The economy as hyperreality

A lot has been written about the failures of economics, some of it worth reading. However, as far as I know, nobody has pointed out that pretty much all of us - me, Simon Wren-Lewis, the Adam Smith Institute and all - make a systematic error in thinking about economic policy.

This struck me when reading this by John Kay:

Government by announcement is now characteristic of British politics. The goal is to make statements that will receive favourable media coverage. There is little perception of any need to follow up on these announcements, or consideration of how they might interact with other similar announcements, and no concern for the effects of the uncertainty these initiatives create for people engaged in real business.

This makes the same assumption that Simon makes when he writes about "mediamacro". It assumes that there is a real thing out there called the economy which policy impinges upon and so there's a distinction between impressing the media and good policy-making.

This assumption is questionable. Perhaps we should instead think of the economy as a hyperreality.

Here's Wikipedia:

Baudrillard defined "hyperreality" as "the generation by models of a real without origin or reality", it is a representation, a sign, without an original referent. Baudrillard believes hyperreality goes further than confusing or blending the 'real' with the symbol which represents it; it involves creating a symbol or set of signifiers which actually represent something that does not actually exist like Santa Claus.

And here's the Stanford Encyclopedia of Philosophy:

What passes for reality is a network of images and signs without an external referent, such that what is represented is representation itself.

These, surely, are better descriptions of "the economy" as the Westminster Bubble sees it than our old-fashioned empiricist idea of "the economy" as an external reality. "The economy" is a set of symbols which exists in its own right without reference to anything else. And good policy-making consists in appearing to manipulate those symbols in a manner satisfactory to the creators and upholders of that hyperreality. "Mediamacro" is the only macro - or at least, the only macro that matters for policy purposes.

Now, you might reply here that, eventually, "bad" policy - in the quaint empiricist sense - will eventually make itself so obvious that the hyperreality can't ignore it. I'm not sure.

For one thing, voters' perceptions of empirical reality are skewed both by fundamental ignorance and by ideology. Hyperreality can thus be sustained by an interaction of the public, politicians and the media. And as Simon says, the direction of causality of the creation of this hyperreality is unclear: do the media merely reflect voters' opinions, or create them?

And for another thing, when it comes to creating hyperreality, we are emphatically not all equal. The suffering of the unemployed, poor and disabled might be "real" to them - but if you're outside the 1% you have little hope of affecting the hyperreality that matters.

What I'm saying here is that those of us who complain about economic policy are assuming what has to be proven - that there's an external reality which matters more than the hyperreality of the media-political elite. And this is questionable. To those who boast of being in the "reality-based community" there's an obvious retort: who gives a damn about your so-called reality?

Comments

[Luis Enrique]

"assuming what has to be proven - that there's an external reality which matters more than the hyperreality of the media-political elite."

what has to be proven and what would proof consist of?

The word "matters" has no meaning in isolation. Things matter to somebody or for something.

Are you asking me to prove that my economic reality (wages, prices, opportunities etc.) matter to me?

[Dave Timoney]

"'The economy' is a set of symbols which exists in its own right without reference to anything else". Hence the aspiration of economics to the purity of maths.

The key insight of hyperreality is one of process: the way that a model can evolve to the point that it "takes leave" of the original reality. This actually has an ancient pedigree in the metaphysical impulse. Hence the aspiration of economics to the status of universal law.

[Ralph Musgrave]

I find Chris’s suggestion that economics does deal with reality very bizarre. Strikes me there is a very real difference between someone who cannot afford proper nutrition and lives in a slum, and in contrast someone who CAN AFFORD proper nutrition and lives in a bog standard UK semi detatched house.

[Luis Enrique]

I tell you something that definitely is hyperreality - the model of economics inside the heads of most critics of economics.

[chris]

@ Luis, Ralph, FATE - there are many possible hyper-realities; maybe the straw man of "conventional economics" is one.
@ Luis - by "matter" I mean, in this context: does the conception of economics in which austerity does damage matter for political purposes? Given that politicians aen't even bothering to engage with Portes/Wren-Lewis, the answer seems to be no. (The same's true for immigration policy).

[Deviation From The Mean]

The are so many countless variables at play in any given situation/scenario that ultimately all economic theories are meta theories. (Though bourgeois economics really is just bereft of real ideas and concepts. My economic studies were not around the fundamental concepts, fundamental drivers of the system but advising football club owners at what prices they should set their tickets! - I am thinking of the Begg/Fischer/Dornbusch texts here)

The trick is to abstract the things that need to be abstracted and not abstract what is essential, if ever it can be really stated in that way.

But when it comes to the real world ideology will always inform policy choices. Take cuts to local authority budgets. They have numerous affects, many that are bad. But to a Tory they fit in with the ideological project and austerity is judged against those goals.

What I find hard to understand is how the right are allowed to base policy on ideology so much more easily than the left. When the left do this the right hit back and claim the left are deviating from human nature!

[gastro george]

I regulary enter hyperreality when listening to politicians and the media. Today Cameron talked about raising the higher tax band to £50k so that it doesn't trap nurses into paying higher tax, and this has been repeated by a number of journalists. Now I may be shooting myself in the foot here, but a cursory look at some recruitment web sites put senior staff nurses on high £30k at most. Is this another case of the mediabubble rich over-estimating other people's incomes?

[Strategist]

What do you think of this one in Cameron's speech? http://www.politicshome.com/uk/article/105662/david_cameron_speech_to_2014_conservative_party_conference.html

"So here’s our plan. We are going to balance the books by 2018, and start putting aside money for the future."

Is that in a piggy bank kept at No.11 or is some kind of interview with an IFA called for?

[rogerh]

"We're an empire now, and when we act, we create our own reality. And while you're studying that reality—judiciously, as you will—we'll act again, ..."

This quote is from Karl Rove. Check out this gentleman on Wikiquote, he was in the front line of new politics and his quotes tell you a lot.