With the last three posts being high mathematical-economic theory, let’s go 180 degrees and look at this recent essay – the introduction of a book, actually – by Michel Callon, one of the deans of actor-network theory (along with Bruno Latour, of course). I know what you’re thinking: a French sociologist of science who thinks objects have agency? You’re probably running away already! But stay; I promise it won’t be so bad. And as Callon mentions, sociologists of science and economic theory have a long connection: Robert K. Merton, legendary author of The Sociology of Science, is the father of Robert C. Merton, the Nobel winning economist.
The concept here is performativity in economics. An essay by William Baumol and a coauthor in the JEL tried to examine whether economic theory had made any major contributions. Of the 9 theories they studied (marginalism, Black-Scholes, etc.), only a couple could reasonably be said to be invented and disseminated by academic economists. But performativity is not so sanguine. Performativity suggests that, rather than theories being true or false, they are accepted or not accepted, and there are many roles to be played in this acceptance process by humans and non-humans alike. For example, the theory of Black-Scholes could be accepted in academia, but to be performed by a broader network, certain technologies were needed (frequent stock quotes), market participants needed to believe the theory, regulators needed to be persuaded (that, for one, options are not just gambling); this process is reflexive and the way the theory is performed feeds back into the construction of novel theories. A role exists for economists as scientists across this entire performance.
The above does not simply mean that beliefs matter, or that economic theories are “performed” as self-fulfilling prophecies. Callon again: “The notion of expression is a powerful vaccination against a reductionist interpretation of performativity; a reminder that performativity is not about creating but about making happen.” Not all potential self-fulfilling prophecies are equal: traders did in fact use Black-Scholes, but they never began to use sunspots to coordinate. Sometimes theories outside academia are performed in economics: witness financial chartism. It’s not about “truth” or “falsehood”: Callon’s school of sociology/anthropology is fundamentally agnostic.
There is an interesting link between the jargon of the actor-network theory literature and standard economics. I think you can see it in the following passage:
“In the paper world to which it belongs, marginalist analysis thrives. All it needs are some propositions on decreasing returns, the convexity of utility curves, and so forth. Transported into an electricity utility (for example Electricité de France), it needs the addition of time-ofday meters set up wherever people consume electricity and without which calculations are impossible; introduced into a private firm, it requires analytical accounting and a system of recording and cost assessment that prove to be hardly feasible. This does not mean that marginalist analysis has become false. As everyone knows, it is still true in (most) universities.”
Economists surely see a quote like the above and think, surely there is something more to this theory of performance than information economics and technological constraints. But really there isn’t. Rather, we economists generally do model why information is the way it is, or why certain agents get certain signals. A lot of this branch of sociology should be read as an investigation into how agents (including nonhumans, such as firms) get, or search for, information, particularly to the extent that such a search is reflexive to a new economic theory being proposed.
http://halshs.archives-ouvertes.fr/docs/00/09/15/96/PDF/WP_CSI_005.pdf (July 2006 working paper – final version published in McKenzie et al (Eds.), Do Economists Make Markets by Princeton Univ. Press)