that the algorithm can be part of the deployment of power, not just in terms of its function but also in terms of how it is understood as a phenomenon. Algorithmic decisions are depicted as neutral decisions, algorithmic decisions are understood to be efficient decisions, algorithmic decisions are presented as objective and trustworthy decisions, and so on. We certainly need to gain a greater view of the inside of the algorithmic systems in which we live, but we also need to develop an analysis of the cultural prominence of the notion of the algorithm, what this stands for, what it does and what it might reveal.