Expectations-based Processes – An Interventionist Account of Economic Practice: Putting the Direct Practice of Economics on the Agenda of Philosophy of Economics
The paper starts by distinguishing between two kinds of economic practice: theoretical economic practice (TEP) (model and theory building) and direct economic practice (DEP) (the practical operation upon real economies). Most of the epistemological and philosophical considerations have been directed to the first type of practice, one of whose main goals is the discovery of particular sorts of economic laws, mechanisms and other regularities which throw light on relevant economic patterns. We do not deny that in some restricted domains these kinds of regularities may be found. Rather, we claim that the realm of economics is best understood as consisting of processes whose regular structure (if they have one at all) is not guaranteed beforehand but may be crucially influenced and successfully enforced by what we call DEP.
We claim that (a) some economic processes are a particular type of social process that will be referred to as Expectations-Based Processes (EBP). Characteristically, an EBP shows a connection between the information that individuals receive from the relevant economic context, the expectations they form, and the actions they perform; (b) in those cases in which EBP exhibit a regular behaviour, they depend on agents’ expectations and, crucially, we argue, on interventions upon them. Authorities as well as other economic actors may intervene to change agents’ expectations (and therefore, their decisions), contributing to shape EBP and helping to produce the patterns that lead to some targeted economic phenomena.
These features of EBP show that they are not shielded from external influences and they do not run autonomously once triggered. Therefore they cannot be conceived as mechanisms or as economic machines. Rather they are open-ended processes that require continuous prodding on the part of policy makers to keep them running in the intended way.