The New York Review of Books has an excellent review of Akerlof and Shiller’s recent book Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism here. As a warning, I have not yet read Animal Spirits. My favorite part of the review concerns Akerlof and Shiller’s treatment of economic vs. noneconomic motives (and rational vs. irrational responses). I’m going to quote a big section of the review because I think it says cleanly something I’ve been saying messily for years, and which I’ve been trying to find better ways to say. First, the review (by Benjamin Friedman) quotes the book at length:

Picture a square divided into four boxes, denoting motives that are economic or noneconomic and responses that are rational or irrational. The current model fills only the upper left-hand box; it answers the question: How does the economy behave if people only have economic motives, and if they respond to them rationally? But that leads immediately to three more questions, corresponding to the three blank boxes…. We believe that the answers to the most important questions regarding how the macroeconomy behaves and what we ought to do when it misbehaves lie largely (though not exclusively) within those three blank boxes.

Friedman then goes on to problematize this fourfould table*:

One of the inevitable difficulties with this kind of argument is that it depends so much on just how words are used. What is the difference between an economic and a noneconomic motive? If I buy a new car because I like its styling and good gas mileage, that’s presumably an economic motive. What if it’s a hybrid and part of my reason for buying it is that I value the “story” of my doing my bit to help slow global warming? If a business owner provides scholarships for his employees’ children, is his motive to treat them fairly for fairness’ sake or to foster their loyalty and thereby improve their productivity?

The answer, in the end, is that an “economic” motive is whatever economists include in their theories of how people behave. And since different economists are always proposing different theories, what constitutes an “economic” motive can differ from one theory, and one economist, to another. Since at any particular time there are dominant theories, there is some coherence to what people would understand as an “economic” motive; and so the point Akerlof and Shiller are trying to make here is far from empty. But it is more elusive than they suggest. The distinction between what’s “rational” and what’s not is, if anything, even more fraught. [Emphasis mine.]

If you’re Callon, that sounds a lot like “Economists frame the economic”. Alternatively, if you’re more into Gieryn, economist do boundary work around the economic. Either way, I think Friedman has given an excellent and jargon-free description of both the ways in which economists construct the economic and why challenging those constructions is meaningful even though they are, in some sense, arbitrary. In other words, just because “X is socially constructed” does not mean it’s pointless to argue that “A is X” or “A is not X”. Rather, that’s why such an argument is meaningful.

The question Friedman does not go on to ask – and which may be somewhat utopic to even bother pondering – is whether or not the categories of “economic” and “rational” have “shed more heat than light”. Fabio recently asked over at OrgTheory, are there other foundations for economics that might make more sense than the dominant model based on (rational, economic) choice. Perhaps another way of asking this question is, are there fruitful, alternative ways of conceptualizing what “economic” and “rational” mean? Or is there a way of getting at similar problems (of the distribution of scarce things, the dynamics of making and trading things, etc.) using a wholly different framework, that eschews “economic” and “rational” entirely? For example, I think the move to satisficing over maximizing (Fabio’s first suggestion) is a redefinition of rational but not of economic.

Alright, back to Polanyi…

* I wonder how many published papers and essays consist of making and then problematizing such tables. Many, if my theory classes are any guide.