So, first update: I found a very fun, relatively new (Nov 2007) history of economics blog. Via that blog, I found a summer workshop on the history of economics, and a speech given there by Deirdre McCloskey entitled How to Buy, Sell, Make, Manage, Invent, Produce, Transact, Consume, Marry with Words*.
McCloskey, known for her work on the Rhetoric of Economics (a book that recently arrived to a shelf near me…), uses this speech to talk about an entirely different constellation of language and economic action: the persuasion economy (my term, not hers, I think). McCloskey argues that somewhere between 17 and 28% of GDP can be counted as persuasion income. That is, jobs whose task is to persuade, not just inform. Of course, the measures for this are very rough, but the overall magnitude of the phenomenon is unmistakeable – millions of people in the contemporary U.S. work getting other people to do things, and convincing them that doing so is a good idea, rather than producing a particular good (even an informational good). And, McCloskey goes on to argue that the cost of producing goods (food, cars, etc.) has declined dramatically over the past few hundred years and will continue to do so,
But persuasion does not become cheaper. It will not go the way of goods and information, the subject of conventional economics since Bentham, into close-to-zero-opportunity-cost extinction. The decision what to do with the farmer’s hogs, knowing all there is to know about prices, is still made in the kitchen council by farmer and son and wife, persuading each other; or in the councils of the farmer’s mind. The decision about where to send the regiments, into the Wheat Field or around the Union left, is still a matter of persuasive talk.
For persuasive talk, “The technology is irrelevant“** and thus the main story economists have told about the information economy and the rise of technology is less than helpful. Here’s a relevant example (and one that connects to some work by Abolafia on the uses of language and rhetoric at the fed, as well as a paper by Greta Krippner) of the kind of thing McCloskey is talking about:
As Mehta puts it, “real individuals ascribe particular and shifting identities to themselves and their opponents in a bargaining situation (for example, as ‘friends’ or ‘non-friends,’ or as partners in a relationship). . . . They adopt a particular set of expectations and behavioral responses contingent on the meaning they ascribe” (p. 93). These are roles we assign in stories we tell. An example is the role—literally, the theoretical, fairy-tale role—played by the chairman of the Federal Reserve Board in
“setting” the interest rate. There is no evidence that Ben Bernanke actually “sets” the world interest rate. The notion that he does so is impossible, though a wildly popular tale, considering the bit of information that the portfolio he has influence over is a tiny portion of the loanable funds available in the world’s capital markets. But the exchanges dance, at least in the short run, to Ben’s tune, because of the heroic story that people tell about the meetings of the Fed open market committee.
It’s interesting to think of Bernanke’s role as primarily persuasive, especially at this particular moment in time. This whole discussion also connects interestingly to a question I’ve had for a long time but never been able to phrase well. It seems like at some point in human history, people started spending most of their time worrying about each other rather than about ‘nature’, or non-human forces. Most of our day to day interactions, struggles, etc. are with other people, rather than the fields or the heat. Those forces still affect us, greatly, of course, but even those effects are now mediated usually through technologies. The heat bothers us when the AC breaks, and we have to hire someone to repair it, which entails a search and a bargaining game, etc. But I still have no good way of formulating this question – how does one weight worrying about cancer (both natural and artificial) or in any way disentangle much of this? McCloskey’s more narrow question – how much of economic action right now consists of persuasion – seems at least a bit more tractable, and approaching the same basic point.
So, in short, very neat.
* Oddly, the speech/essay lacks a cite to Austin. Oh well, everyone knows anyway.
** Irrelevant is probably too strong, but we can definitely say that the technology does not eliminate the costs associated with persuasion, especially if there are counter-persuaders using equivalent tech.