October 1, 2007
A recent post in the Test Society blog (whose main writer is a personal friend) discusses the publication, by Palgrave of a set of lectures by French philosopher Michel Foucault. While reading this fascinating text, with its broad historical scope and its boundary-spanning insights, I gradually noticed a thread of analytical narrative that bears an interesting insight for modern risk management. This point, which appears repeatedly in the texts (and is, as far as I know and understand, one of the fundamental building blocks in Foucault’s thought) is the process by which the individual was re-configured vis-à-vis society, or societal structures. According to Foucault, that re-configuration began taking place, in Europe, at the end of the Middle Ages; it was established and institutionalised in the following centuries and reached its peak (at least in pure conceptual terms) in the eighteenth century, with the crystallised idea of Enlightenment. In that process of reconfiguration, the individual, in its interaction with societal institutions, is turned from being a ‘subject’ to (what can be called) a ‘calculable-relational object’. That is, the individual, after the transformation, can no longer be regarded simply as a detachable part of the society, a subject that can be easily singled out, isolated and manipulated. Instead, the individual came so to be seen as integral, irreducible part of a larger phenomenon, a broader category or a temporal intra-societal structure. Hence, the new conceptual and practical unit of reference swallowed the individual into a set of binding contacts and obligation outside of which she could not exist (e.g. physically, religiously) or at least could not be detected as a meaningful entity by the society. Furthermore, the existence of the larger societal phenomenon is dependent on the establishment of various calculative agencies and practices, such as the collection of statistics, the assessment of probabilities and the creation of numerical bases for policy.
Foucault uses a set of examples through which he explains the construction of the modern concept of the plague:
Take the exclusion of lepers in the Middle Ages, until the end of the Middle Ages. …[E]xclusion essentially took place through a juridical combination of laws and regulations, as well as a set of religious rituals, which anyway brought about a division, and a binary type of division, between those who were lepers and those who were not. A second example is that of the plague. The plague regulations […] involve literally imposing a partitioning grid on the regions and town struck by plague, with regulations indicating when people can go out, how, at what times, what they must do at home, what type of food they must have, prohibiting certain types of contact, requiring them to present themselves to inspectors, and to open their homes to inspectors. We can say that this is a disciplinary type of system. The third example, is smallpox or inoculation practices from the eighteenth century. The fundamental problem will not be the imposition of discipline so much as the problem of knowing how many people are infected with smallpox, at what age, with what effects, with what mortality rate, lesions or after-effects, the risks of inoculation, the probability of an individual dying or being infected by smallpox despite inoculation, and the statistical effects on the population in general. In short, it will no longer be the problem of exclusion, as with leprosy, or of quarantine, as with the plague, but of epidemics and the medical campaigns that try to halt epidemic or endemic phenomena.
This short example (and the text is rich in such micro-analyses) shows the construction of modern risk. To act institutionally about risk, it needs to be described and analysed in systematic tools. So, for example, individuals have to be removed from the concrete events of the plague or a financial crash only to be returned to them as figures in the numerical version of occurrences. Indeed, it is vital that the specific actors are anonymized and that the events are generalised and classified as a ‘case of…’ Without such institutionalised procedures, the conceptual tools that brought about modern risk management could not have developed. That is, the ability to perform historical VaR calculations, for example, is rooted in the historical transformation that Foucault analyses where idiosyncratic individuals disappeared and calculable plagues were constructed.
I recently got a draft of a review paper, Theories of Markets and Theories of Society by Marion Fourcade, and now, that the paper is out, (American Behavioral Scientist, 50:8, 1015-1034) I would like to say a few words about the piece. A brief disclaimer first: my work is discussed favorably in the review, which is great. However, this not the main reason, I am writing about the piece. I refer to it here because I think that it presents a very useful map of ideas and concepts in contemporary economic sociology.
Fourcade begins by presenting a general dichotomy between ‘field analysts’ and ‘network analysts’. Then, perpendicularly to this dichotomy, Fourcade presents the work of ‘the performativists‘:
Finally is a group I will designate as the performativists, a much more recent stream of research, by and large coming out of Europe and out of science studies, who emphasize the way technologies (that is, men-machine complexes produced by –for instance– accountants, economists, or operations researchers) intervene in the construction of markets and economies.
This is a very nice definition to the work that falls under the broad label of performativity and can serve as a good starting, in my mind, to a discussion about the new developments in economic sociology. Having said that, I think that the truly radical ideas that that the performativity stream brings (or rather, re-introduces) to economic and organisational sociology have been subdued somewhat in the review and I would like to refer to one of these here briefly.
Let us look again at the connection between technologies and market behaviour and evolution that is mentioned in the definition above. Market technologies are products of expert knowledge that is being put through a ‘social mangle’ and performativity analyses the ways in which expert knowledge (i.e. risk management, management accounting, etc) turns, in effect, into an economic technology and is being embedded into economic activity.
Apart from the neat idea of ‘unexpected consequences’ that performativity applies to various cases, what this expert knowledge – technology – markets connection implies is that we should re-configure economics itself. That is, if the radical message of performative economic sociology is adhered to, then the study of economic action would refer not only to how humans interact (this leads us back to the famous story about baboon society), but equally to how humans and machines interact and bring about economic realities.
In other words, performativity calls for a change in the fundamental unit of analysis of economic action. The ‘economic atom’ of neoclassical economics – the single, utility maximising agent – is replaced by an ‘economic molecule’ – a cluster of humans and devices. Performativity offers this cluster as the basic unit of economic action.
It has to be mentioned that very similar things were suggested by Philip Mirowski in his seminal Machine Dreams. What the ‘performativity people’ add here is a more compact set of theoretical statements that can be applied to a wide variety of analysis topics in economic sociology.