Economic uncertainty and economics imperialism

Matthew Watson  - Professor of Political Economy and ESRC Professorial Fellow, University of Warwick

The first suspect to consider in this regard is the practice of writing economic history.  This is not merely because it is easier to be wise after the fact than it is in the moment.  Economic historians do, of course, treat it as their professional raison d’être to reconstruct the logic of an event after it has fully played out, and they are also likely to have recourse to data that retrospectively quantifies these outcomes in a way that would have been impossible whilst the event was still in the making.  What was experienced at the time as a period of flux – often as a period of unfathomable and deeply traumatic flux, leading to feelings of increasingly all-encompassing existential crisis – can often be redescribed from the safe distance of future observations as a relatively untroubled move from one system setting to another.  The raw emotion of day-to-day struggles gets lost the more that direct memories fade; and once it is lost, that deep-seated fear of the unknown is nigh-on impossible to put back into the analysis.  When we read economic histories of the Great Depression of the 1930s, for instance, and whilst we wait for what we already know is going to be told as a happy ending (usually in the form of ‘and then along came Keynes, and everything was all right in the end’) can we really call to mind the individual traumas of the dole queue, means testing and the thought that joblessness might now have become a permanent state of being?  Can we ever really expect economic historians to reconstruct the emotional insecurities of feeling unsure about what is going to happen next?

The presence of level-headed after-the-fact analysis is one of the benchmarks by which historians pass judgement on the fellow practitioners of their craft.  However, this does tend to render the trajectory of the economic system less retrospectively uncertain than it actually was at any moment when the trajectory under consideration was being traced through.  This tendency, moreover, has almost certainly been exacerbated by the increasing incorporation of economic theory into the practice of writing economic history.  Through this means, historical events come more and more to be made to fit theoretical models.  The economy as it is experienced in everyday life is thus increasingly reimagined as ‘the economy’ as it appears through the lens of theoretical economics.

Economic history was one of the first fields to succumb at least partially to so-called economics imperialism, the phenomenon through which the methods and models of economic theory have taken over other social scientific subject fields.  The economic historian’s craft, which probably always tended to err in any case towards retrospective reassurance that things were never as bad as they appeared at the time, was thus at least to some extent overwritten by the economic theorist’s often unflinching faith in the universal applicability of their explanatory models.

As such, what may have been experienced as endemic uncertainty by economic agents at a particular moment of time might henceforth be subjected to a double reinterpretation, each of which pushes uncertainty further towards the margins of the story.  The first layer of reinterpretation comes from the historian’s efforts to depict widespread uncertainty as the inevitable outcome of the further institutionalisation of the logic of system change.  The second follows from the theorist’s fascination with the essential aspects of abstract economic behaviour.

In its orthodox form at least, economic theory reduces all behaviour to that which is consistent with the solution to a partial differential equation.  Such equations will no longer typically be visible in the resulting model, because to say that they are hardly at the cutting-edge of mathematical sophistication is obviously a rather big understatement.  But the presence of economic agents who act slavishly in this way is likely to be a necessary feature of those models.  They are always either maximising or minimising something, akin to the position of turning points of mathematical functions taking the form y = f(x).  No challenge is permitted to this conception of agency, because it is simply assumed that nature has ordained the economic agent to act in this way.  If they are not either maximising or minimising something, then they cannot be considered to have acted economically at all.

Economic history written through the perspective of this style of orthodox economic theory consequently has all of its behavioural uncertainty removed at the point of origin.  Historical uncertainty may still be admissible, but what of the scope for fleshing out the feelings of alienation that so often follow from being caught in a moment of intense historical uncertainty?  Presumably this has to be severely curtailed if every economic agent at every moment of time is blessed with pure certainty of behaviour.

The issue here is that although economics has proved to be an imperialistic social science, at the same time the history of economic theory is one of colonisation from its outside.  The economic content of economic theory has largely been displaced by mathematical content.  The internal structure of the resulting theoretical models now typically follows their fundamental mathematical logic, with the question of what the models can tell us about everyday economic experiences ranking a long way second.  To follow in the footsteps of the most sophisticated mathematical economists is today frequently to embrace the techniques of convex set theory.

What particularly marks this theory out is the efforts its key proponents have made from the mid-twentieth century onwards to reduce its internal structure to only those set-theoretical relationships that could be proved to be true by definition.  The mathematics consequently creates a façade of certainty that is entirely impregnable.  No qualifications to known pasts, known presents and known futures can be entertained if the mathematical structure is to be allowed to retain its pristine condition.  Thus the mathematical tail wags the economic dog to a wholly uncompromising degree.

Of course, alternatives persist.  There is no requirement to think that the history of economic systems must be constructed through the perspective of economic theory, let alone through the perspective of an imperialistic mathematical economic theory.  Moreover, if uncertainty is to be asserted as an essential economic ontology, then it is important that such links are broken.  Perhaps only inadvertently so, but they push the analysis so far in the direction of certainty that each new generation of political economists is forced to discover a language of economic uncertainty for itself.  However, uncertainty should be our instinctive starting point, not something that catches us off guard when its presence is suddenly impossible to miss