The national economy as an imaginary

by Herbert J Gans

In 1983, social scientists went ballistic when political scientist Benedict Anderson described nations as imagined communities. He claimed that people falsely perceived it as a collectivity to which they belonged even though they knew virtually no one in it.

I argue here that the national economy is also imagined. Although everyone is thought to belong to it, it is not an actually existing social body, and thus cannot act.

Also known as “the economy,” the national economy has no leaders, participants or constituents, much less a social structure. It can therefore be described as an imagined social system – or in postmodern terminology, as an imaginary.

True, national leaders, public agencies, private firms and other influentials speak about the economy, claim to – and believe – they act in its behalf or against it and try to affect it. Nonetheless, the economy itself cannot make economic policy or produce material, symbolic or financial goods.

In addition, those who speak for or against the economy also measure it constantly, for example, with the Dow Jones Index and the unemployment rate. The measuring makes it real, at least to those who do the measuring and use the measures. Even so, the economy does not buy and sell stocks or create unemployment. Only actually existing economic institutions can do that.

In fact, the economy is a summary term for the totality of economic institutions. As such it is a useful term for journalists, politicians and even academics who have to summarize the country’s economic activity for lay audiences and other constituencies.

The economy is also a concept used by people who research economic actors and activities, but as such it is a tool from the researchers’ conceptual toolkit, not an empirical reality.

Indeed, for sociologists and other researchers, its unfitness for empirical study, like that of other summary terms such as society or culture, is its major shortcoming.

The economy is unfit as well for policy makers and politicians, for the term suggests it is a homogeneous whole. However, economic institutions have distinctive participants and constituencies with distinctive and often conflicting interests.

In addition, their institutional actions and resulting reactions have a variety of effects of diverse magnitudes, including noneconomic ones, on participants, constituents and many other people and institutions.

Effects can be beneficial or injurious, and the latter are, or should be, of concern to policy and political organizations and agencies. Identifying the beneficiaries and injured is especially important because economic institutions generally defend their benefits – currently the huge monetary rewards to their executives – and downplay or deny the injuries.

Politicians and political parties can often be distinguished by whether they appeal for votes to the beneficiaries or the injured.

Although almost everyone in America favors economic growth, in reality, at any given time, some economic institutions grow while others do not, with diverse effects on the citizenry.

Even during the mid-20th century decades of relative affluence, when it was believed that a rising tide lifted all boats, some stayed exactly where they were, and some sank. These days, the rising tide mainly benefits those already owning boats or able to afford to buy them.

Many other basic economic terms are also imaginaries, and much the same analysis can be applied to them. There is no empirical reality called the market despite the central role it plays in capitalist ideology.

Supply and demand can be measured and there are many economic institutions in which people, firms and other economic organizations buy and sell, including corner groceries and the stock market. They do not behave like economic theory’s imaginaries, however, for most seek to buy low and sell high whenever possible.

The national labor market is another imaginary, and even empirically graspable local labor markets are scarce. Slave markets are part of American history, shapeups are becoming obsolete and there are not many urban and suburban street corners where day laborers selling themselves can be bought.

Most of today’s hiring is done in employment offices, or via Craigslist, classified ads and through word of mouth.

Being hired can be studied as a process resembling a labor market, but this process varies wildly in the array of economic institutions summarized as the economy. The process and the actors hiring and being hired are stratified in many different ways, with differential effects on those being hired. Equally important, the labor market imaginary does not notice firing and the people who are fired.

Economic measures like the unemployment rate, the Gross National Product and the various stock market indices could also be described as imaginaries but they are better understood as social constructions.

They too are necessary for journalists, politicians and others having to summarize complex issues for lay publics, but researchers and policy makers need to focus on unemployment rates and other measures in actual firms, agencies and other organizations.

The above analysis has several implications.

First, that the economy is an imaginary does not invalidate it as being empirically graspable. As already noted, it plays a valuable social role as a summary concept. Moreover, if everyone treats the economy as real and it influences their actions and ideas, it is real. If those who speak for it exert economic and political power, it is even more real.

Second, those who speak for the economy and act in its behalf are almost entirely economic or political elites. This alone is a good reason for an empirical – and policy-oriented – analysis of actually existing economic institutions.

Third, all imaginaries being social constructions, they can be altered or rejected if they do not permit relevant and useful empirical research, economic policy making and political action.

Fourth, my emphasis on empirical reality does not mean to advocate empiricism. Empirical study is impossible without concepts, measures and proxies, but researchers must be careful to pick those that best describe and explain empirical reality, including all the so called subjective perceptions of that reality. Policy analysts and policy makers should follow the same guidelines.

Finally, economic sociologists should consider the creation of empirically graspable substitutes for the economy as imaginary. Thus, the empirical reality might be viewed as a humongous set of frequently interrelated or intersecting private and public economic institutions or systems, each with an array of functions, participants, constituents, beneficiaries and victims.

In a highly stratified society, positions in the hierarchy determine our connections to, and our perceptions of that humongous set of economic institutions. In a way, we all exist in and share somewhat distinctive economic worlds.

The list of such worlds is very long, for employees, employers, investors, producers, consumers and others performing economic roles are all embedded in different economic worlds. The economic worlds of contingent and jobless workers do not resemble those of hedge fund managers.

The same observation applies to economic institutions. There are no commonalities between the worlds of the corner grocery, the multinational corporation, and the public agencies that are charged with supporting or regulating them. The economic worlds of financial firms are very different from those of manufacturing firms – and even more so from academic ones which manufacture knowledge.

Herbert Gans is Robert S. Lynd Professor Emeritus and Special Lecturer, Columbia University, Department of Sociology.