IMAGINED FUTURES

Fictional Expectations & Capitalist Dynamics

Jens Beckert

Kevin Haughey
11723080
 Abstract
We have all heard the old adage that economists have predicted seventeen of the last nine
recessions. Or the apocryphal story of the economics student who boasted to his tutor that
the finals he had repeated were easy as the questions were the same as the previous year –
only to be told that unfortunately the answers had changed!

The world craves certainty and no less so in the field of economics.

The author, Jens Beckert, embarks on his journey through capitalism, beginning with looking
at the origins of decision-making. The core of the project dissects the fundamentals of the
present-day capitalist world in which we live: money, investment, consumption and
innovation. He concludes by highlighting our misunderstanding of the instruments we use in
forecasting the future.

Beckert describes his research as a monograph but be under no illusion: in addressing his
‘Imagined Futures’ his focus may be constrained - but the parameters of his project
encompass disciplines as disparate as economics, political science, history, anthropology,
psychology and literary criticism.

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 Contents
Abstract

Contents

Biography 3

Section I: Decision-Making in an Uncertain World 4

The Temporal Order of Capitalism 4

Expectations & Uncertainty 5

Fictional Expectations 6

Section II: Building Blocks of Capitalism 7

Money & Credit 7

Investments 8

Innovation 9

Consumption 10

Section III: Instruments of Imagination 12

Forecasting 12

Economic Theory 13

Personal Comments 14

References 15

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 Biography
Jens Beckert, author of “Imagined Futures: Fictional Expectations & Capitalist Dynamics”, is
a German sociologist who was born on the 21st July 1967 in Frankfurt.

In 1991, he secured an MA at the New School for Social Research in New York City reading
sociology. Beckert continued his studies at the Free University of Berlin where he secured an
MBA in 1993. He remained in Berlin, specialising in the field of economic sociology,
earning his doctorate in 1996 and his habilitation here lead to publishing a book in 2003 on
the sociology of inheritance.

Two stints as an associate professor at the International University Bremen and University of
Göttingen preceded his role as a director at the Max Planck Institute for the Study of
Societies, appointed at just the age of 37. It is here where focus is on the governance of
modern populations. Beckert has had the privilege of visiting fellowships throughout Europe
and beyond: including Princeton, Harvard, Florence and here in Paris.

Alongside his role at Max Planck, Beckert currently undertakes work both with other
universities and with journals. This is manifested with his collaboration with the University
of Cologne and Sciences Po; with his role as editor for the European Journal of Sociology
and as a member of the American Sociological Association.

Beckert continues to publish articles and books, mainly in economic sociology, as this is
where his interests lie. “Imagined Futures” was published in 2016, where he built on his
work of the same name of a previous article which he wrote in 2013.

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 Section I: Decision-Making in an Uncertain World
The Temporal Order of Capitalism

Most of the necessary ingredients for the development of capitalist markets are well
documented:
• Secure property rights
• Strong state power
• Double-entry bookkeeping
• Development of labour markets

However, a less-recognised fundamental is the change in the temporal disposition of actors

with regard to relevant time horizons – essentially how actors view the future.

To clarify, when discussing ‘actors’ I am referring to ‘economic actors’ which are

traditionally those who use resources such as land, labour or capital, to shape the economy,
and generally for their own benefit. It could be:
• An individual
• A company
• A government
• A society as a whole.

In the past, people were certainly more content with the status quo. Traditional outlooks
initially lay unchallenged and widely accepted. Though society may not have been
necessarily indifferent to the future, they viewed it as either pre-determined or cyclical
(Bourdieu 1979). Detraditionalization and the emergence of the future having potentially
multiple endings has been a transformation over time.

It was however the Enlightenment and the development of philosophies that really changed
the scene. This led to a wave of Utopian descriptions of social orders in the 18th & 19th
centuries. People began to look beyond the present and consider the effects that lifestyle
choices today, could have on their future.

So as people began to make decisions on their future, what do they consider? Beckert argues
that when decision making, we must consider our expectations of the future that we currently
hold. He describes these as ‘present futures’ which are temporal horizons of the present.

And what shapes these present futures? Uncertainty.

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Expectations & Uncertainty

Sociologists look to social structures and norms to explain their assessments of the future.
When considering expectations, they are likely to consider:
• Beliefs
• Goals
• Meanings

Their future tends to be viewed as a prolongation of the past.

On the contrary, economics has always been a very forward-thinking science. Despite this,
the current state of the world is generally interpreted with a constant fixation on past events.

The past is a done deal, so why should we bother fussing over it? While Beckert accepts that
existing structures and past experiences help determine the decision of actors, he arguably
believes that perceptions of the future have a much greater effect.

Uncertainty is prevalent in every decision that we make. But it is especially relevant when
discussing the business and financial world. Any situation which involves change, novelty or
crisis – uncertainty is paramount. And it is these situations which are related so closely to the
dynamics of capitalism (Knight 1921).

However, decisions cannot be chosen based on mathematical probabilities and calculations

alone! If probabilities were to be eliminated, actors whose outcomes which are fully
calculable would not be entrepreneurs – they are not taking risk!

Actors’ expectations about future outcomes must be taken into account if we are to
understand action in the economy. The future is just as vital as history as actors use
expectation and projectiles of counterfactual futures in order to consider alternative options.
For this reason, uncertainty is the cornerstone for decision-making.

Influences on imagined futures include:

• Family & Inheritances
• Social status
• Companies & Marketing
• Laws & State subsidies
• Discrimination

The capitalist system is dynamic, not completely unstable. This is a crucial point to make for
any contribution that highlights the contingency of present futures.

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Fictional Expectations

Since then we don’t know, for sure, how the future will unfold – it is uncertain. And since it
is uncertain, our expectations of it are subjective and we therefore have a ‘fictional
expectation’.

When I discuss the concept of fiction it is not similar to that of say ‘fictional values’ - which
some commentators likened to share prices during the dotcom bubble.

Instead, it is a parallel to the fiction we associate in a literary sense. When we are reading a
book, we immerse ourselves in the surroundings and, be it just for the time of reading, we
assume that we are in this created reality. Fiction creates a reality whereby both author and
reader act as if the described reality were in fact true.

Under conditions of uncertainty, assessments of the future create a reality of their own, where
their assertations go beyond merely reporting empirical facts. Business plans, advertising,
lottery tickets can all be viewed as props – triggering the imaginers as they go along.

Returning to the financial world, actors constantly base and make decisions under these
fictional expectations, knowing that, by definition, they aren’t real. But just be because
fiction isn’t real, why shouldn’t we be moved by it?

It can bring together factually existing imagined things by interconnecting reality and the
imaginary. The contrast is that obviously readers of novels don’t put these fictional
descriptions into practice - unlike economic actors in the real world.

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 Section II: Building Blocks of Capitalism
Money & Credit

The monetary system has evolved considerably over time - from the original gold-standard to
what we have today. The current system we have is vital in all aspects of capitalism.

We assume three fictions when considering money:

1. If I were to rip up a €20 note in front of you now, you’d probably be angry? But
money, be it in paper form or digits on a screen, has no intrinsic value. We assign a
value to it. This is the first fiction.

2. The second is that depositors must behave as if their deposits are always available for
withdrawal. In October 2008, Angela Merkel informed the German public that all
private savings would be guaranteed by the state. Which in this case was 586bn €.
How the German government would have paid such a sum is a mystery.

“Beliefs exert a far greater influence on economic behaviour than any effect the money
supply may indirectly bring to bear on prices.” (Orléan 2014)

3. And the final fiction is that we believe for money to be stable. The confidence in
money is instilled through an ‘economy of words’ between policies and actors:
governments, central banks, companies and rating agencies.

The credit system:

• Allows money to be made faster – exerting a structural force on the economy to grow
• Invokes imaginaries of a counterfactual future that involves entrepreneurial riches or
an altered social status
• Comes with risks

Lenders must try to avoid fraud were expectations are a deliberately created fiction. They
must consider the credibility of the lender, the market and whether or not it has the ability to
enforce repayment. The core of all credit decisions is a slate of confidence.

Financial crises are essentially a crisis of confidence and in these situations, time horizons
shrink. Monetary crises can occur when the granting of loans ceases. Or when the
purchasing power of money falls so drastically that the acceptance of money for goods is all
but stopped.

With hyperinflation, German farmers in the 1920s began to not accept the German mark
This led to the inception of a new currency – a new German mark. Which actually turned out
to be a large success due to the joint confidence which radiated through all corners of the
society.

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Investments

Economic growth is dependent on investment – be it in production, capital, financial assets or

skills. If people are unconvinced of investments, money will just remain as liquidity –
stopping growth of the economy.

When we invest in imaginaries, the effect is even more ambiguous. Today, due to the
increasing dominant role of financial markets, interest in investments is often focused on
financial investments, rather than on investments in plants and equipment.

As can be seen from Fig. 6.1, except for a crash in 2008, financial markets have grown year
on year as a percentage of domestic profits - in this case studying the United States.

These vary considerably to traditional markets:

• They are based on time
• Continue until they are sold as opposed to ending once the transaction occurs
• Generally focussed on the very short term
• Their prices are not necessarily self-fixing, and can vary fiercely from profits

One need only look to the profits of the dotcom companies, compared to their prices, as
evidence of this this final point.

So, what does dictate price changes, and more specifically price drops? This occurs when
actors ‘lose faith’ - reflected by the departure of actors from their existing beliefs.

In order to reduce this issue, institutions like accountancy firms were introduced. Their role
is to reassure the soundness of firms to continue and to further investments.

Categorization also influences expectations regarding future value. Market valuations are
based on specific categorical frames. Probably the most familiar of this is of rating agencies
placing bonds in different risk categories like AAA.

However, neither can relieve fully the actor to the task of judging - but both can certainly
have an impact on their judgement.

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Innovation

Innovation is key in dynamics - decisions are informed considerably by actors’ fictional

expectations. One of the main ‘problems’ with innovation and exploring its value is that the
future value of innovation can only be determined if it is known in advance what the
innovation will be. Generally, though, early hopes rarely reflect actual outcomes.

Before we even had record players, we had gramophones or phonographs. When Thomas
Edison invented the Dictaphone, he intended it as a device for businessmen to record
dictations for their secretaries to type. It did not occur to him that its ability to play music
would make it far more popular as an entertainment device.

Since innovation relates to an actor’s expectations - when entrepreneurs expect an existing

technology to improve quickly, they are reluctant to invest. A clear, and unfortunate example
of this is the solar industry. A quicker uptake and transfer from fossil fuels, would surely
occur if people didn’t think that the solar technology, including batteries, would be outdated
shortly after their purchase.

Therefore, actors rely on institutionalized rules of decision making - world views and social
practices that orient decisions in the face of uncertainty. This brings a considerable degree of
coordination when it comes to innovation. Different actor groups tend to align their action
based on overlapping expectations - sometimes in fear of being left behind.

‘Promissory stories’ assign roles to actors which helps develop a plot around innovation.
These stories can create a shared worldview, compelling the actor to follow paths envisioned
in a certain imaginary.

Previous innovations are commonly used to justify a new innovation - even sometimes in
completely different fields. This can be described as the historical trajectory’s:
‘logical next step’, ie. the next generation.

“Once technological promises are shared, they demand action and it appears necessary for
technologists to develop them, and for others to support them.” (van Lente & Rip 1998)

Technological developments are anchored in economic power structures and cultural

representations.

Actors must innovate under uncertainty - it is impossible to know beforehand if profitable.

They behave as if innovation becomes reality.

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Consumption

Modern day society has evolved a lot, consumers are no longer satisfied with just merely
existing. 100 years ago, the populations of OECD countries spent around 80% of income on
food and housing; nowadays this has dropped to between 30-40%.

To sacrifice more of our wealth on goods, we must value the good more than the sacrifice -
this brings us to our version of valuation.

Goods have a physical value - a value based on what an object physically does. But goods
with symbolic value have much more potential for growth. Because we have socially rooted
values and aesthetic ideals – we assign fictional values to goods depending on how we think
they may improve our social status.

These symbolic connections between goods and the social position of their owners – leads to
a source of demand.

• By attaching value or significance to say a pair of football boots worn by Paul Pogba,
we may think of ourselves in this socially elevated position.

• Those who play the lottery do so imagining all of the possibilities and riches a
winning ticket may bring.

• Fairtrade products instil within the consumer that they are doing good by purchasing
such a product.

• And an old painting or an old aged wine might bring the consumer ‘back in time’ to a
particular year or place that can no longer be visited.

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The imaginary performance of goods has a transcending quality to it – it offers access to
distant regions, past historical events, unreachable social positions or aesthetic values by
allowing the object to have a symbolic representation of something which is otherwise
intangible. These situations are succinctly displayed in Fig. 8.1.

A lot of the time though, we become disappointed when we actually receive a product. Our
imaginative version prior to purchase, exceeds our new valuation post purchase. The only
‘purchase’ without disillusionment is money (Parsons 1963). It is devoid of concrete
characteristics and offers the user the freedom to buy any product with it. The only threat to
money’s imaginative force is its devaluation.

“At the same time, it makes the question of actors purchase ‘unnecessary’ consumer goods
even more puzzling, since the value of any specific consumer good must be higher than the
perceived value of the money not spent.” (Ullrich 2006)

Because producers depend on the marketability of their products, they therefore invest in
associating their products with consumer ideals. Norms of social recognition are created and
enforced by those who are able to make others wish what they wish them to wish for - the
foundations of the advertising industry.

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 Section III: Instruments of Imagination
Forecasting

Before purchasing a good, consumers project the satisfaction it will bring them. This is
called forecasting. It is essentially a form of expectation building. The forecasts which
receive the most attention are generally carried out by national institutions of the likes of the
OECD and the IMF.

However, few macroeconomic and technological forecasts are actually accurate. The future
they anticipate rarely comes to pass. Their failures have been prevalent since their inception.

An early example is when The Harvard Economic Society naively predicted in December
1929 that the American economy would bounce back the following year. And when
forecasts don’t come to fruition, the institutions defend their stance by pointing towards their
probabilistic nature. Technological forecasts share the same ‘qualities’ - unreliability being
one.

The failures of forecasting have been explored:

• They may lack complexity
• Data problems may lead to endogenous failure
• Some of the assumptions may be incorrect

But what may be the most surprising is that as statistics have become more readily available,
econometric models become more sophisticated, the accuracy of forecasts has not
systematically increased over time. Because of this, forecasts should only be considered as
an instrument for creating fictional expectations. When the political world act on forecasts
they are essentially acting on make-believe - the forecasting lends legitimacy. Actors pretend
the future will be a certain way.

And since forecasts cannot objectively predict the future and the projections articulated in
forecasts help to shape the future, this implies that they are inherently political. An example
of this is “the more heavily a country is indebted to the IMF, the more pronounced the
underestimation of inflation rates is likely to be”.

Sometimes successfully forecasting even one event correctly, say for example Peter Schiff
predicting the ’08 crash, gives all your future forecasting a special status. But there has been
no progress into the predictability of the future. And forecasts fail in this sense

But as an ‘expectation technology’ - allowing a field of actors to co-align decisions, they

actually work quite well (van Lente 1993). Therefore, a successful forecast is a convincing
one - not necessarily an accurate one.

This of course leaves economists with the thankless task of defending the claim that
economic events are predictable against immense empirical and theoretical evidence to the
contrary

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Economic Theory

Economic theories are instruments used to create expectations – these are fictional.
• They reduce the complexity of the factual world
• Some are built on past events
• They are reflexive - influencing the behaviour of their objects

Economists look for reinforced suggestion that their fictional worlds could be real. When we
observe an outcome in the real world that resembles an outcome in the model world; we
conclude, through abductive reasoning, that the cause of the outcomes described in the model
are also the causes of the real-world outcome.

But the model world is not a real world stripped of its complicating factors, but rather a
parallel reality constructed by the theorist. But how does theoretical knowledge shape the
economy on a practical level?

Theories obviously do not represent reality, but this does not prevent the coordination effect.
While theories provoke imaginaries of the future and inspire decisions actors perceive as
helping them reach that future, an established theory may begin to unravel. Their lifespan is
therefore cyclical:

1. Ceases to produce continuing imaginaries of a desired future

2. People begin to doubt it
3. A new theory emerges
4. These shifts are proliferated through institutional organisations like the OECD
5. Repeat

Therefore, theories need not be true or false, merely credible. And credibility has an
institutionalised basis - it stems from power. Once convinced, actors act as if the theory is
true. And some actors may advocate a theory because they will benefit as a result - it may be
knowingly false.

“Predictive theories can therefore be compared to crystal balls, not in the sense that they can
show us the future, but that we can gaze into them in the hopes of catching a glimpse of the
future, and instead we see a vision of ourselves reflected back instead.”

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 Personal Comments
A same crystal ball analogy used in the final chapter could be argued for financial markets.

The fiction introduced in the beginning of the report resonates throughout all corners of
financial markets.

We have a capitalist system in which we invest based on what we can envision, rather than
upon what we can quantify. The evolution, or one might suggest revolution, of financial
market dynamics are dictated by both individual and collective fictional expectations
And it is the credit system that we have today that is what drives the economy forward.

We are forever exploring tools and models that can refine our methods and make forecasting
more empiric, clinical and accurate. However, for all the modelling and methodology we
have constructed, ‘homo economicus’ is more likely to predicate their actions on their own
constructed vision.

One can appreciate that capitalists would not like to think that they were predicating
economic futures on ‘contagions of sentiment’ but this is exactly what happens.

We embrace the challenge of understanding modern economic activities by utilising tools

which were traditionally the preserve, perhaps of the arts, rather than the sciences. Is the
algorithm as an analytical tool to be melded with a literary narrative?

Imagination and emotion triumphs over calculation and consideration and concerns in the
field of economics resonate with similar developments in political life.

Perhaps his position is tenable as at an existential level, economic predictions are important,
not because of their accuracy, but because they themselves promote expectations that prompt
economic activity in the first place. And it is from this, that I draw my final conclusion on
financial markets.

Without say, insider information, no-one can truly predict the future and therefore none can
truly predict if the markets will go up, go down, surge or crash.

And if someone does convince you that they do, their job as an actor or their story as a piece
of fiction; may have already succeeded on what it set out to do…

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 References

Bourdieu, Pierre. 1979. Algeria 1960. Translated by Richard Nice. Cambridge: Cambridge
University Press.

Knight, Frank H. 2006. Risk, Uncertainty, and Profit. Mineola, NY: Dover Publications.

Orléan, André. 2014. The Empire of Value: A New Foundation for Economics. Cambridge,
MA: MIT Press.

Parsons, Talcott. 1963. “On the Concept of Political Power.” Proceedings of the American
Philosophical Society 107: 232–62.

Ullrich, Wolfgang. 2006. Habenwollen: Wie funktioniert die Konsumkultur? Frankfurt am

Main: Fischer.

van Lente, Harro. 1993. Promising Technology: The Dynamics of Expectations in

Technological Development. Delft: Eburon.

van Lente, Harro, and Arie Rip. 1998. “Expectations in Technological Developments: An
Example of Prospective Structures to Be Filled in by Agency.” In Getting New Technologies
Together: Studies in Making Sociotechnical Order, edited by Cornelis Disco and Barend van
der Meulen, 203–29. Berlin: de Gruyter.

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