Economics Is Structured Like a Language
William Kaye-Blake (Lincoln University, New Zealand)
© Copyright: William Kaye-Blake 2006
The title of this paper is a rip-off of Lacan’s pronouncement that ‘the unconscious is structured like a language’ (Lacan, 1981). It is meant to carry two meaning. First, it is an ontological statement. It asserts that a ‘study (or a theory) of being or existence, a concern with the nature and structure of the “stuff” of reality’(Lawson, 2003) that employs insights from the study of language can provide insights into those human activities labelled ‘economic’. This paper discusses the implications of a linguistically-inspired conception of economic phenomena and contrasts this ontology to those of Lawson (2003) and Ruccio (2005).
The title is also a nod to McCloskey’s work on how economists do economics. She emphasised that, as much as economists are interested in incontrovertible facts and solid logic, they are also constantly using models/metaphors to tell compelling stories about economic behaviour. Economists are story-telling creatures and they use all the tools of language and rhetoric to tell their stories. This paper, for example, relies on the metaphor that economic activity is in some way similar to language. It also, for better or worse, appeals to the authority of dead white men, such as Lacan, Saussure, and Freud, another rhetorical device. Mostly, though, it attempts to tell a compelling story in hopes of persuading the reader.
Two ontologies: Lawson and Ruccio
Lawson’s Reorienting Economics (2003)is to be commended because of the discussions it has stirred up regarding the philosophical underpinnings of economic research. It has been extensively reviewed and discussed in this journal, so the discussion here is brief. Lawson suggests that mainstream economics is unhealthy because it relies on mathematical-deductive explanations of economic phenomena. These are closed-system explanations, in which the same initial conditions lead (with some probability, including 1.0) to the same results. He conceives of social reality, including economic phenomena, as an open system, as processual or emergent, and as depending on ‘transformative human agency’ (p. 16). Thus, an economics based on critical realism is more appropriate.
Lawson is advocating that economists be explicit about the ontologies motivating their research. He is also advocating his preferred ontology, critical realism, which appears to be as follows. Social reality is layered and structured. Regularities that are observable at the surface of social reality may be used to identify principles that are operative at some deeper level. Social reality is also open, because ‘events are determined by a multitude of shifting causes’ (p. 42). According to critical realism, economists can observe surface human actions or human doings. Taking into account the social rules and positions that structure society, it is then possible to reveal or locate similarities or patterns or regularities.
There are significant issues with Lawson’s ideas that economists can (a) all agree on some set of specific regularities as important and typical of economies, and (b) use transcendental analysis to move from these observed phenomena to explanations of their underlying causes. The discussions of Hodgson (2004), Caldwell (2004), and Vromen (2004) are particularly insightful about the weaknesses in Lawson’s ideas, and their arguments need not be repeated here.
What is at issue here is the specific ontology that Lawson advocates. As Vromen (2004) asks, ‘What grounds does Lawson have for believing that his ontology provides some sort of impeccable neutral ground…?’ (p. 18). This point is emphasised by the alternative ontologies that Ruccio (2005) discusses – Marxism, postmodernism, and their synthesis – which provide well-developed and solidly grounded theories of the nature of reality generally and economics specifically. It is the postmodernist ontology that this paper would like to address, recognising that Marx’s writings have a complex status for postmodern theory. Marx’s analysis of alienation and exploitation are important to postmodern theory, which nevertheless tends to reject the metanarrative of dialectical materialism (Tweeten & Zulauf, 1999).
Ruccio (2005) explains that postmodern theory views social reality as constructed through discourses. This means first that economists from different schools rely on ‘different concepts and conceptual strategies’ (p. 44). However, there is no external measure against which to compare the different discursively produced conceptions of economic reality, and thus no standard to use to validate (or, in a more Popperian vein, invalidate) any particular discourse. This is the classic problem that Derrida pronounced: ‘il n’y a pas de hors-texte’, everything is text (Tweeten & Zulauf, 1999). Even social interactions can be viewed and read as texts (Hirschman & Holbrook, 1992). The second implication of the discursive construction of social reality is that discourse is performative: ‘the economy … will be affected by which discourses are present’ (Ruccio, 2005). What gets to be discussed and how it is discussed affect the social ‘reality’ that is being analysed, a sort of socio-economic Heisenberg uncertainty principle.
As a result, postmodern ontology is very different from Lawson’s. Most importantly, it asserts that there is no ‘depth’ to social reality, no influence of lower-level metaprinciples on higher-level actualities or surface. Instead, there is only surface: ‘Nothing behind, nothing underneath; no levels of ontological priority or causation’ (Ruccio, 2005). This ontology is that of Foucault and Deleuze and Guattari. It is a ‘flat’ vision of ‘the nature and structure … of reality’. Each phenomenon is the product of forces acting on each other, and each meaning is created by a play amongst different discourses (Massumi, 1992). These forces are constantly acting and interacting, so that social reality is constantly making and remaking itself. Importantly, people are free to choose their own identities, e.g., as consumers (Hirschman & Holbrook, 1992), by combining the forces that act on them (and on which they act) in new ways (Massumi, 1992). Social reality is open, as Lawson maintains, but for a different reason. It is not that multiple principles operative at a deeper level than the surface of economic phenomena are at work, making regularities sometimes difficult to perceive. Instead, the interplay of forces is happening right at the surface, in the different discourses that are constructing the social reality.
These are the ontological perspectives that Lawson and Ruccio have provided, which have hopefully been faithfully re-presented. An ontology based on the insights of linguistics is somewhat different. The next section describes a linguistic economics, and explores the challenge that it makes to a key concept from Lawson and Ruccio: openness.
A different ontology: linguistic economics
The study of language, linguistics, is in part concerned with semiology, the study of signs and signification. In language, words are signs or signifiers that point to, represent, or stand for signifieds. The relationship is arbitrary, in that any signifier could be used for a certain signified. In addition, the signifiers have no positive content, but their meaning is based on the differences between signifiers (Saussure, 1916 ). Meaning is therefore determined by a chain of signifiers, because these relative differences between signifiers can be altered by the presence of other signifiers (Copjec, 1994; de Saussure, 1916 ).
Saussurian linguistics underpin the postmodern ontology of Ruccio, in which meaning is creating by the interplay of the differences of the signifiers or the interplay of the discourses present in a specific moment. However, Saussurian linguistics also inform Lacanian ideas, which have led to a certain strand of cultural theory. It is this strand that this paper picks up. To understand this different ontology, the notion of openness is examined below.
Openness is a key concept for Lawson. He perceives that social reality is open and proposes that critical realism is faithful to this openness, while mainstream economics uses closed mathematical-deductive techniques. Two things should be noted. First, it is not at all clear that critical realism can be both analytical and open: all analysis requires some closure conditions (Hodgson, 2004). Secondly, the extent to which mainstream economists have a closed ontology (as opposed to closed analyses) is debatable (Vromen, 2004). Those caveats aside, openness is key for Lawson. He explains it as follows:
We can make best sense of such variability [such as differences in prices for different consumers] by recognising that there is not a cessation of the underlying causal structures and mechanisms where a pattern does not strictly hold, but that countervailing mechanisms are also typically in play affecting the actual outcomes. This is consistent … with the social world in general being open (events are determined by a multitude of shifting causes). (p. 42)
By contrast, he maintains that, ‘[f]or the deductivist, analysis requires that underlying powers, etc. are always reflected fully in predictable behaviour, i.e. are actualised, and in ways where events could not have turned out otherwise’ (p. 26).
The postmodern view of openness is slightly different. Postmodernists ‘emphasize the randomness of causation and effectivity of chance, the indeterminacy of events’ (Ruccio, 2005). For Deleuze and Guattari, this openness is the result of the potential present in each present moment, in which multiple forces come to bear but amongst which individual have some choice: ‘Becoming must keep on becoming, in an indefinite movement of invention opening wider and wider zomes of autonomy populated by more and more singularities’ (Massumi, 1992).
There is a problem with both of these formulations 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. Savoir pour prevoir, prevoir pour pouvoir.
The root of this problem is that Lawson and the postmodernists are looking at the past: they theorise that prior forces/operative principles cause the present and push it into the future. The insight of linguistics is that the present is not determined until the future has already happened. Meaning depends on a chain of signifiers, each of which is capable of modifying the meaning of a previous signifier. The present is open not because (or not only because) so many different pasts can lead to it, but also because the unknown future can change the meaning of the present. Saussure was aware of this problem, and attempted to resolve it by fixing meaning at the moment of understanding, when ‘the open-ended diachrony of the system was bracketed and a synchronic closure was supposed to be operative’ (Copjec, 1994). The problem is two-fold: first, that subsequent events can alter that synchronic closure, and second, we as users of language are aware of this possibility.
Two examples from economics may clarify the issue. The first example is from Caldwell (2004), who described the problem that econometrician have in extrapolating policy recommendations from their empirical modelling results. ‘How is [an economist] to make believable inferences from such a literature, when results may have already been, or in the future be, challenged and even conceivably overturned?’ (Goldfarb, quoted in Caldwell, 2004, p. 23). That is, current understanding or meaning of economics is contingent on future results, just as current meaning of signifiers is contingent on the future chain of signifiers. The second example is from Robinson (1962), who explained that Pigou reconciled Marshall’s notions of capital with those of Walras and Jevons by modelling the end state when accumulation had ceased. At that time, capital has a demand price and a supply price. But, Robinson notes, the point when accumulation has ended does not help very much in understanding the present. Thus, to make sense of capital, Pigou had to imagine a time when the chain of signifiers had ended, when the last signifier slid into place and fixed the meaning, the price, of all the priors.
Economics is structured like a language. 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 (Galbraith, 1967) and insurance. However, economics is fundamentally open because the future is unknown; it could surprise us (Earl, 1983).
The next section presents a less theoretical and more ‘grounded’ discussion of linguistic economics. Its motivation is Lawson’s comment that he is often asked to apply his theory, that he is often asked to provide a critical realist account of some phenomena (Lawson, 1999, cited in Davidsen, 2005). The example is consumer reactions to genetically modified food, an analysis of which could benefit from reference to a linguistic model of economic activity.
The value of genetically modified food
Genetically modified food is a contentious topic on several levels. First, there is a scientific debate over what the potential impacts of GM crops and GM food could be on the environment (Benbrook, 2001; CEC, 2000; Firbank et al., 2003; Gianessi, Silvers, Sankula, & Carpenter, 2002). GM food is also politically contentious, raising issues such as control of the food supply, consumers’ rights to be informed and to choose, and liability regimes (Caswell, 1998; Thompson, 1997; Wright, 2000; Wynne, 2003).
Finally, GM food is contentious within the economics discipline: the push to describe consumer reactions contends with the push to prescribe what those reactions ought to be. The tension between is and ought is clear in the literature on consumer willingness to pay for GM food. Throughout this literature, there are respondents who refuse to accept GM food at the prices offered (e.g., Burton & Pearse, 2002; James & Burton, 2003; McCluskey, Ouchi, Grimsrud, & Wahl, 2001). Yet, because consumers ought to accept GM food (because scientists say that it is safe and several governments say that it is substantially equivalent to non-GM food (Huffman, 2003; Tegene, Huffman, Rousu, & Shogren, 2003)), the reactions of such consumers are set aside. They are excluded as irrational, not for economic analysis, outside the bounds of economics and under the purview of some other discipline (Earl, 1986).
GM food is also problematic from an economic perspective because reactions are unpredictable. Socio-economics categories that economists use for describing people tend to be ineffective for describing willingness to pay for GM food. Income, education, age are all inconclusive. Gender has consistently been used, but some suggest that it may not be important (Kaye-Blake, Bicknell, & Saunders, 2005; Rigby & Burton, 2003). The result is that economics is largely impotent at predicting the willingness to pay of different consumers, and cannot claim much more than that consumers are different because they are different.
A linguistic economics is also not baffled by the fact that people react differently. Meaning is contingent; this is what linguistics demonstrates. What a person says now has meaning based on what has been said in the past AND what will be said in the future. But members of a linguistic (economic) community must communicate (exchange) before the future fixes the meaning (value) of the utterances (transactions). Two different reactions to GM food can be seen as two different ways to cope with the contingent nature of the value of GM food.
One way to cope with this uncertainty is to act as though the important aspects of the commodity are already known. This is the nature of the argument that GM food is substantially equivalent to non-GM food. Consumers know what food is and what it does because of their life-long association with food. Substantial equivalence suggests that consumers can accept that GM food is just like non-GM food in all the ways that matter. GM food is no differently contingent than non-GM food and no special precautions or activities need to be undertaken. It is thus not surprising that individuals with greater trust in institutions have greater acceptance of GM food (Grice & Lawrence, 2003; Shoemaker et al., 2001; Verdurme & Viaene, 2002). They believe that governments and corporation ‘know’: savoir pour pouvoir, pouvoir pour prevoir. Because these institutions can know and predict, the future is not uncertain and the present is therefore not contingent.
The second way to cope with this uncertainty is to act as though meanings and values in the present are radically contingent on an uncertain future. Thus, present actions should be robustly appropriate under a range of different futures. This is the nature of the arguments that GM technology requires a precautionary principle: future impacts will not be known until the future arrives, so people should choose present actions with desirable outcomes under a range of different possible futures. These consumers believe that past events have been surprises – BSE was caused by a mechanism that scientists said could not happen – and that present decisions need to be made with an eye for the potential for surprises (echoes of Shackle here).
GM food thus provides an example of how a linguistically-informed economics can better understand economic behaviour. Faced with the uncertainty caused by the contingent nature of present transactions, people may choose to discount the potential uncertainties or to focus on the potential for unforeseen consequences. Importantly, neither response is demonstrably ‘right’ or rational, in that the value of GM food cannot be known until the future has already happened.
Lawson’s critique stresses that the mathematical/deductive ontology that mainstream economists use is incorrect for their subject matter, the economy. He suggests the ontology of critical realism as a better approach. Ruccio, in turn, provides a postmodern ontology as a different alternative. A central idea for these ontologies is that of openness. Both Lawson’s openness, based on underlying operative principles, and postmodern openness, based on multiple forces interplaying on the social surface, are argued here to be not so much open but complex. The present is viewed as the culmination of knowable principles or past forces. The present is therefore a product of the past and thus closed.
Making Lawson’s ontological turn into a sort of philosophical roundabout, this paper offers another ontological exit. It suggests that it may be useful to understand economics linguistically. Linguistics demonstrates that meaning is produced by differences between signifiers. Until the chain of signifiers ends, the differences and therefore the meanings are not fixed. The present is thus open not because of the past but because of the future. It is the same with economics: 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.
The discussion on the ‘appropriate’ ontology for economics, sparked in this forum by Lawson’s writings, is welcome. This paper presents and, yes, advocates a specific ontology, one informed by linguistic ideas of Saussure by way of Lacan and Copjec. It is not intended to be read as a rejection of others’ ontologies, however; it is an offering of a different perspective in the hope of widening the discussion. It is also meant to be contingent, a thinking that never finishes realising itself. Only when someone has had the final word can the meaning of this paper be fixed.
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Author contact: firstname.lastname@example.org. Agribusiness and Economics Research Unit, PO Box 84, Lincoln University, Canterbury, New Zealand;