Following the 2008 Financial Crisis vehement criticism of neoclassical economics as an academic discipline, and of the global economic and financial system which has been built using its findings, has become the mode du jour. This is as true of International Relations as is of other branches of the arts and social sciences – as demonstrated by recent (complimentary) reviews in CRIA of Ha-Joon Chang’s most recent book and of a kind of revisiting of the work of Karl Polanyi.
Chang has become something of an anti-austerity rock star, and Polanyi a ‘lost genius’, because they, among others, are proponents of a ‘new’ kind of critique of orthodox economics. This critique doesn’t follow the line of what was the more ‘popular’ critique of orthodox economics, Marxism. It therefore doesn’t fall prey to many of the arguments which have been used to dismiss it (namely that attempts to implement Marxist economic theory in practice have by-and-large been colossal failures).
They have instead suggested that neoclassical (or ‘market’) economics doesn’t work not simply because it is an exploitative system run in the interests of the minority against those of the majority, but because the presumptions which it makes about human behaviour are out-of-step with how people actually behave. The rational, calculative animal that markets rely on to maintain their dynamics, homo economicus, simply doesn’t exist.
Some, following the observations of psychologists such as Daniel Kahneman and Amos Tversky, conclude that ‘rational’ human decision-making isn’t as ‘rational’ as we think it to be. Others, following Polanyi, claim that it is difficult to come to the conclusion that people are inherently ‘self-interested’ and ‘materialistic’ when they are embedded in webs of social context. Economists and economic historians drawing on either or both argue that, to paraphrase Chang himself, these shortcomings mean that economics as a discipline should not be treated as a science. Economics is instead best seen as a branch of the humanities akin to politics or history, and the ‘facts’ of the market should instead be considered ‘opinions’.
This line of argument, however, isn’t new – something demonstrated by the fact that Polanyi’s magnum opus, The Great Transformation, was originally published in 1947. Debates over the point(s) made by Polanyi and others have been going on in sociology and in anthropology for well over half a century. Some of the conclusions reached can tell us a lot about what might be wrong with the approach taken (broadly speaking) by Chang, Polanyi, and many, many others.
The ‘conclusions’ which I’m referring to are those reached by a number of sociologists influenced by the work of Michel Callon. A ‘founding father’ of a theoretical current in Science and Technology Studies called ‘Actor-Network Theory’, Callon argued in his 1998 work The Laws of the Markets that what had blighted critiques of orthodox/neoclassical economics is that they had treated the discipline in a theoretical manner. Critically-minded sociologists and anthropologists had been narrow-minded in viewing economics as a set of hypotheses to be verified and/or falsified, rather as an object of study in and of itself.
So what Callon (and those who, roughly speaking, ‘follow’ his theoretical inclinations and line of argument) is saying is that to try and figure out whether the neoclassicists were originally ‘right’ in the first place or not is to miss the point. Neoclassical economics has had an incalculable influence on the social, political, economic and legal structures prevalent in the world today, and trying to prove the assumptions underpinning the discipline wrong is not going to change any of that.
An altogether more interesting (and controversial) direction which Callon takes this argument in is to introduce the notion of ‘performativity’, referring specifically to the ‘performativity of economics’. Here, Callon states that trying to figure out what ‘human behaviour’ is in its most original form is futile because the ‘engineering’ done by technocrats influenced by neoclassical economics itself has an impact on the way we have that makes trying to figure out how we might ‘naturally’ behave pointless. It’s a classic constructivist move. Economists are wrong in assuming that there is such a thing as ‘human nature’, but in assuming that it exists have essentially brought the world they imagined to be true into being.
Economics makes this ‘imagined world’ a reality, according to Callon, through a form of action called ‘framing’. This means that either tangible goods (such as property) or intangible goods (such as labour) are divorced from the interpersonal or socio-cultural connections associated with them through the vagaries of ‘the system’. If you own a house and don’t adhere to the adage of ‘buy low, sell high’ because of the sentimental value attached to it, for instance, you stand a chance of getting battered by a crash in property markets. You will, it follows, not repeat the same mistake again.
Where we can see such ‘framing’ occurring on a grand scale is in the recent events in Greece. Here, SYRIZA attempted to steer a course away from the ‘austerity’ demanded by orthodox economics, the European Central Bank (ECB) and the IMF, and promptly stopped because they ran the risk of sending the country into financial meltdown. Yanis Varoufakis, the country’s exuberant ex-Finance Minister, has wisely stayed out of the matter after realising that confronting the ‘minotaur’ of economic orthodoxy had led to Greek bonds rapidly becoming next-to-worthless, or at least more worthless than they were when S&P downgraded their bonds to ‘junk’ status in 2010.
The whole assertion that ‘this is a coup’ only goes so far, however. Greece’s creditors had, over the course of the negotiations between Greece and ‘the Troika’, made clear that offering Greece debt relief could be problematic. This was in part because the regulations governing the Global Financial System had already been set and in part because taxpayers would be outraged that what they saw as Greek profligacy was affecting their wallets. To ‘perform’ an economy, it follows, one has to stick to the script. All of the agents involved may not be ‘naturally’ inclined towards behaving in such a dispassionate way, but because of the (potential) consequences if they don’t, to a great extent they have to.
Following this line of argument doesn’t mean suggesting, however, that the global economic and financial system is bereft of some very serious and fundamentally compromising flaws. Callon and other adherents of Actor-Network Theory don’t try to argue that the systems which they study are stable or even that cohesive – quite the opposite, in fact. The IMF backtracking on their generally hardline stance towards debt relief is an example of a modification, in some small way, of the ‘system’.
What I do suggest is that IR scholars wishing to analyse contemporary global capitalism take a step back and, to paraphrase another developer of ANT, Brutno Latour, ‘let the actors speak for themselves’1. Studies of global capitalism need not be devastatingly critical or enthusiastically positive – it is possible, and perhaps preferable, to treat it not as something that is necessarily ‘bad’ or necessarily ‘good’ or more appropriately for this piece ‘wrong’ or ‘right’, but rather as something that simply is.
For an explanation of Callon’s line of argument which is (thankfully) largely devoid of the jargon that Callon tends to write in, see Andrew Barry and Don Slater’s 2002 article ‘Introduction: The Technological Economy’ in Economy and Society, volume 31. If you’d like to read a (rather angry) riposte to Callon’s thesis, see Daniel Miller’s 2002 article ‘Turning Callon the Right Way Up’ in the same volume of Economy and Society (a special issue devoted largely to Callon’s work regarding markets).
Those looking for an introduction to Actor-Network Theory in general should read either Callon’s 1986 piece ‘Some elements of a sociology of translation’ in the John Law’s edited volumePower, Action and Belief: a New Sociology of Knowledge or (preferably) the introduction to Latour’s 2005 book Reassembling the Social: an Introduction to Actor-Network Theory.
Jack Smith is an undergraduate student with the Human, Social and Political Sciences faculty at the University of Cambridge and is an intern with CRIA. He is affiliated with King’s College.