Towards a semiotic economics


The habit in economics of using either tenth rate metaphors (without being aware they are metaphors) or to mathematicise human behaviour has largely doomed the discipline to irrelevance, at least when it comes to uncovering anything remotely resembling the truth. It is a determined effort to avoid a central fact. Markets are animated by humans, who, amongst other things, are able to understand the metaphors or mathematical models applied to their behaviour, and to respond accordingly. That means any quasi-science borrowed from physics or biology won’t work in economics. Atoms, plants or animals, are not aware of the models or metaphors applied to their behaviour. Human beings are. (With the possible exception of economists, who don’t seem to be aware of very much at all).

Yet if we accept the centrality of human beings to markets, it still leaves some big questions unanswered. One of those is the question of individual and collective will. It makes eminent sense to talk of an individual’s will; their volition. Only those who believe in a completely mechanistic, determinist universe would have difficulty with that.

But it becomes more tricky when we start talking of collective will, the volition of crowds. Groups of people do not have a “mind” that makes “choices” in the same way that we think a person does. Yet they do seem to have volition, which tends to be characterised as “culture” or, in the case of extreme behaviour “madness”.

I am not about to propose an answer to this problem – there is none, not least because as soon as a plausible explanation emerged it would defeat itself because people would be aware of it and do something different. As the literary critic George Steiner noted, a Freudian slip was only a Freudian slip when nobody knew what a Freudian slip was. Analyses of mind only work when the subject of the analysis – the person with the mind — is unaware.

What I am going to suggest is that the problem of collective and individual will is a central puzzle, and mystery, of markets that requires a different approach. It is a core conundrum. Much of the discussion about the collective will versus individual will has concentrated on the existence or otherwise of an “invisible hand”: a collective altruism versus an individual selfishness. I haven’t noticed too many applying that bold leap of faith in markets when the selfishness of financiers almost destroyed the global financial system on that fateful day in September 2008.

My view is closer to Keynes:

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”

A belief, one might add, held by people claiming to be subscribing to a superior brand of rationalism. One is reminded of GK Chesterton’s comment that when people give up faith the problem is not that they believe in nothing, but that they will believe in anything.

Still, the invisible hand is a useful metaphor for the individual-collective tension (please note: a metaphor). Keynes had this to say:

“The master-economist must possess a rare combination of gifts …. He must be mathematician, historian, statesman, philosopher — in some degree. He must understand symbols and speak in words.”

Note his point about symbols and words. A symbol has a specific referent (i.e. isomorphic) and is in itself dead, it has no particular life of its own. Words can have multiple referents, of varying degrees of intensity, and the language can itself be alive. That is, the word’s existence can resonate.

Economists like to use symbols because it creates the illusion that they have authority, they know something. It is a neat trick and nice work if you can get it. But it is deeply dishonest, and, as it has developed a life of its own – as we all hang on GDP statistics, or current account figures, to see whether we are going the right way and our life has a purpose — strangely absurd.

By contrast, the flexibility of language, its potential “aliveness”, makes it more useful to address conundrums like the interplay of individual and collective will. In other words, economists would be well served to become as literary and articulate as Keynes was, and to use first rate metaphors in a self aware way, rather than tenth rate metaphors in an ignorant and pompous way.

That will not lead to the “right” answer about markets. But it could lead to a more mature understanding.

Latest posts by __ADAM__ (see all)


    • Lol. A pejorative amateur psychoanalysis of economists’ pathological delusion that their profession is a science? It’s almost as unscholarly as it is unoriginal.

      How many times does this timeworn boilerplate need to be recycled and discarded? Maths in econ is just a way to express an argument in clear and precise terms, free from the kind of casuistic nonsense that sees symbols described as ‘dead’ and words ‘alive’. Colourful language is exactly what econ does not need.

      As Paul Krugman wrote;

      “Some people claim to reject neoclassical economics, but their alternative is not an alternative model but a lot of verbiage; they talk at the economy, and imagine that by so doing they achieve a higher level of sophistication and realism than economists who try to express their ideas in terms of little models.

      And they’re kidding themselves; all they’ve done is hide their implicit models and prejudices behind a dust cloud.”

      • I would hardly call SON an amateur…your response, on the other hand, fits that bill nicely. Might I suggest you will enhance your limited linear thinking with a couple of acid tabs and focus on the dust cloud, maybe then you will understand there is a bigger quantum world out there.

        SON has been encouraging us to see the bigger picture. Activate your inner observer and re read the post then comment.

    • Don’t look at me, I already have one. That’s quite enough for one life time, thank you very much …

  1. Alex Heyworth

    Surowiecki’s “The Wisdom of Crowds” has something valuable to say on this.

    The basic thesis is that large groups of people are more likely to be right than “experts”. Decentralized decision making is better. Collaboration makes scientists more productive.

    • +1

      One of the most out landish and arrogant ideas going around is that when economic activity is subdued, because people for whatever reason choose not to undertake transactions, what is needed is for some wise poobahs to work to manipulate decision making by individuals.

      Of course they give their meddling nice descriptions like ‘stimulating’ or ‘supporting’ that suggest they are merely correcting some abnormality in ‘animal spirits’. The idea that the decline in activity might be quite rational and should be respected as part of the process of transition eludes them.

      Yank some levers and make the world a better place.

      This is not to say that collective action in the form of govt works is not required nor that all forms of welfare payments are without merit.

      Simply that more weight should be given to the choices made by the population. Sometimes they lose interest in participating in particular transactions for very good reasons.

      If more regard was given to allowing communities to function as organic economic units, rather than as objects of technocratic administrative manipulation, there might be a bit more collective self help that is genuinely rooted in the community.

    • Define “right”.

      Every species has an inbuilt capacity to bring great harm to itself. This is what awaits a belief in the wisdom of the crowd.

      Not all scientists are more productive with collaboration… just most of them. But decentralized decision making can be a poor choice when any individual area lacks the critical mass to be effective. Too many institutions suffer from a lack of leadership because they’d rather outsource the decision making too far down the chain.

      I’m a great believer in the power of self organisation but there are too many things it sucks at for it to be applied wholesale.

      • Alex Heyworth

        Quite so. I don’t think Surowiecki would disagree with you, and I certainly don’t. Re science, the ‘big ideas’ often seem to come from mavericks, often people whose main specialty is outside the field – Wegener, a meteorologist with a doctorate in astronomy, propounding continental drift is a good example. The development of ideas into something useful tends to be done better via collaboration – the Manhattan project is a good example.

        And of course, as well as the wisdom of crowds, we have the madness of crowds to contend with.

      • Alex Heyworth

        PS, the trick is to work out those things where crowd wisdom is a useful approach. Quite easy in some areas, difficult in others. Surowiecki does explore this question, although the book is all too brief.

      • No arguments here.

        Innovation is usually a result of a person with a problem sharing that problem (directly or indirectly) with someone with a skillset that has not been applied with sufficient effort to that problem. One of the parties has to be motivated to solve the problem, so either the problem is shared, or the skillset.

        I’ve seen a recent experiment specifically designed to show up the tunnel vision of expertise. The experts in a particular area were given a problem to solve that looked like something in their area, when in fact it wasn’t. Non-experts solved the problem in a much smaller amount of time than the experts who spent most of their time trying solutions that “should” have worked rather than the true solution that the laymen discovered within a few minutes.

  2. bolstroodMEMBER

    When discussing the collective will of human beings similarities in the psychology of flocks of birds and schools of fish, Wilder beasts and Zebras & other herd animals is worth investigation.
    We share at least some traits with other species.

    As to Chestertons quote , the problem is belief itself. Men believed for centuries that the world was flat. Believing did not make it so.People prone to believing things are capable of believing anything.We see this in the financial & economic reports every day. Belief, unfortunately ,is the bedrock of our financial system , credo = I believe , the root we get our word credit from. For every creditor there is a debtor. Look where debt has got us. Belief in financial terms generates trust, I believe he will pay his debts.When the trust is broken ,as in the US subprime scandal , the system collapses.No one knows how to repair broken trust. Fidelis = to respond to = faith
    i.e. high fidelity stereo, perhaps a better rock to build an economic/financial system on .

    “economists would be well served to become as literary and articulate as Keynes was.”
    Keynes was educated properly. In his day he was taught word derivation, latin & Greek roots , the meaning of words. It is all very well to talk of” the flexibility of language , its potential “aliveness” ” but if you do not know what words mean you don’t know what you are talking about. This seems to be the case with our current generation of finance /economists spokes- speakers, who have been badly let down by our education system

  3. Just Dismal 2

    an interesting logical problem with collective altruism: who is the observer? if the observer is not part of the collective, self destruction might well be seen as “altruism” of sorts.

    • One of the many logical problems. I suppose it could be called intersubjective rather than objective or subjective, i.e. many observers. But that just shifts the problem along one step, it doesn’t solve it. Indeed it can’t be “solved”.
      Lurking inside this is the idea that self interest versus altruism is a dichotomy. It is problematic because at one level how can a “self” that acts, has volition not have “self interest”? That is the point that Ayn Rand is exploiting, with her arguments that we should just face up to the reality that we are all self interested so we should just get on with being that. Then she makes an absurd leap by claiming it is moral to do so.
      At another level, one can easily be seen to act against self interest by doing something that involves sacrifice or harm to oneself (ostensibly for others). The first use of self interest is a tautology, it is meaningless. The second at least discriminates between different types of behaviours and intent.
      I guess the point I am trying to make is that a focus on the words used, literariness, at least allows for greater discrimination and clarity (I supposed I am biased because I have a PhD in Literature). Mathematical symbols and poor metaphors (used with little awareness that they are metaphors) does not allow that. And the mathematical “precision” to which MJV refers is really an illusion; the world is not precise.

      • I caught this the other day:

        The self-interest crowd generally go for the argument that altruism exists because we were used to sharing genetics with our tribe ('s_number) and thus there was a biological imperative to help them survive (and thus our own common genes) as much as helping ourselves survive.

        We are far more related than most people realise ( so the traditional arguments of altruism still hold.

        However, I find this a somewhat irrelevant argument. We evolved a genetic imperative that helped our genes survive by helping the genes of our kin survive. But then have we also evolved a brain (as a species) and a shared history of knowledge and culture that can also allow help our shared genes survive through rationalised altruism? If we can make a rational argument for why we should be altruistic (for the good of the species), is it not our genes also that have allowed us to achieve this? It seems to me to matter less why we are altruistic and more simply that we are and that it is useful.

  4. “…Markets are animated by humans, who, amongst other things, are able to understand the metaphors or mathematical models applied to their behaviour, and to respond accordingly. That means any quasi-science borrowed from physics or biology won’t work in economics…

    Sometimes, of course, that is exactly what you wish to happen, and is why one is modelling in the first place. For example, if one could model the circumstances of a bubble and apply rules so that people and regulators (who are people), as you point out, “…respond accordingly…”

    In science and engineering, the phenomenon of feedback where the components of the system actually react to the rules or inputs is well known and once known, can be part of the models.

    The next point, is that often what happens is that there is a response, which requires a further application of a model, which induces a further response, which requires a further application, etc etc. What is critical to understand at this point, is whether or not these successive iterations of model application are smaller and smaller – in which case the model can be very useful, or whether things just go completely out of control.

    Now in the case of human beings, especially in a democracy, if the rules or model are acceptable to most, often the first iteration is sufficient, if not, then the question is, are a couple more iterations enough to be ‘close enough’ to provide a practical insight into what is going on in the economy, and will it reduce the amount of ‘gaming’ sufficiently to be useful? That is the material point.

    The next point to make is that like in physical systems, if the rules are not right or improperly applied, everything goes ballistic. It is interesting that Marx was able to deduce that the economic rules binding capitalist society together during his times were sufficiently unstable as to make revolution possible.

    The final point in making good models is to know where the limits of those models are. An example of this is trying to work out some costs and benefits in cost benefit anlayses. Often these are not really able to be determined by any one group of people (such as economists) – eg the benefits or otherwise of the NBN because the people crunching the numbers do not have enough information to price all the possible benefits. In that case, political outcomes can be seen as a proxy for the benefits, and why ultimately some of these things are political.

  5. Hm. Reasonable enough. As a professional mathematician I accept that mathematics is merely another language, albeit a very formal one understood by few people. Least of all economists.

    The central problem of modern economics starts when people start reifying models ( mathematical or verbal) – which are by definition an extreme simplification of reality – to be the absolute unadulterated truth rather than just a useful tool.

    The mathematical methods of neoclassical economics can actually be used for many purposes, there is nothing inherently “right wing” or even “neoliberal” about them. Though they have been thoroughly appropriated by people of that political persuasion to “prove” their case, without having to actually prove anything empirically.

  6. About fifteen years ago I was at a party in Shanghai talking with a prominent Chinese Psychiatrist about mental illness in China.

    What he said amazed me because he claimed that the outward manifestations of mental illness in China were slowly changing from the traditional Chinese characteristics towards the Western manifestations (per DSM-IV).

    In effect he was claiming that even the most mentally ill of patients somehow understood the yardstick that was used to measure their illness and would continue to develop these diagnostically significant characteristics until they felt that they were somehow correctly diagnosed.

    He had some amazing stories about once common behaviors amoungst the Chinese mentally ill population that had all but disappeared. Literally howling at the full moon was apparently very common 30 years ago but had progressively disappeared as western influence spread from East-to-west across China.

    What hope can economists have of creating accurate models, if even the most mentally challenged in our society subconsciously modifies their behavior because the measurement model exists.

    • That is not so extraordinary. The same thing happened in the US with the rise and spread of psychoanalysis in the 40-50s. It did not manifest as different behavior but the awareness of a malady, unhappiness when they ‘ought’ to have been happy. Psychoanalysis could manage this problem. In other words the profession needed patients and the public said we need your help.

    • This is common in lots of systems. Your efforts to observe or control a system alter the system itself. The design is usually iterative until you reach a convergence i.e. design the observer/controller, investigate the system changes, redesign the oberver/controller for the augmented system, repeat. Like any iterative problem, there are no guarantees of finding stable solutions, or that any given “moves” or starting locations will lead to solutions if they do exist.

  7. Surely economics is the study of bounded choice rather than of individual or group “will”.

    We can only ever exercise choices among those options about which we have knowledge and to which we have access. In this sense, our choices are constrained or bounded by varying sets of limits; and the choices we express are not necessarily the same thing as that which we “want” or “need”, and should not be seen as the products of our “will”.

    The iterative invention, discovery, disclosure, articulation and provision of choices and the processes of giving effect to our selections, both as unique individuals and as members of groups – including within markets, which are a particular kind of group – seems to me to be the subject matter of economics, taken in its broadest sense.