In a tentative mode, I would like to suggest that the term or notion of the algorithm should also be considered when attempting to understand the social power of algorithms. In some ways this power can potentially be detached from its technical and material form whilst still capturing something of the exteriority. As such, we would need to understand algorithms within their discursive practices and framings. The notion of the algorithm is evoked to influence and convince, to suggest things and to envision a certain approach, governmentality and way of ordering. Plus, the term is also part of wider rationalities and ways of thinking. Together then, this requires us to explore and illustrate the power of this term whilst also potentially using it as a focal point for opening up or revealing these wider rationalities. The notion of the algorithm is part of a wider vocabulary, a vocabulary that we might see deployed to promote a certain rationality, a rationality based upon the virtues of calculation, competition, efficiency, objectivity and the need to be strategic. As such, the notion of the algorithm can be powerful in shaping decisions, influencing behaviour and ushering in certain approaches and ideals. The algorithm’s power may then not just be in the code, but in that way that it becomes part of a discursive understanding of desirability and efficiency in which the mention of algorithms is part of ‘a code of normalization’ [Foucault, M. (2004). Society must be defended: Lectures at the collège de France, 1975–76. London: Penguin., p. 38]. The notion of the algorithm is part of the social power we should be exploring. The term algorithm carries something of this authority. Algorithms are, largely, trusted for their precision and objectivity. A certain rationality may well then be built into this perception of the algorithm. The discourse surrounding the algorithm might well reveal something of the wider political dynamics of which they are a part.
A form of accounting, in which the sums were not expressible in common units, would of course not yield anything rationally intelligible. Now, a socialist economy, as we have defined it earlier in terms of its goals, in no way presumes a purely administrative economy, which unilaterally sets the prices for all goods (fixed prices), yielding figures that can be readily added. Instead, such a socialist economy also allows for these prices to arise through agreement (negotiated prices). Since we thus do not want to make any presuppositions about price formation, we must consider the theoretically most general––and, from the viewpoint of accounting, practically most unfavorable—case. We therefore assume that the economy for which we seek a quantitative overview has all types of price formation, from price formation in a market through the free play of supply and demand to administratively set prices. Whether such an assumption is theoretically valid, or even practically conceivable, remains to be seen. […]
But here begins the actual difficulty, which we wish to designate the quantitative difficulty. Fixed prices can affect negotiated prices at a minimum in two fundamentally different ways, according to whether their effect propagates “downstream,” […] meaning the same direction that the production process runs (towards the final product)—or in the opposite direction (towards the raw materials). The cost principle in accounting implies, however, that only those cost figures arising from the “downstream” effect of a fixed price may be added to one another. […] A fixed price and all the negotiated prices that arise from its “upstream” effect may be added neither to that fixed price itself nor to the negotiated prices arising from its “downstream” effect […]
Natural costs express the sacrifices that the natural process of material production requires, according to the character of the production task involved. Social costs, on the other hand, are that extra sacrifice that society’s will imposes on us via the effort both to ensure just distribution in every instance and to secure production with higher social utility. It is evident that separate quantitative recording of these cost groups (natural and social costs) is the main, practical task of socialist accounting. Without the recording of natural costs, production would have no reliable, infinitesimally precise guidelines, operating instead on intuition and approximation. We wish to point out here with particular emphasis that without the recording of social costs, the political-moral side of socialism would be no more realizable than the technical side would be without the recording of natural costs. Humanity will only be free when it understands what it must pay for its ideals. Only then will humanity come to recognize that the realization of these ideals depends exclusively on humanity itself. Then too, however, humanity will find the strength to realize its ideals.
“Sozialistische Rechnungslegung” [“Socialist Accounting”], 1922; trans. Johanna Bockman, Ariane Fischer, & David Woodruff 2016.
Although Adam Smith was responsible for coining one of the most popular slogans for describing how a market economy operates, its semantics are determined by two further aspects. On the one hand, if we follow the tangled history of the “invisible hand” metaphor, we can see how through this metaphor theological and cosmological questions were deposited in the field of social ontology. A century before Adam Smith, for instance, the metaphor referred to something secretly at work in relations between natural things, a cosmological phenomenon that, like the mechanism of a clock, hides behind the clearly visible hands and dial: “For Nature works by an Invisible Hand in all things.” […] The manus gubernatoris of Scholastic philosophy, the guiding hand of God invisibly directing all Creation, returns as an influential theological metaphor for the Providence manifest in the natural order, the oeconomia naturae. And before the “invisible hand” appeared in Wealth of Nations as a topos for the law-governed activity that turns self-interest and the striving for gain to the general good, this expression occurred in Smith himself in an entirely different yet equally significant context.
In his History of Astronomy, probably written around 1758, not only did Smith attempt an apologia for the Newtonian world system, with its laws of gravity and inertia; he also casually remarked on the inability of polytheistic religions to trace irregular events in the natural world — events in which they saw the miraculous power of the ancient gods at work — back to regularly occurring patterns. While it is only natural that “fire burns and water refreshes,” or that “heavy bodies descend and lighter substances fly upward,” extraordinary phenomena such as lightning, thunder, or storms call for explanation — and for this the ancients would in the end simply turn to Jupiter’s “invisible hand.” […] Here too the invisible hand is treated as a cosmological fact; and just as an invisible hand will later bring the unpredictable inclinations of self-seeking subjects to order, so too here an invisible hand shows how irregular natural events manifest the workings of divinely ordained laws. As a result of such supernatural intervention, earthly matters are brought into conformity with Providence, irregularities are translated into order, and diffuse forces and movements [p.26] are made to bear witness to an invisible power linking them together. All this activity by invisible hands indicates that hidden manipulations — in the most literal sense — intervene both in the natural course of events and in the dynamics of social interaction.
On the other hand, it should not be forgotten that Smith presented another version of his concept of the “invisible hand” in the first volume of his 1759 essay on moral philosophy, The Theory of Moral Sentiments. And here homo economicus is defined by more than his failure to see the whole situation, his lack of a comprehensive overview. Economic beings can only function to the extent that they are always missing something even more fundamental. […] Despite or precisely because of their “natural selfishness and rapacity,” the rich share their wealth with the poor. In Smith’s words, this means that […] “they are led by an invisible hand to make nearly the same distributions of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants; and thus without intending, without knowing it, advance the interest of the society and afford the means for the multiplication of the species.”
Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), pp.25-26.
Put somewhat crudely, we would have to speak here of the emergence of a liberal despotism. […] This momentous moral-philosophical shift was probably first made explicit by the physiocrats […] The market guarantees that natural laws can pertain equally to moral life; and the forces of the market make it possible for economic law, in particular, to represent natural rights in general. […] One inevitable consequence of this overall accommodation to the market is that the distinction, stemming from the modern theory of the state, between civil society and the state of nature no longer makes sense. The market cancels or elides this distinction and eliminates the associated aporias of natural law. It circumvents the social contract and presents itself as a kind of état de nature. [p.30] What later goes by the name of “liberalism” thus first took the form of naturalism, which defined so-called market freedoms primarily in terms of a duty and an obligation: the duty to relinquish control of economic subjects and a corresponding obligation to subordinate governments and their agents to primordial market laws.
Joseph Vogl, The Specter of Capitalism (Stanford: Stanford University Press, 2015), p.29.
Since the Middle Ages, the rudiments of a functioning credit system have been necessary conditions for the expansion of commercial capitalism. […] It is all the more surprising, then, that it was not until the end of the eighteenth century that a sufficiently systematic discussion of banking, capital, and credit mechanisms got underway. This may be due to a delay in the emergence of a systematic science of economics, which was notoriously late in catching up with manifest business practices; but it may also have owed something to a certain theoretical resistance to the fact that a genuinely capitalst structure — one that trades with credit, assets, prospective profits, and hence with time — could no longer be directly translated back into elementary exchange and balance relations. Though people still assumed that there was a balancing dynamic at work in the market, the constant circulation of debt, credit, and capital they observed seemed to contradict this assumption, and they were evidently alarmed by the wide-ranging impact of the economic decisions and actions being taken.
Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), p.41.
ABSTRACT: Bernoulli’s framework of expected utility serves as a model for various psychological processes, including motivation, moral sense, attitudes, and decision making. To account for evidence at variance with expected utility, we generalize the framework of fast and frugal heuristics from inferences to preferences. The priority heuristic predicts (i) Allais’ paradox, (ii) risk aversion for gains if probabilities are high, (iii) risk seeking for gains if probabilities are low (lottery tickets), (iv) risk aversion for losses if probabilities are low (buying insurance), (v) risk seeking for losses if probabilities are high, (vi) certainty effect, (vii) possibility effect, and (viii) intransitivities. We test how accurately the heuristic predicts people’s choices, compared to previously proposed heuristics and three modifications of expected utility theory: security-potential/aspiration theory, transfer-of-attention-exchange model, and cumulative prospect theory.
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This brings us to one of the most important component of the new social law and the oikodicy, a defining feature of homo economicus and his milieu, the market. Economic beings are reliable on account of their very limitations, they are social due to their lack of sociality, and it is only through their self-interested participation in trade that they can be brought to serve a purpose extrinsic to themselves. Above all, they best exercise control over themselves and others if they are left uncontrolled. There is nothing — and this will be one of the leitmotifs of the liberalism to come — more harmful than a government that wants to do good. On the contrary, what is called for here is a Mephistophelian agenda, one that takes its cue from a power “which would do evil constantly and constantly does good,” inadvertently producing what is best for all. Civil society, which constitutes itself as the milieu of homo economicus, is governed by the principle of nontransparency or inscrutability; there is no benevolent political actor, possessed of an all-encompassing overview and piercing insight, who might be willing and able to do what is good for everyone.
Joseph Vogl, The Specter of Capital (Stanford: Stanford University Press, 2015), p.24.