6.  Ludonarrative Dissonance: Economy as a Diversified Language Game Landscape

H. Beck points out that the participation of people in the economy seems to transform them inductively into experts (Beck 2011, col. 2f.). Their opinions are “little theories” as they contain, if only in a minimalist fashion, distinctions and causalities (more on this point later).

This does not exclude the fact that the science of economics endeavours to test and vary fixed meanings and to establish new meanings. Of course there are controversies about the meaning of facts, about the use of metaphors and interpretations. But the controversies within economics are not of interest here, although they provide the occasion for reflection on the point that if language differences already occur within economics they must also exist for non-members of the economic language game (on the fact that the actors in economic events have different theories in their minds but can nonetheless cooperate: Priddat 1998b).

See Hutter and Teubner 1994; Priddat 2004a. This assumption is taken over at the cultural-scientific level with the assertion that the language of economics is being adopted more and more by outsiders (Stagl 2011: 130; Pörsken 2007). It is incorrect, however, to state that “the economic languages with their special definitions of reality (are penetrating) more and more into the other partial areas” (Stagl 2011: 130), as the fact that the wording does indeed penetrate into the other areas does not mean that economic thinking and hence economic language sui generis are also adopted. What is left over is hybrid forms, or a façon de parler.

Akerlof 2007 is critical on this point; he refers to the “endogenity of norms” which economics has hitherto not been able to deal with For a systematic treatment of this point see Gintis 2009.

Example: a housewife says: “I buy x because the man on television seems so trustworthy” an entrepreneur says: “I always invest in spring, because things have always gone well for me in spring”; a worker says: “It doesn’t matter where you work, you always get carpeted”, etc.

See van den Berg and Priddat 2009.

See McCloskey 1991 and 1998.

Or to metaphors. Lakoff and Johnson (2003) show that the conceptualization of reality is to a high degree structured and organized metaphorically. The density of the metaphors increases in relation to the degree of abstractness of the context to be grasped (Lakoff and Johnson 2003: 115 and 50), for example in the financial crisis (Peter 2011: 140ff.). “Metaphors not only define reality, but create a frame of interpretation for a particular world view” (Scacco 2009; quoted in Peter 2011: 142, n. 11).

“I have made a lot of money” a D speaker says. Every other D speaker understands him. For the E speaker the statement is imprecise; he must ask: How much?, By what means?, As income from interest or from work? etc. Has the money been saved, invested or consumed?, etc.

The assumption of games theory that all the players are in a state of common knowledge implies that all the players speak the same language S (the language of games theory) and can therefore understand the rules and the moves of the model in which they are placed. Anyone who is trained in the language S/E sees games everywhere in the economy; D-speakers, on the other hand, do not even know that they are involved in a game, let alone which game it is.

In the economy people often do not speak “economically” about the economy, but in a mixture of E and D or entirely in the language D. The assumption of the economists that their actors, whom they model in the theory E, i.e. in the language E, also speak E is deceptive. For example, actors in the economy who, when they occur in E-theories, ought to speak pure E, in fact speak some kind of jargon of a management philosophy or the like (for example a PeterSenge-, TomPeters- or RupertLey-language or some other kind of “bizz talk”. But again, these are also exceptions.

The relationship language/economy is developed in detail by Beate Männel (2002). For a more recent treatment Kabalak et al. 2008. See also Priddat 2010: chap. 7.

If we divide actors up according to their mental models then markets are combinations of rational actors, Hayek-actors, Northian rule followers, Schumpeter and Kirzner innovators, Simonian bounded rational actors etc. They all speak E, but linked with specific and mutually different theories, so that they each speak a different E. This requires research of its own (see Priddat 2012b). When we study this, we speak of differentiations in the language E, i.e. we assume that the actors speak E in accordance with a specific model. This is a different difference than that between E and D. Such internal differentiation only serves the purpose of indicating that even E cannot give rise to a homogenous language game. Whether the actors know which model they are acting in remains an open question.

For if the everyday actors as economic actors act successfully without speaking E the demand that they should learn E in order to act optimally is either an empirically unproved assumption or a requirement that is beside the point in the daily practice of economic life. The consequence of this assumption would be that economists are the most successful economic actors, something which has hitherto simply not been proved (See McCloskey 1992). Economists are judged on how intelligent they sound and not in accordance with a scientific criterion which tests their knowledge of the real situation. (Taleb 2008: 134).

This ethical basis is well documented: Haferkamp et al. 2008; Bolton and Ockenfels 2000; Falk and Fischbacher 2006; Pesendorfer 2006; Fetchenhauer and Dunning 2006; Roos 2007; Baron 1995.

It is possible that expectations, as mistaken interpretations, are interpretations of possibilities which, if one were to ‘assess them realistically’, would not be realized. Expectations are exaggerations of possibilities which are only then first perceived as such. They form ‘frames’, not decisions.

We can see considerable fluctuations in the statistics: in 1966 there were 3.75 million shareholders in Germany; the number rose by 2000 to 6.21 million and sank again by the middle of 2008 to 3.39 million. In 2009 it was at 3.4 million and today it is around 4.1 million. This corresponds to 6 % of the population over 14 years old (dmoh 2012; based on surveys of NFO-Infratest).

This is not only true of small investors. In a study of Alliance-Bernstein (9,600 investors in 24 countries) 77 % of those questioned stated that they had had little success with their capital investments. Only 23 % regarded themselves as successful (Nagaswami 2007, col. 1). On this point in general see Montier 2006.

Just as a person following his gut instincts does not want information on alternatives because he has already ‘decided’ intuitively, so too the small investor does not want any information on risks, as he has only joined the games because he wants to win. The supplier of the shares may not give more precise information, as they would otherwise endanger the buying preference.

Investors frequently rely on tips instead of developing strategies which take the relevant risk factors, transaction costs etc. into account. See hbe (2004), where a study of the CFA Association involving the questioning of members is presented). This – and many other mistakes – are determined by D/E differences in communication. The investors have their own D-interpretations and do not even want to think and decide in E, for example by taking the opportunity costs into account.

In the same way the disappointment they will experience in speculating in stocks will again confirm their old idea that capitalism is a game only for the rich.

In a population with a basically anti-capitalist stance it is hardly surprising if losses in the stocks game are seen as a confirmation of this basic position, or, are reformulated in the terms of the language D, which always maintains this basic stance in a semantically charged way. Thus someone who raved enthusiastically in the E language when buying stocks in the new market can complain after making losses in the D language. The idea of some economists that the actors would learn from this proves ineffectual in view of this E/D difference.

The fact that the actors were not informed about the risks by the bank employee selling the stocks is an additional problem in a twofold form. (1) Risks were left unmentioned, (2) but many investors do not even want the communication of these risks. When both communicants move in an atmosphere of dynamic capital markets it is difficult to push through a sober evaluation (see Goldberg 2008; Priddat 2012c).

When such forms of rule observation occur we can also talk of an institutional determination of market behaviour. Advertising aims to induce this institutional determination of the actor’s behaviour. The actor addressed by the advertisement is meant to follow the rule: ‘always buy x’ Observing a rule then means not deciding rationally. One can assert that the decision to follow a rule was at least rational. But the rationality of choice is only valid for the situation involving choice. It cannot be valid for all subsequent situations, as they change the alternatives (see Priddat 2008). But if the alternatives change in every subsequent situation in which the rule should be applied, the starting situation which led to the rational choice of the rule has changed, so that one can ask whether this rule would have been chosen again in one of the subsequent situations.

In neuroscience the complex distinction of the simultaneity of cognitive and affective aspects is an indication, as David Eagleman has pointed out, of the coexistence of different “I”s (or “I” aspects) (Eagleman 2012a, b). The relationship to language is still unclear, but we can interpret decision situations as the parallelism of cognitive and emotional aspects which generate a mood of their own or permit ambivalences, which turn out contingently in the situation involving a decision. Rational choice turns out to be a one-sidedly cognitive determination. If we have hitherto understood E and D to be language games involving different rationalities, we must now regard D as being more open to emotions. This gives us a reference to neurolinguistic analyses. (Hermann-Pillath 2010). It is at least clear that the distinctions between E and D run in the direction of cognitive/affective differences.

We must then consider what laboratory experiments actually reveal. For every test subject knows that he is dealing with ‘economic statements’ and possibly tries to do justice to the experimental set-up somehow or other, i.e. he tries not to think, speak and decide as he would under the free conditions of D. In the laboratory all the situational incentive constellations are excluded and the test subject is thrown back on a cognitive residuum, which he will dutifully apply because he is conditioned by the laboratory: a game situation of artificial validity.

One can indeed assign the action choices made ex post to preferences, but not ex ante, as the situation can always bring new alternatives into play in the decision process. (Priddat 2008). D-speakers can act in a parallel fashion with different preferences, which are not cognitively ranked, as is assumed by rational choice theory, but are decided upon situatively and emotionally. We are then not dealing with preference profiles of individuals but are splitting up the individual neuro-scientifically into multiple persons who each have their own preference. As there is no ordering “I” (Eagleman 2012b) in this situation the “I”/preference relationship which would have to be interpreted as an agreement/attunement with the situation is inoperative as the basis for a decision. Emotions and communications have a much more powerful effect than has hitherto been assumed in economics. In everyday life one has become accustomed to reckoning with them.

Further economic D-theories:

On moral consumption see Koslowski and Priddat (2006).

“Many amateurs believe…that firms and organizations inevitably get better and better on account of the competition (and the discipline required by quarterly reports). The strongest will survive; the weakest will die out. As far as investors and stock jobbers are concerned the advocates of this doctrine believe that one must only have them enter into competition with one another and the best will flourish and prosper whereas the worst will have to learn a new profession. (for example petrol station leaseholders or even dentists)” (Taleb 2008: 143).

We are dealing with ‘conceived’ simulation programmes (Halbach 1991: 830).

It is not a question here of the microeconomic foundations of macroeconomics, but of a different phenomenon, namely that microeconomic actors whose behaviour is to be analysed for the explanation of macroeconomic phenomena are modelled in such a way that they function as recipients of macroeconomics. But if they understand macroeconomics and model their (microeconomic) actions on it is difficult to pursue macroeconomics on a microeconomic basis, as we can no longer describe the microeconomic behaviour independently of the actors’ knowledge of macroeconomic contexts/theories.

Entrepreneurs sometimes even advise people to forget all the knowledge of economics they acquired at university in order to be successful (e.g. Jackstädt 1991). Stock jobbers as well (Taleb 2007).

Such a hope rests upon the assumption that ‘true’ economic statements exist, which economics, the science of the economy, has discovered. But if we know that there are various economic theories whose true statements are only valid in relation to the theory in question if we wish to talk about ‘true’ statements at all, and if we also know that D-languages exist which do not express economic facts in statements which are a part of economic theories, we cannot then assert that ‘true’ economic statements exist, but must at least say that there are many, and deriving from these many, many more statements which cannot be attributed to an economic theory in the context of the language E (see Priddat 1994).