Performativity: some more points
August 9, 2007
In the last few months an impressive variety of reactions, interpretations and buds of follow-up work regarding the notion of performativity of economics have been accumulating. It is impressive, (and satisfying personally) to see this intellectual trajectory evolving. At the same time, there are several points of misconception that seem to accompany almost every discussion I witnessed about performativity. A good example for this is a recent post in Org Theory, but this is only one example.
Let me touch two points briefly:
First, it is claimed that performativity analyses and criticises the validity and accuracy of economic theory with regard to market.
Well, one way to answer this is to say that the validity of economic theories is relevant, but it is only an intervening variable here. This is because performativity is focused on the way actors (individuals, organisational, hybrids) take into account economic theory. If actors incorporate into their decision-making an economic theory in such a way that changes the behaviour of the market or alters the way it develops, then we have performativity of that theory with regard to that market. So, the accuracy of the theory may play a role in the actors’ decision to use it, but that is not necessarily related to the emerging performativity.
Second one, and this is a very common claim, goes like this, in a generalised form: performativity only works for very specific/esoteric/exotic cases: strawberries, FCC auctions and such. What about production markets/labour markets/commodity spot markets?
The answer to this claim is two-fold, I should think. First, it is true that performativity was detected in specific markets, but this does not necessarily mean that it does not exist in other markets too. Note that performativity is devilishly hard to pinpoint empirically. One has to show causal connections between a theory and changes in the evolution of a market. The Black-Merton-Scholes model and the Chicago Board Options Exchange provided us with a ‘natural laboratory‘, as it were, because the beginning of options trading and the publication of the model took place virtually simultaneously. So, given that detecting and proving performativity is not simple, it is not surprising that it has been shown, so far, only in a handful of cases.
Second, (and this is the more important point), I believe that performativity of economics is only the tip of the iceberg. Expert bodies of knowledge affect the evolution and behaviour of markets continuously and profoundly. Areas like management accounting, risk management and information systems, to name but a few, ‘perform’ markets no less and very likely more than economic theories. It is true that, by and large, these fields do not claim to produce objective description of the markets, as neoclassical economics does. Yet, once incorporated into the institutional structure of markets, even ‘programmatic’ knowledge, such as accounting rules, become part of the taken-for-granted reality just like options pricing models do.