Exogeneity – Economics and Nonknowledge

2009_07_07, by Tas Vicze

An economic fact is structured as follows: “consumers in the sample place a premium on liquidity β = 0.73.” This serves its task in economic models and allows economists to draw conclusions that are correct for all practical purposes. But in everyday life such a number is meaningless. The reason for this is that this number cuts across all discourse, all affect, and the social conditions that engender it, rendering these causalities exogenous to the non-conceptual statements of economics. As such, an economic fact’s epistemological scope is not sufficiently expressed by the all-too-philosophical categories of episteme (‘know-what’) and technē (‘know-how’)—though obviously these cannot help but play a significant part—but can be better characterized as a form of nonknowledge. This use of the term ‘nonknowledge’ is, however, not reducible to the Confucian dictum “To know what you know and to know what you do not know, this is knowledge”—which merely redoubles epistemology on itself in a transcendental begging of the question. To know what we don’t know would require that we know what we don’t know we don’t know, ad infinitum. The nonknowledge of economics is, as it were, the last instance of the Confucian limit statement. This nonknowledge takes place in a single number, which unifies (without being unitary) and commensurates (without commensurability) disparate orders of causality. The purpose of such a number is, borrowing a phrase from Roland Barthes (a far better political economist than Althusser ever was), to inexpress the expressible. Exogeneity is the reason why economics must necessarily be (in)expressed by numbers, not words—as well as why philosophy, mired in discourse, is unable to speak of economics.

In its disjunction from Knowledge proper, economics is non-paranoiac precisely to the extent that it is okay not to know. This has in the past led to accusations that economics is a form of religion, by analogy with the latter’s suppression of questions via dogmatism. This is not internal to economics, however, but rather takes place in its traversal (and subsequent travesty) in(to) discourse, where causality is truncated and contingency forgotten. Economics deals in facticity without fact (Heidegger), which as such remains open, ‘closable’ in the last instance only. The clause “for all practical purposes” helps to underscore its (non-)answerality, its indecisionality between practice and theory. Yet, economics tra(ns)verses into discourse precisely by supplying this ‘last instance’—by endogenizing it, as best illustrated by Milton Friedman and the money supply. Philosophy cannot handle exogeneity. Its own limit statement is that economics become a Theory of Everything.

2009_06_30 by Tas Vicze

A concept is a model. This implies that the only form of ‘concept’ in economics is an economic theory itself, in its entirety. This goes unnoticed because the first idea associated with economics in the public mind is “supply and demand”—this despite the fact that real economists never use these terms in practice. An introductory course in economics (many people’s only exposure to the discipline) teaches students to play around with such concepts as supply and demand, interest rates, and so on. Philosophy ‘of’ economics likewise proceeds by attaching to an economic ‘object’ such as ‘labour’, then trying to relate it to other concepts. But those few who take an intermediate economics course find that they are being taught the same information, but without concepts. ‘Objects’ are replaced with exogenous variables, or rates of change x/y (read: “derivative of x with respect to y”). An economic model is an elaborate tautology, in the extended Wittgensteinian sense of the term where pq is a tautology, since the concept of p is contained in the concept of q. Its conclusions arise from the syzygy (roughly, coalignment) of its variables along with its presuppositions (made for the sake of simplification). In an elaborate process of synergy, this syzygy creates a concept that may be imposed at will. Conclusions (prescriptive and descriptive) seem obvious to an economist but are not so to a layperson, and philosophy students pontificate about neoliberalism while econometrics students are incapable even of articulating what they don’t understand in class. Yet, it’s precisely this para-conceptual syzygy that constitutes all that is valuable in economics. What separates a good model from a bad one is that in the latter, a specific presupposition may be shown to do all the ‘work’ in providing the model’s conclusion.

Semantically, all of the interesting statements of economics take place within the preposition of a philosophical statement. As Laruelle writes, “The identity of the with (the One with the One, God with God), is the true ‘mystical’ content of philosophy, its ‘black box’.” The armchair philosopher is forced to engage in an amphibological attempt to render (pseudo-)exogeneity as endogenous, forced to autopositionally posit black boxes in the form of virtus dormitiva (Molière). Philosophy creates names for the Real, and by these purports to have explained it. Conversely, an economic variable is a name that does not name (Lao Tzu: 名可名,非常名), but non-conceptually gestures toward radical ( absolute) exogeneity.

**Thanks to Tas Vicze for the artwork; you can view the rest of his portfolio here.

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About Graham Joncas

We are a way for capital to know itself.

Posted on August 10, 2013, in Economics, Non-Philosophy, Philosophy and tagged , , . Bookmark the permalink. 6 Comments.

  1. Despite not understanding the neologisms you are using and their necessity, I sense an attempt to turn economics into mathematics and leave it just there: a “model” as a mathematical object which seems to exist for reasons of finding clever reductions and simple proofs. Now isn’t this just the case of physics or math envy and even in physics the lack of contact to experiment or the avoidance of consequences of those experiments raises criticism. One is open to abstract nonsense and “exogeneity” of mathematics, but throwing all resources on it and claiming one is doing relevant theoretical research while it turns out one doesn’t is considered unreasonable.

    For the public the criticism of theoretical economics is quite simple: where is the beef? Where are the correct predictions? Has there ever been a consequence of stating a wrong prediction, has an economist ever excused for being plain wrong? If not, what is it good for? If economists can’t explain it, who else could, philosophers?

    • Sorry for the denseness of the prose—the neologisms and such are intended partly to situate the arguments within particular lines of Continental thought (Laruelle, Guattari, Barthes) so that philosophers will take the arguments seriously, and partly because economists understand all my points intuitively but have never seen anything philosophically interesting about them. All of the above points can, I’m pretty sure, be put in a crystalline way, which I intend to do elsewhere. It will just take longer to write, at the cost of some frustration in the meantime by people who are not familiar with one discipline or the other.

      I take an instrumentalist position that the Real (the economy, in this case) is something ultimately unknowable, and that our theories work as tools to help us understand it, but should always be considered fallible. In economics, this general stance is best identified with Milton Friedman’s Essays in Positive Economics, where he makes the bold claim that the presuppositions of economics don’t matter (for the time being), as long as they’re able to explain and predict events. Since sacrifices of realism will have to be made in any practically doable model, I view the alternative as being a thoroughly philosophical insistence that economics become a Theory of Everything.

      My claim is that unlike physical models, economic models have to deal with diverse ‘causalities’, e.g. human agency, ‘relations of production’, the environment and so on (including the aforementioned physical models), which economics manages to capture—without addressing directly—by making a variable exogenous. You have all of these different dimensions of the social sphere operating by entirely different rules, but when an economist statistically calculates (to use my original example) a liquidity premium, all of these spheres are indirectly taken account of in the variable’s value (“commensurated”) without having to translate them in terms of some totalizing/unitary underlying factor (“without commensurability”). Philosophy has no equivalent of exogeneity as used in economics, so it has to deal with all of these ‘causalities’ by an act of synthesis (usually subordinating them all to an overarching theme).

      Despite economics’ impressive predictive success for localized, specific problems, no economist really thinks this success will ever extend to all domains. The well-known ‘Lucas critique’ argues that if people were rational then their rationality would cause them to figure out predictable patterns from the past and adapt (i.e. try to take advantage of them to make money), so that past information would be completely useless for predicting the future (Taleb, 2001: 98). People are just too complex, so you have to make approximations. What I argue above is that while economic models implicitly take into account the contingency (the ‘it could have been otherwise’) of the values for exogenous variables, this contingency is lost when people start to talk about these models in conceptual terms. So it’s perfectly reasonable to demand that pundits and policymakers have ‘skin in the game’, as Taleb likes to say, i.e. their own money riding on the quality of their predictions. What I’m ultimately arguing is that what most people encounter on the news and associate with the term ‘economics’ really has nothing to do with real economics, and that a lot of the problems of economic prediction can be partly attributed to the truncation that occurs when we start to talk about economic models. My use of “abstract nonsense” is, hopefully, a first step toward coming up with an alternate, less Procrustean way to talk about economics, that I call ‘non-economics’.

  2. Dear Mr Joncas,
    My name is Tas Vicze, I’m a graphic designer from Hungary. I stumbled upon your blog post titled “Exogeneity – Economics and Nonknowledge”. I liked your point of view on economics and the world and I’m glad you included two of my images in your article. It would be a very nice collaboration between us if you included at least my name or my portfolio address in the article!

    Thanks, and good luck with the work you are doing!


    • Oh, absolutely. You’ll notice that when you put your mouse over the pictures, your name is part of the link that shows up on the bottom right corner of your screen (so you haven’t been entirely uncredited this whole time!), but a link to your portfolio is preferable. I’ve put it at the bottom of the post.

      As you’ve surely gathered, I adore your art. Please do keep it up.

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