Carsten Herrmann-Pillath

A neurolinguistic approach to performativity in economics

What makes institutions ‘real’? One central notion has been emerging recently in sociology, which is ‘performativity’, a term borrowed from the philosophy of language. I propose a neurolinguistic approach to performativity that is based on John Searles theory of institutions, especially his concept of a ‘status function’ and his explanation of rule-following as a neurophysiological disposition. Positing a status function is a performative act. I proceed in two steps to establish the neurolinguistic framework. First, I apply the concept of ‘conceptual blending’ borrowed from cognitive science on the status function, and give empirical applications from the research on performativity in financial markets. Second, I sketch the underlying neuroscience framework following the neural theory of metaphor, which I illustrate empirically with examples from behavioral finance and neuroeconomics.

Social Capital, Chinese Style: Individualism, Relational Collectivism and the Cultural Embeddedness of the Institutions-Performance Link

China is the odd man out in the research on social capital and economic performance. A brief survey of recent World Values Survey data shows China to be a high-trust, achievement-oriented society, which does not fit into popular pictures of rampant corruption and abuses of power. I argue that one difficulty results from methodological issues in research on social capital, where a universally accepted theory of social capital is lacking, including theoretically grounded methods of measurement. These resulting applications often generalize a Western notion of civil society as a benchmark, implicitly. I propose that social capital has to be conceived as a context-bound intermediate level theoretical term, putting methodological arguments by Durlauf (economics) and Little (Chinese studies) together. The resulting empirical method is that of triangulation across different disciplines, combining emic and etic approaches. I present an application on the notorious phenomenon of guanxi in China, which results in its re-conceptualization as ego-centric networking and relational collectivism, based on a culturally specific framing of affectual aspects of social relations. With this notion of culturally specific social capital, we can better understand the relation between institutions and economic performance in China.

Entropy, Function and Evolution: Naturalizing Peircian Semiosis

Cybersemiotics claims that the standard uses of the Shannon information concept as applied on systems with cognition and communication fail to account for the semantic dimension of semiosis. This argument does not properly recognize the role of entropy in semiosis. Entropy comes into full play if semiosis is seen as a purely physical process involving causal interactions between physical systems with functions. Functions emerge from evolutionary processes, as conceived in recent philosophical contributions to teleosemantics. In this context, causal interactions can be interpreted in a dual mode, namely as standard causation and as an observation. Thus, a function appears to be the interpretand in the Peircian triadic notion of the sign. Recognizing this duality, the Gibbs/Jaynes notion of entropy can be added to the picture, which shares an essential conceptual feature with the notion of function: Both concepts are a part of a physicalist ontology, but are observer relative at the same time. Thus, it is possible to give an account of semiosis within the entropy framework without limiting the notion of entropy to the Shannon measure, but taking full account of the thermodynamic definition. A central feature of this approach is the conceptual linkage between the evolution of functions and maximum entropy production.

Institutions, distributed cognition and agency: rule-following as performative action

Aoki recently proposed the concept of substantive institutions, a concept that relates the outcomes of strategic interaction with public representations of the equilibrium states of games. I argue that the Aoki model can be grounded in theories of distributed cognition and performativity, which I put into the context of Searles philosophical account of institutions. Substantive institutions build on regularized causal interactions between internal neuronal mechanisms and external facts, shared in a population of agents. Following Searles proposal of conceiving rule-following as a neuronally anchored behavioral disposition, I show that his corresponding notion of collective intentionality can be grounded in recent neuroscience theories of imitation as the primordial process in human learning. I relate this to Searles concept of status function and the neuronal theory of metaphors. This results in a precise definition of rule-following as performative action. I present two empirical examples of this: (1) the institution of money, and (2) status hierarchies in markets.

Disparities in Chinese economic development: approaches on different levels of aggregation

Based on a new and recent set of data on economic development in the Chinese prefectures, the paper investigates the impact of different levels of spatial aggregation on the assessment of regional disparities in China. We analyze the structure of inequalities in the light of a component analysis of the general measure of entropy, which is applied on inter-regional disparities with reference to different levels of aggregation as well as the rural/urban segmentation. We reach the conclusion that lower levels of data aggregation are to be recommended for policy purposes, that nationally homogenous discrimination still impacts favorably on urban areas, and that in many rural areas, there is a clear growth trend with diminishing regional disparities.

Are Human Rights and Economic Well-Being Substitutes? Evidence from Migration Patterns Across the Indian States

The objective of this paper is to study the relationship between the demand for human rights and the demand for economic prosperity from the “exit” perspective, looking at migration patterns. We investigate intra-national migration in India, which is a federation of various states that feature significant economic and political differences. The paper finds that the quality of human rights protection and the economic well-being in the target state are substitutes with respect to determining patterns of migration. These results depend on framing effects; human rights complaints appear to be interpreted differently by migrants, depending on the trust in the government in the target state.

Prefecture-Level Statistics as a Source of Data for Research into China's Regional Development

The complexity of Chinas regional economy requires the development of new data bases with a high degree of disaggregation. This paper introduces a prefecture-level data base which has been created from the published data dispersed across the provincial yearbooks of the PRC. The validity of the data and their possible significance is discussed. We provide a survey of currently available data categories which are consistent across time and space. We give some comments on possible consequences for assessing regional development, for example, with regard to inter- and intra-regional disparities.

Competitive Governments, Fiscal Arrangements, and the Provision of Local Public Infrastructure in China A Theory-driven Study of Gujiao Municipality

This article introduces the analytical framework of “government competition”, which encompasses current models of Chinese local government like the “developmental” or “entrepreneurial state” as special cases. The argument is based on a detailed empirical case study of Gujiao Municipality (Shanxi Province) which is put into perspective with reference to two other cases (Tongxiang, Zhejiang Province, and Zhangjiagang, Jiangsu Province). It is argued that the specific interaction between fiscal reforms and local approaches to infrastructure finance is the outcome of vertical and horizontal competition among governments. This competition is conceived as a complex system of formal and informal institutions undergoing endogenous change. Rooted in historically determined institutions like the regional property rights system in local resources, the system evolves through political entrepreneurship crafting competitive strategies and institutional innovations. The peculiar features of Chinese local government like budgetary dualism, local resource ownership or fiscal bargaining should not be conceived as “policy failures” in terms of deviations from centrally imposed formal institutions. They are defining features of the institutional framework of government competition in China, in which the central government is only one player.

Making Sense of Institutional Change in China: The Cultural Dimension of Economic Growth and Modernization

Building on a new model of institutions proposed by Aoki and the systemic approach to economic civilizations outlined by Kuran, this paper attempts an analysis of the cultural foundations of recent Chinese economic development. I argue that the cultural impact needs to be conceived as a creative process that involves linguistic entities and other public representations, providing integrative meaning to economic interactions and identities to different agents involved. I focus on the phenomenon of localism in China, which I relate to other cultural phenomena, in particular networks, culturalism and modernism. Thus, economic modernization is a cultural phenomenon on its own sake. I summarize these interactions in a process analysis based on Aoki’s framework, which identifies specific forms of cultural causality.

What have we learnt from 20 years of economic research into culture

Economics is undergoing a process of methodological naturalization, i.e. further converging with the sciences. Simultaneously, in past decades there has been an upsurge of interest in the role of culture in the economy. Yet this does not imply an opening up to the humanities, both in the broad sense and in the sense of cultural studies. This article is a stock-taking exercise. I briefly summarize recent economic work on culture and show that this is lacking a systematic theory of culture. This compares with the strong fusion of economics and the humanities, especially historical studies, at the turn from the 19th to the 20th century, in continental Europe, especially Germany. Looking for theoretical foundations of cultural analysis in contemporary economics, the notion of cognitive schemes looms large, seen as a device to deal with uncertainty. Interestingly, this concurs with some views in biological anthropology, and thus fits into the naturalization trend. However, there are many difficulties in what turns out to be close to functional reductionism. This points towards an alternative approach in economics as well, which centres around the notion of identity. I argue that, even in the context of naturalization, identity is significant precisely for its non-functional dimensions, for instance, as a group marker that is resistant to corrosion because of the lack of incentives for functional imitation between groups. This almost paradoxical role of identity explains why economics has troubles with culture, which, on the one hand seems to be ephemeral to economic processes in general, but on the other can obtain strong causal impact depending on idiosyncratic contextual conditions. This stalemate can only be resolved if economics begins to consider creative actions that establish and change identities on both the individual and collective level. I argue that this perspective leads back to the origins of the discipline, in particular Adam Smith in his role as a moral philosopher.