Imagined Futures: Fictionality in Economic Action

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Imagined Futures: Fictionality in Economic Action A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Beckert, Jens Working Paper Imagined futures. Fictionality in economic action MPIfG Discussion Paper, No. 11/8 Provided in Cooperation with: Max Planck Institute for the Study of Societies (MPIfG), Cologne Suggested Citation: Beckert, Jens (2011) : Imagined futures. Fictionality in economic action, MPIfG Discussion Paper, No. 11/8, Max Planck Institute for the Study of Societies, Cologne This Version is available at: http://hdl.handle.net/10419/45621 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu MPIfG Discussion Paper 11/ 8 Imagined Futures Fictionality in Economic Action Jens Beckert Jens Beckert Imagined Futures: Fictionality in Economic Action MPIfG Discussion Paper 11/8 Max-Planck-Institut für Gesellschaftsforschung, Köln Max Planck Institute for the Study of Societies, Cologne May 2011 MPIfG Discussion Paper ISSN 0944-2073 (Print) ISSN 1864-4325 (Internet) © 2011 by the author(s) Jens Beckert is Director at the Max Planck Institute for the Study of Societies. [email protected] MPIfG Discussion Papers are refereed scholarly papers of the kind that are publishable in a peer-reviewed disciplinary journal. Their objective is to contribute to the cumulative improvement of theoretical knowl- edge. The papers can be ordered from the institute for a small fee (hard copies) or downloaded free of charge (PDF). Downloads www.mpifg.de Go to Publications / Discussion Papers Max-Planck-Institut für Gesellschaftsforschung Max Planck Institute for the Study of Societies Paulstr. 3 | 50676 Cologne | Germany Tel. +49 221 2767-0 Fax +49 221 2767-555 www.mpifg.de [email protected] Beckert: Imagined Futures iii Abstract Starting from the assumption that decision situations in economic contexts are char- acterized by fundamental uncertainty, the paper argues that the decision-making of intentionally rational actors is anchored in fictions. “Fictionality” in economic action is the inhabitation in the mind of an imagined future state of the world and the beliefs in causal mechanisms leading to this future state. Actors are motivated in their actions by the imagined future and organize their activities based on these mental representations. Since these representations are not confined to empirical reality, fictionality is also a source of creativity in the economy. Fictionality opens up a way to an understanding of the microfoundations of the dynamics of the economy. The paper develops the notion of fictional expectations and applies it to investments, consumption and money. The last part relates the notion of fiction to calculation and social macrostructures as two other devices of decision-making and hints at the relevance of fictionality for the mac- rodynamics of capitalism. Zusammenfassung Entscheidungshandeln in wirtschaftlichen Kontexten findet unter Bedingungen fun- damentaler Ungewissheit statt. Ausgehend von dieser Annahme argumentiert das Pa- pier, dass Entscheidungen intentional rationaler Akteure in Fiktionen verankert sind. „Fiktio nalität“ umfasst die Vorstellungen des zukünftigen Zustands der Welt und der kausalen Mechanismen, die zu diesem Zustand führen. Akteure werden durch diese Imaginationen der Zukunft motiviert und organisieren ihre Handlungen auf ihrer Grundlage. Da die Vorstellungen nicht an die empirische Realität gebunden sind, ist Fiktionalität auch eine Quelle der Kreativität. Fiktionalität eröffnet so einen Weg zum Verständnis der Mikrofundierung wirtschaftlicher Dynamik. Das Papier entwickelt das Konzept der fiktionalen Erwartungen und wendet es auf Investitionen, Konsum und Geld an. Im letzten Teil wird das Verhältnis von Fiktionen zur Rolle von Kalkulation und sozialen Makrostrukturen in der Entscheidungsfindung erörtert und die Relevanz von Fiktionalität für die Makrodynamik des Kapitalismus angedeutet. iv MPIfG Discussion Paper 10 / 8 Contents 1 Decision-making in economics and sociology 2 Economics 2 Economic sociology 3 2 From rational expectations to fictional expectations 4 Fictionality 5 Fictions as stories 7 Fictions and economic dynamics 9 Fictions as a basis for action 10 Literary and non-literary fictions 11 3 Fictionality in economic action 12 Investment decisions 12 Consumption 17 Trust and money 18 4 The role of calculation and social macrostructures 21 Calculation and fictionality 21 Macrostructures and fictionality 23 5 Conclusion 24 References 26 Beckert: Imagined Futures 1 Imagined Futures: Fictionality in Economic Action [There are matters about which] there is no scientific basis on which to form any calculable probability whatever. We simply do not know. Nevertheless, the necessity for action and for decision com- pels us as practical men to do our best to overlook this awkward fact … (Keynes 1973[1937]: 213) On what basis do actors make decisions in economic contexts? According to economic theory, decisions are based on rational calculations of the outcomes associated with the various possible choices. Following sociological approaches to the economy, decisions are anchored in social structures, especially institutions, networks, and cultural frames. In this paper, I want to add a different perspective on the question of the micro-foun- dations of economic action, giving weight to a much underemphasized aspect of it. Starting from the assumption that decision situations in economic contexts are charac- terized by fundamental uncertainty, I argue that the decision-making of intentionally rational actors is anchored in fictions. By “fictions” I refer to images of some future state of the world or course of events which are cognitively accessible in the present through mental representation. “Fictionality” in economic action is the inhabitation in the mind of an imagined future state of the world. Actors are motivated in their actions by the imagined future state and organize their activities based on these mental representa- tions. Since these representations are not confined to empirical reality, fictionality is also a source of creativity in the economy. Fictional expectations in the economy take narrative form as stories, theories, and discourses. Including fictionality in a theory of decision-making opens up a way to an understanding of the microfoundations of the dynamics of the economy. I first provide a brief overview of various approaches in economics and economic so- ciology to the explanation of economic decision-making. This will sharpen the point of departure advanced in the article. Second, I develop the notion of fictional expecta- tions to be applied here and its role in the constitution of action in economic contexts and especially the creativity of action. In the third part, I illustrate the role of fiction in the contexts of investments, consumption, and money. In the last section, I relate the notion of fiction to the role of calculation and social macrostructures in economic decision-making. Finally, in the conclusion I hint at the relevance of fictional expecta- tions for the macrodevelopment of the economy. For helpful comments on earlier versions of this paper I would like to thank David Dequech, Christoph Deutschmann, Arne Dreßler, Martin Hellwig, Sophie Mützel, and Werner Rammert. 2 MPIfG Discussion Paper 10 / 8 1 Decision-making in economics and sociology Economics Economic theory assumes that actors make choices based on rational calculations (Wil- liamson 1993). Assuming a fixed set of preferences, given factor endowments and re- strictions, actors calculate the choice which maximizes their expected utility. To do so, actors systematically scrutinize all possible alternative combinations and calculate the consequences of all options. This makes it possible to arrange the various options in a rank order of utility and to construct complete indifference maps across all feasible trade-offs. The macroeconomic result is an equilibrium which can be deduced math- ematically based on the starting conditions and the assumptions made in the theory. The future enters into the decision models of economics in the form of rational expec- tations (Muth 1961; Lucas 1972). Assuming market pressures and the systematic use of all available information, rational expectations theory states that the predictions actors form with regard to economically relevant variables in the future are correct, in the aggregate, because all individual errors are random. Hence, the predicted outcomes do not differ systematically from the resulting
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