Economics imperialism

The story of economics imperialism begins with an act of secession – or was it expulsion? When Adam Smith published The Wealth of Nations in Reference Smith1776, the field was dominated by the ‘easy mingling’ of economic and social topics. This peaceful co-existence was disrupted by Ricardo's introduction in the nineteenth century of a ‘much more abstract analysis’. A ‘battle of methods’ (Methodenstreit) ensued in which the abstract–deductive approach won a ‘victory’ so ‘devastating’ that those Germans and Austrians who continued to cleave to a ‘historically and socially oriented’ approach were largely reclassified – effectively downgraded – from economists to economic historians.Footnote ⁸ Throughout the nineteenth century, economic sociologists such as Weber and Durkheim worried away at the asocialisation and ahistoricisation of the increasingly dominant abstract–deductivist model. But for the first half of the twentieth century, ‘sociologists increasingly shied away from economic topics – which they perceived to be the domain of professional economists’ (Swedberg and Granovetter, Reference Swedberg, Granovetter, Swedberg and Granovetter1992, pp. 3–4).

What is distinctive about the ‘economic approaches’ that survived this battle of methods? Just as there are many different ‘approaches’ to law – doctrinal, sociological, critical to name but a few – so there remain many different economic ‘approaches’ – institutional, behavioural, neoclassical and so on. But just as there is something essentially legal about, for example, identifying the ratio decidendi (a concept) in a court judgment, privileging proportionality (a value) in determining whether a kick might be excused as an act of self-defence, and taking note of the date on which a treaty comes into force (a fact); so there is something essentially economic about, for example, identifying the point at which utility is maximised (a concept) for a consumer of sausages, privileging efficiency (a value, although some would deny it to the grave) in determining how to allocate water resources, and taking note of the number of chickens sold in Wichita in 1972 (a fact).

Not only did the victorious abstract–formalist economists revel in their isolation in the ‘economic’ sphere, they then began to push back into other ‘social’ spheres. Law was given a civilised economic once-over as early as 1937, when Ronald Coase (Reference Coase1988) initiated transaction costs economics with his observation that business people could reduce their costs by adopting different legal forms – contracts, partnerships, firms and so on. Social interactions could now be regarded as costs, and law as cause or an effect of them. Matters became somewhat more aggressive thereafter. When Gary Becker launched his campaign (mid-1950s to present) to treat every (social) thing ‘as if’ it were a market – using the neoclassical micro-economic model of rational utility maximisation to explain and predict all human behaviour – most economists were sceptical. He had, quipped George Akerlof, learned to spell ‘banana’ but not when to stop (Fine, Reference Fine, Jomo and Fine2006, p. 7). However, within a few years, Becker's acquisitive stance was but a slightly garish outpost of the increasingly taken-for-granted economics imperialism.Footnote ⁹ For example, Public Choice, in which economic approaches are used to analyse politics, was a well-established discipline by the mid-1960s.Footnote ¹⁰ In 1983, Becker was offered a joint appointment at the Sociology Department at Chicago University – giving, in his view, ‘a signal to the sociology profession that the rational choice approach was a respectable theoretical paradigm’ (Reference Becker1992: Nobel Prize Biography). By 1987 he was president of the American Economic Association (Swedberg and Granovetter, Reference Swedberg, Granovetter, Swedberg and Granovetter1992, pp. 1–2), and by 1995, Richard Posner could be imagined leaning confidently, languidly back in his chair as he opined that:

Becker's temerity in elaborating ‘the economic approach to human behaviour’ energised economics imperialism in two ways (my emphasis). First, it reinforced the impression that in the battle of economics methods, only one (the asocial, the ahistorical, the fittest?) had survived, behind which all troops could safely unite. Second, it set out a terse analytical framework by which parachuting economists could orient themselves in the yet-to-be conquered social wilderness. Becker declared that three assumptions, ‘used relentlessly and unflinchingly, form the heart of the economic approach’. These are first, that individuals seek to maximise (utility, profit, etc); second, that markets ‘with varying degrees of efficiency co-ordinate the actions of different participants – individuals, firms, even nations – so that their behaviour becomes mutually consistent’; third, that the preferences of actors (individuals, firms, states and so on) are stable (Reference Becker1976, p. 5). Although plenty of productive debate and innovation has challenged the boundaries of these assumptions in the ensuing years (for example, behavioural economics, information-theoretic economics), and there are schools of economics thought that eschew at least some of them (for example, the ‘new’ economics as exemplified by the New Economics Foundation), and still other schools that are especially avid in their support of them (for example, the neoliberal and Austrian schools), they remain the preconditions of all remotely mainstream economic analysis – always present, sometimes suspended, sometimes extended.

One inherently multidisciplinary field in which the dominance of economics has been particularly stark is that of ‘development’. Development – a notoriously contentious and slippery notion, variously regarded as essential, impossible and objectionable – can be defined as any attempt to improve (in the eyes of the developer) the lives of the relatively (locally, nationally, regionally, internationally …) ‘poor’ (financially, culturally, socially …).Footnote ¹¹ Continuous improvement or ‘progress’ has been the battle cry of development since Harry Truman coined the notion of ‘underdevelopment’ on the day he took presidential office in 1949 (Esteva, Reference Esteva and Sachs1992, p. 6). Development activities reflect many of the forms of intervention characteristically made by governments worldwide, except that they are always done by the relatively rich to the relatively poor. It is therefore unsurprising that development has mirrored the general submission to economics imperialism, albeit with a time lag. Indeed, Arturo Escobar has proposed that ‘[o]f all those figures associated with development and with the production of development knowledge’, the development economist always ‘stood out clearly above the rest’ (Reference Escobar2005, p. 141). Development economics was for a time ‘protected’ from the ahistoricisation and asocialisation afflicting mainstream economics, thanks to the commitment of some key figures, such as W. W. Rostow (of Stages of Growth fame) and Robert McNamara (who brought a focus on basic needs to the World Bank), to interdisciplinarity. ‘But this was to change, and dramatically, with the rise of neoliberalism’. First, the state was now regarded as a hotbed of wasteful, self-serving, manipulation (‘rent-seeking’). Second, the market became the sole reliable ‘mechanism for achieving development’. Third, development economics lost its status as a distinct branch of economics. ‘Exactly the same universal principles’ were thought to apply across developing and developed countries. Historical differences and variations in ‘social and economic structure’ were categorised as forming the environment – ‘exogenous factors’ – within which homo economicus goes about maximising utility' (Fine, Reference Fine, Jomo and Fine2006, pp. 4–6). Indeed, Escobar has argued that development came to be about not only ‘upgrading’ and ‘modernisation,’ but also the introduction of the rationality of homo economicus to the developing world (Reference Escobar2005, p. 141). Viewed in this way, development is both a manifestation, and a means, of economics imperialism.

As their bravado grew, economists dipped their toes, waded, then swam ever further from the jetties of trade, finance and investment, eventually ‘discovering’, à la Columbus, the shores of law and development. The field had previously been populated by a band of socio-legal Weberians – at least until their much-vaunted self-estrangement in the mid-1970s (see Carty, Reference Carty1992; Trubek and Galanter, Reference Trubek and Galanter1974). Beginning in 1989, these territories have been progressively cleared of the socio-legal debris, then replanted with the seeds of individual rational utility maximisation that are characteristic of Chicago-inspired law and economics, and remapped with the symbols of ‘good governance’ and ‘rule of law’ which are characteristic of new institutional economics.

Leading the charge on this new frontier was the World Bank Group, so that ‘today, any serious intellectual discussions’ on law and development must address the contribution of the Bank (Faundez, Reference Faundez and Perry-Kessaris2010, p. 180). The history of its involvement has been told elsewhere (see, for example, Decker, Reference Decker and Perry-Kessaris2010). Some scholars have questioned the extent to which the Bank can be said to have a coherent legal reform strategy (Santos, Reference Santos, Trubek and Santos2006), or to be innovators or dominators in the provision of legal reform (Hammergren, Reference Hammergren and Perry-Kessaris2010). Certainly other international financial institutions are also involved in the legal reform project generally, and specifically in the creation of indicators – for example, the Asian Development Bank and the European Bank for Reconstruction and Development. But there is no doubt that the World Bank has been the chief inventor and sustainer of the campaign for ‘better’ investment climates. It is also true that the influence of economics on the demand for, and design and deployment of, indicators has been especially noticeable at the World Bank.

Invasion by indicators

The investment climate campaign is a form of ‘meta-regulation’ – that is, ‘it is part of the taken-for-granted context within which legal reforms are made in client countries of the World Bank’. Its meta-regulating effect is both ‘thin’, in that ‘it applies economic values’ and methods ‘to assess the validity of the methods by which laws are made and enforced’; and ‘thick’ in that ‘it expects that law will promote a liberal market economy’ (Perry-Kessaris, Reference Perry-Kessaris2008a, chapter 1, citing Morgan, Reference Morgan2003).

The indicators at the heart of the investment climate campaign are, to draw on the terminology of Davis, Kingsbury and Merry (Reference Davis, Kingsbury and Merry2011), a ‘technology of governance’ used for the purposes of regulation, but in place of law. The World Bank is a ‘governor’ of the promulgator–user variety, creating Doing Business and Enterprise indicators with its ‘name and imprimatur’ and using them to evaluate, and thereby govern, both legal systems and itself. Specifically, the Bank uses the indicators to evaluate the performance of administrative and judicial institutions against the standard of what it regards as a ‘good investment climate’; and to evaluate its own efforts to ‘improve’ such investment climates. The indicators are also used by ‘the public’, namely those civil society, private and state actors who have an interest in investment or, less commonly, in the performance of the World Bank. The World Bank derives the power to govern performance in investment climates from its ‘economic’ and ‘legal authority’ as a lender; and from its ‘scientific’ and ‘moral authority’ as a long-standing leader in the theory and practice of development economics, although all forms of its authority are ‘contested’ by states and by civil society actors.

Figure 1 maps the influence of the economics approach in the investment climate campaign – normative (values and interests), analytical (concepts and relationships) and empirical (facts and methods), as well as the central role played by indicators. The following sections elaborate upon this map, suggesting that the investment climate campaign reflects three commitments of mainstream economics: a normative commitment to marketisation (‘Ready’); an analytical commitment to mathematisation (‘Aim’); and an empirical commitment to quantification (‘Fire’).

Figure 1

The economic approach in the investment climate campaign

Ready: marketise

The first step of any campaign is to rally the troops and win over hearts and minds. The investment climate campaign issues its call to arms in the competitive, commodifying terms of the market. This is no great surprise given that the World Bank, like other financial institutions, is ‘the natural territory of economists and finance specialists’, whose ‘principal concerns are macroeconomic’, whose ‘charges are to reduce poverty and facilitate economic growth’, and whose ‘principal inhabitants, therefore, are professions which proffer expertise in markets’ (Halliday, Reference Halliday2010, pp. 31–32).

The tendency to treat legal systems ‘as if’ commodities competing for the attentions of foreign investors, their ‘value’ signalled by Doing Business and Enterprise indicators, is a manifestation of the normative commitment of mainstream economics to marketisation. In (economic) theory, such marketisation ought to produce all manner of good things, most importantly competition. A ‘market’ consists of buyers and sellers of a product. Where there are multiple consumers (investors) and multiple producers (states) of multiple products (legal systems) there will be competition among them, resulting in ‘better’ legal systems. This argument ‘is based upon implicit appeal to the biological analogy of natural selection’. So, ‘just as competition, working through the market, induces efficient outcomes in a static framework, the result over time will be an institutional framework conducive to growth and development. Only the “fit” will survive’ (Harriss, Hunter and Lewis, Reference Harriss, Hunter and Lewis1995, p. 11, cited in Perry, Reference Perry2002). This theory relies on problematic assumptions about the preferences, expectations and behaviours of both producers (states) and consumers (investors) of legal systems.

First, the theory assumes that investors actively shop around for the ‘best’ legal system in which to do business, and share common beliefs that the ‘best’ legal system is one that is cheap and quick, as well as common understandings of what ‘cheap’ and ‘quick’ look like. As I have set out at length elsewhere, these assertions are both implausible, for reasons more and less comprehensible to economists; and dangle too far above the empirical ground to merit classification as proven (Perry, Reference Perry2001; Reference Perry2002; Perry-Kessaris, Reference Perry-Kessaris2003a; Reference Perry-Kessaris2008a; Reference Perry-Kessaris2008b). I will only add a reference to Pierre Legrand's recent observation that:

There is no doubt that marketisation does indeed cause states to engage in a relentless competitive process that Veronica Taylor (Reference Taylor and Linsey2005) has dubbed the ‘law reform Olympics’. The publication of indicators serves to continuously pit states against each other, and against their historical selves; the successful being rewarded with finance, technical assistance and praise (see also World Bank, 2004a, p. 53; Govindarajan Committee, 2002, pp. 35–36). Success stories are reproduced on the Doing Business website and with publications such as the Celebrating Reform Series (World Bank Doing Business websiteFootnote ¹²). The Doing Business website also includes a link on its front page to historical data, to encourage states to improve in time for the next measurement – although that plan is often scuppered by changes in methodology which the Bank determines render the data incomparable over time, which is why, for example, the startling achievements of Georgia (see below) are not apparent on the Doing Business website.

The legal system ‘as if market’ game is mirrored in the increasing tendency to speak of an international ‘market’ for legal services, which has sent France and the UK, to name but two, scurrying in search of the unique selling points of their legal professions.Footnote ¹³ There is also a strong emphasis on the idea that the customer is always right. For example:

The problem, in the words of political philosopher Michael Sandel, is that ‘[m]arkets leave their mark’. They ‘are not mere mechanisms. They embody certain norms’ and ‘presuppose’ and ‘promote, certain ways of valuing the goods being exchanged’. So when economists ‘assume that markets are inert, that they do not touch or taint the goods they regulate’ they are making ‘a mistake’. The most superficial type of ‘mark’ is illustrated in Sandel's example of a nursery which seeks to incentivise parents to pick their children up on time. It introduces a charge for lateness. The parents, now interpreting accommodation of lateness as a service for which a fee can be paid, are more late, more often (Sandel, Reference Sandel2009). Much deeper marks were noted by E. F. Schumacher in his Small is Beautiful of 1973 (echoing Karl Polanyi's Great Transformation of 1944):

The implication for the present purpose is that the marketisation of legal systems leaves a mark on legal systems, those who produce them and those who use them. The first mark is left on our understanding of what law is for. When we think of legal systems as commodities, and investors as their main audience, we devalue, or even forget about, the other ‘sacred’ social functions of law. Roger Cotterrell has long argued that law is more than a resource for the maximisation of benefits to individuals. It is also an essential ‘communal’ resource for the support of the full Weberian spectrum of relations – not only individuals, and not only of instrumental investment relations, but also of loving familial, faithful religious and respectful traditional interactions (Cotterrell, Reference Cotterrell1997; Reference Cotterrell2006). The World Bank's Independent Evaluation Group (2008)Footnote ¹⁴ hovered close to the same point when it argued in its review of the Doing Business project that ‘any research relating the regulatory environment to economic outcomes is necessarily partial’, because, among other things, what benefits investors ‘may not be good for … the economy and society as a whole’. Where interests are in competition, the ‘balance … is a matter of political’, not economic, ‘choice’ (p. 51). But the effect of meta-regulating investment climate discourse is that the economics is in effect doing the choosing.

The problem became clear to me when I studied the role of the Indian legal system as a communal resource in investor–government–civil society relations. I began my account of that research with the following theoretical dissatisfactions with the investment climate campaign:

The validity of those theoretical misgivings was confirmed by the empirical reality in India. Not only was the investment climate campaign diverting attention from the interests and values that underpin non-economic relations; it was actively undermining the ability of law to support those non-economic relations.Footnote ¹⁵ Furthermore, viewed through a sociologically informed lens, the investment climate campaign proved to be disconcertingly linear, with little exploration of the possibility of interactions among and between laws, legal institutions and humans. Of course an instinctive and well-exploited economic understanding of the self-reinforcing effects of indicators is clearly discernable – as performance improves, so there is an incentive to improve performance. But investment climate discourse takes no account of the complex, reflexive interactions that take place between and among investment, state, civil society and legal system actors – not least the use, abuse and avoidance of law (Perry-Kessaris, Reference Perry-Kessaris2008b, pp. 18–19).

The second set of marks left by marketisation can be categorised as ‘indicator politics’ (Desrosières, Reference Desrosières and Touffut2007, p. 136) – those wasteful, distracting efforts at one-upmanship to which humans appear to be so prone. For example, as I have reported elsewhere (Perry-Kessaris, Reference Perry-Kessaris2008a, pp. 126–7), a former World Bank Country Director for India remembered in an interview how in 2004 one chief minister had demanded an emergency Sunday morning meeting at the director's residence to express his dismay at the indicators produced for his state. In the State of Karnataka, two former chief ministers passed the indicators grenade back and forth between them, accusing each other of complicity in making it ‘the most corrupt state in India in 2004’, and demanding ‘clarifications’ from the Bank.Footnote ¹⁶ Meanwhile, the same Doing Business report was ‘like an electric shock to the French (and French related) legal community’ for this ‘country steeped in its legal tradition, was rated forty-fourth (behind Jamaica, Botswana and Tonga) and considered one of the legal systems least conducive to economic growth’ (Kerhuel and Fauvarque-Casson, Reference Kerhuel and Fauvarque-casson2009, p. 811). Various conferences, commissions and other defensive and retaliatory mechanisms of more and less productive value were launched in response. A longer-term perspective on the law-reform Olympics might have given some much-needed, albeit perverse, reassurance to the French, for in a 2003 study I found that the US or the UK consistently ranked ‘worse’ than at least one South Asian nation across a range of legal indicators manufactured between 1999 and 2002 (Perry-Kessaris, Reference Perry-Kessaris2003a). Neither country was as shocked as France at their supposed inferiority. Perhaps the Anglo-American blow was cushioned by the contemporaneous lauding in the infamous ‘legal origins’ literature of the common law as fundamentally more efficient than civil law.Footnote ¹⁷ But my point is that all of this is surely a diversion from the professed aim of the game – namely, ‘improving’ the lives of the relatively ‘poor’.

Perhaps the most extreme form of indicators politics is cheating – that is, deliberately targeting reforms towards improving indicators, rather than legal systems. Economists tend to be somewhat coy about this topic. They prefer the term ‘gaming’, which to my ear implies a degree of admiration or at least studied ambivalence about the strategy in question. But who among us is thrilled by the prospect of Olympic athletes striving to go ‘swifter, higher, stronger’ by dipping into performance-enhancing drugs? On that note, how impressed can one be by Georgia's literally incredible rank of eleventh easiest place to do business in the world in 2010, not to mention its meteoric rise (overtaking Japan and Germany among many others) from 112th in 2004, via a best reformers award from the World Bank in 2007?Footnote ¹⁸

Good things can come from measuring performance. For example, I would certainly be moved to action if I found that students were switching away from courses I teach and I pay close attention to student comments about my teaching. But there is always a danger of – perhaps even a propensity towards – things going too far, especially when quality is put on a competitive, war-like footing. It is not the fault of economists that humans sometimes want to cheat, but they are to be chastised for their willingness to create an environment in which cheating becomes a strategy rational above most others. Indeed, chastisement does not really go far enough: their very own, much coveted, theory of individual rational utility maximisation predicts that cheating will occur wherever it can be done (here due to the impossibility of measuring accurately, see below), and is to the advantage of the cheater (here due to the fact that rankings may bring rewards).Footnote ¹⁹ So why risk it?

Aim(?): mathematise

At its best, mathematical analysis summarises, clarifies and renders transparent relationships – whether hypothesised or proven – between concepts. The basic theory behind investment climate discourse is that the amount of foreign investment flowing into a country depends, among other things, upon the effectiveness of that country's legal system. Were it not so influenced by economics, the basic theory behind the investment campaign could be represented in a diagram of the kind set out in Figure 2. Instead it tends to be set out a format akin to the formula below, in which, suffice it to say, y _i represents investment flows and R _i represents the effectiveness of the legal system

Figure 2

A visual metaphor for investment climate discourse

The habit of representing legal systems as variables in a development economics equation, their places held by indicators, is a reflection of an analytical commitment of contemporary mainstream economics to mathematisation. A former president of the American Economics Association is quoted as calculating that in 1940 ‘less than 3 per cent’ of the pages of the American Economic Review included even ‘rudimentary mathematical expressions’ (Milonakis and Fine, Reference Milonakis and Fine2009, p. 123). From that point on, the ‘scientific program’ of mainstream economists has been fetishistically to ‘reformulate verbal … arguments into symbols and variables and diagrams and fixed point theorems and the like’ (McCloskey, Reference Mccloskey2002, p. 11). By 1990, nearly 40 per cent of the refereed pages of economics were to ‘display mathematics of a more elaborate type’ (Milonakis and Fine, Reference Milonakis and Fine2009, p. 123), apparently in pursuit of a pseudo-scientific sense of certainty, control and continuity. The contemporary economic paper or lecture rarely takes long to slip from sentence to formula, from happiness to Q^*, from wondering to knowing, from real world to ‘blackboard economics’ (Coase, Reference Coase1988, cited in Perry-Kessaris, Reference Perry-Kessaris, Hatchard and Perry-Kessaris2003b, p. 65). Where it is possible to substitute ‘an elegant and exact formula’ such as ‘E = mC² or, to give a somewhat less elegant example from economics, 1 + i _usa= (e _forward/e _spot) (1 + i _france), called “covered interest arbitrage”’ for a ‘clumsy fact or numerical approximation’, then one surely ought to do so (McCloskey, Reference Mccloskey2002, pp. 13–14). However, when mathematisation simply reinvents a verbal wheel, mysticising the common-place, it is more than irritating. It excludes members of the colonised disciplines who may not be technically qualified to navigate their newly re-labelled terrain.

Mathematisation can also be destructive. First, like other forms of ‘metaphorical language’, mathematics may simply hollow out the analysis and ‘constrain’ the ‘vision’ of the analyst ‘so that their reading of social reality may be quite different from those using other metaphors and other languages’. Second, while some economic metaphors are ‘illustrative’, others serve to ‘constitute the very lens through which we view the world’ (Bronk, Reference Bronk2009, pp. 22–23). The slip from illustration to constitution can sometimes occur simply through familiarity. As Deidre McCloskey (Reference Mccloskey1998) explains, some metaphors, such as Becker's treatment of children as ‘durable goods’ are still ‘live’, meaning that they remain ‘conscious and surprising’, exerting a ‘structuring effect’ of which ‘we are aware’. But others, such as the metaphor of ‘equilibrium’, have been with us long enough to become ‘half-dead – that is, no longer consciously recognised’. The danger is that ‘we may become oblivious to the extent to which it structures and constrains our vision’ (Bronk, Reference Bronk2009, p. 23, citing McCloskey, Reference Mccloskey1998).

An excellent example is provided in the construction by economists of so-called ‘Rule of Law’ indicators, which all too often seek to measure the protection of property rights, which is the obsession of economists, rather than the equal application of the law to all regardless of position, which is what lawyers tend to regard as the core component of the rule of law (see Davis, Reference Davis2004; Taylor, Reference Taylor and Linsey2005). How many earnest conversations must have been held at cross-purposes as a result? Another clear example is provided by a terrifyingly popular article by Acemoglu, Robinson and Johnson (Reference Acemoglu, Robinson and Johnson2001) on ‘the colonial origins of development’, in which they propose, among other things, the following equation:

Unfortunately, the authors were unable to find an indicator to directly ‘measure’ the ‘institution’ of protection against expropriation in colonial times. So they chose a proxy indicator (an ‘instrument’), namely mortality among settlers, thinking that better institutions (including property rights to protect against expropriation) must be associated with lower mortality. As Aldashev (Reference Aldashev2009) points out, that choice of proxy is highly problematic, for there are plenty of reasons for high mortality rates that are entirely unrelated to the protection of property rights. But the article remains extremely influential, and has helped to set in concrete a particular interpretation of how ‘strong’ property rights ‘matter’ to development.

Third, mathematisation seems to divert attention from both the lack of theory and the lack of facts. Although economists may have identified a number of legal and economic concepts which they regard as central to law and development, the precise nature of the relationships between these concepts, and their connection to economic development, remain both incompletely theorised and unproven. For example, John Ohnesorge (Reference Ohnesorge2009) has observed that corporate law reform focuses on the development of ‘equity markets as a source of external finance’, assuming that external finance results in successful corporations, when in fact, ‘data from a country like South Korea during rapid development would call that into question' (p. 1632). Moreover, each incidence of mathematisation helps to render the dominant structure of the debate ever more taken-for-granted. As Ben Fine has observed, international financial institutions such as the World Bank frequently take ‘complex issues X and Y’ and ‘imagin[e] that … by combining them … the complexities can be set aside and the issue settled by running a simple econometric model … relating the two’. A clear pattern has emerged such that ‘where X is a policy variable and Y is … a goal’, the policy variable X always relates to ‘stabilisation and structural adjustment, and, more recently, to the rhetoric of poverty alleviation, good governance, country ownership and so on’. He points to a study by a World Bank economist that investigated the possibility of achieving objective Y, the identity of which will ‘be revealed in a moment’. The study explained that to achieve Y would require ‘(i) sound macroeconomic policies, (ii) structural policy reforms and (iii) modifying further the system of incentives faced by individuals’. The prescription of this familiar triad ‘can only come as a surprise to the soft-boiled’. However, ‘even the most cynical will surely be surprised to learn that Y is, in this case, “reversing the spread of the HIV/AIDS epidemics and mitigating its impact”!’ (Fine, Reference Fine, Jomo and Fine2006, xx–xxi).

Finally, it is important to note that an obsession with mathematics risks rendering economics (as well as colonised and collaborating disciplines) useless to the real world. ‘Mathematics is not identical to counting or statistics.’ Indeed, ‘most maths has nothing to do with actual numbers’. Mathematics consists of attempts to prove, deductively ‘why/whether’. Quantification, which is the subject of the following section, consists of attempts to identity, inductively, ‘how much’ (McCloskey, Reference Mccloskey2002, p. 9).Footnote ²⁰ As Deidre McCloskey has observed, each of these activities is an inherently ‘virtuous’ and essential component of any attempt to study the real world:

However, a ‘secret sin’ of economics is that it relies too heavily on ‘qualitative theorems … which look like theorizing’ and appear to involve the same ‘tough math’ that ‘actual theorizing would’, but too often offer nothing but ‘pure thinking, philosophy’ to which no number could ever ‘conceivably be assigned’. The ‘theorizing’ involves repeated amendments to assumptions so that ‘the “results” keep flip-flopping, endlessly, pointlessly’. This excessive mathematisation is worsened by the fact that the theory is not ‘disciplined by any simultaneous inquiry into how much’ (quantification), in particular because of the excessive reliance on the notion of statistical significance, on the subject of which I will say a little more below (McCloskey, Reference Mccloskey2002, pp. 41, 44). The point here is that in order for such mathematisation to have any real-world significance, it needs to be supported by numbers. To the extent that the variables to be measured are inherently qualitative, such as legal systems, they must be numericised. To the extent that something cannot safely be numericised – a possibility explored in the following section – it ought not to be mathematised.

Fire: quantify

A legal fact may be represented by ‘a paragraph of text … a series of striking photographs or a video recording’. Alternatively it might be represented numerically, in the form of an indicator (Davis et al., Reference Davis, Kingsbury and Merry2011, pp. 2–3). The tendency of the investment climate campaign to produce and deploy indicators to evaluate legal systems is a reflection of the empirical commitment of mainstream economics to quantification.

The preference for quantification grew across the social sciences in the 1920s and 1930s as ‘a way of claiming status’. Indeed in those heady days, ‘even the social anthropologists … counted coconuts’. Towards the tail end of the socio-legal heyday of law and development in the 1970s, the SLADE project at Stanford collected ‘a vast amount of social and legal data’ which lay dormant after the Self-Estrangement (Twining, Reference Twining2009, pp. 251–53).Footnote ²¹ But from the beginning and ever after, it was the economists – ‘oh, the economists, how they counted, and still count’ (McCloskey, Reference Mccloskey2002, p. 5).

The economically supercharged decision to take legal quantification Over The Top is rooted in the attempt to marketise public services, and the demand came ‘mainly from outside the scholarly community’ (Twining, Reference Twining2009, pp. 253–54). The 1980s saw an erosion of the belief that the quality of public service could effectively be regulated by a commitment to civic duty and a respect for hierarchy among bureaucrats (Desrosières, Reference Desrosières and Touffut2007, p. 135). The solution was to marketise – to introduce to the public sector the ‘best’ of the private sector. But ‘public policies … do not have available accounting criteria such as “market share” or profitability in order to judge their capacity to satisfy users’ needs, or simply their efficiency'. So, the search was on for indicators ‘that could play a role more or less similar to the cost accounting, operating accounts and balance sheets of commercial firms’ (pp. 123, 135). Writing in 2000, Twining observed that, although ‘nearly all public and private institutions are increasingly part of a “performance culture”, dominated by targets, benchmarks, indicators, and league tables’, there was a ‘relative dearth of regular, systematically compiled statistics about legal phenomena at regional, global, and other supra-national levels’ (Twining, Reference Twining2009, 254–56). Then came the invasion. States and inter-governmental organisations such as the EU and later the World Bank were soon engaged in the ‘construction and negotiation of new equivalence spaces’ and ‘agreeing procedures for the quantification of the means and ends of intervention’ (Desrosières, Reference Desrosières and Touffut2007, p. 135). As ‘a large bureaucracy subject to the accountability techniques of the regulatory state’, the Bank must convince its masters that ‘the shift from hard infrastructure (roads, dams, hospitals and schools) to soft infrastructure (judges, customs officials, legal aid and human rights organisations) is a meaningful one’ (Taylor, Reference Taylor and Linsey2005, p. 10; see also Ginsburg, Reference Ginsburg2000). For example, the Country Assistance Strategies (CAS) in which the Bank identifies areas in which it intends to offer ‘support’ to a given country are, the Bank itself notes, ‘increasingly results-focused’ and include ‘clear targets and indicators’ by which ‘to monitor Bank Group and country performance in achieving stated outcomes’.Footnote ²² For example, the 2001 CAS for India identifies two ‘program priorities’ for World Bank activities in the country, of which the first ‘A: Strengthening the enabling environment for development and growth’, in particular the subsidiary component Strategic Objective A2(c)) ‘competitiveness in industry and services’,Footnote ²³ was the primary outlet for the investment climate campaign.Footnote ²⁴ Under this heading, the Bank assessed India's business environment as ‘unpredictable, discretionary and burdensome’. It proposed to ‘work with selected state governments on deregulation and improvement of the investment climate’ and ‘engage the central government through policy dialogue and advice on reforms that fall within its purview’ – including entry and exit regulations (World Bank, 2001, p. 27 and Annex B9, p. 5). Using a standardised matrix format, the 2001 CAS lists the targets against which its progress on Objective A2(c) can be measured as, among other things, increased FDI, faster clearances and ‘improved feedback on business environment from surveys’ (World Bank, 2001, Annex B9, p. 5). The Bank thereby committed itself directly to measuring FDI levels, clearance times and other aspects of the business environment; and indirectly to measuring its measurement – to measure the extent to which the surveys measure the business environment.

Needless to say, the Bank monitors its own performance in measuring and ‘improving’ the Indian investment climate. The standardised Country Strategy Outcomes Matrix that appear as an annex to every CAS and CAS progress report has on each occasion revealed that measurements have been made, and that investment clearances are faster (see, for example, World Bank, 2004; 2007). The trouble is that the achievement of a target is only as good as (a) the target itself and (b) the method used to measure its achievement. With respect to (a), we should remember that the ‘goodness’ of measurement and of speed per se are open to question in a broader social perspective. With respect to (b), we should bear in mind that, for example, while foreign investment in India has increased substantially since investment climate reforms began, it is impossible to know whether the increase is the result of the reforms; and that it is unclear how much two days faster or slower ‘matters’ in the context of investment clearances.Footnote ²⁵

There is much to commend quantification. It ‘has an inbuilt tendency to homogenise and to simplify’ and in so doing, ‘it facilitates large scale comparisons and generalisations’ (Twining, Reference Twining2009, p. 258). As Arrunada puts it in relation to the Doing Business indicators ‘[s]cience requires measurement’ (2009, p. 2).Footnote ²⁶ Indeed, some ‘important questions can only be answered numerically’, and ‘many other questions are at least helpfully illuminated by numbers’. Many who ‘fear numbers, dislike them, dishonor them’ do so because they are ‘confused and irritated by them’ (McCloskey, Reference Mccloskey2002, pp. 5–6). Such wilful non-believers might well be more than converted by spending but a moment under the truly exhilarating influence of Hans Rosling, in whose hands development statistics are transformed from stern but baffling warnings to instruments of profound enlightenment.Footnote ²⁷ But sometimes scepticism is justified, for quantification can go far too far, becoming ‘a nitwit's, or the Devil's, tool’ (McCloskey, Reference Mccloskey2002, p. 6).Footnote ²⁸

The problem of how to quantify the qualitative – how to integrate the rhetoric of statistics and probability with ‘other means of knowledge and action … has been overcome, not logically … but socially’. That is, ‘people’ have ‘agree[d] to compare the incomparable’ and to treat ‘heterogeneous situations as equivalent for practical ends’ (Desrosières, Reference Desrosières and Touffut2007, p. 117)^.Footnote ²⁹ It is a ‘socially and cognitively creative’ process which occurs in ‘contact zones, or mediation points, between the rhetoric of statistics and other rhetorics’ (pp.119, 122; see also McCloskey, Reference Mccloskey2002, pp. 7–8). First, ‘that which was previously expressed in words’ is numericised. Numericisation ‘(just as one says “dramatization[]”)’ involves the application of ‘conventions’ of ‘equivalence’ which have emerged from a tangle of ‘comparisons, negotiations, compromises, translations, registrations, encodings … and calculations’ (Desrosières, Reference Desrosières and Touffut2007, p. 122). For example, the notion of an ‘investment climate’ evolved out of the discourse among policy-makers regarding good governance and private-sector-led development. That notion was then numericised with reference to conventions as to what equates to governance of foreign investment – for example, cost of contract enforcement as a percentage of the claim amount, number of days and number of procedures. Second, that which has been numericised is measured. For example, in 2009 the cost of such enforcement in India was calculated to be 46 procedures, 1,420 days and 36.9 per cent of the claim (Doing Business website as at 14 July 2010). Investment climate has thereby been quantified – ‘ma[d]e into a number’, had a ‘figure’ ‘put’ on it (Desrosières, Reference Desrosières and Touffut2007, p. 122). Finally, a decision is made as to how much the numbers ‘matter’. For ‘[m]attering is a human matter’ which ‘does not inhere in a number’. Facts do not ‘lie around’ like pebbles. ‘It is our human decision to count or weigh or mix the pebbles in constituting the pebbly facts’ (McCloskey, Reference Mccloskey2002, pp. 7–8, 44, 54). For example, how much would it ‘matter’ if contracts were enforced in 42 procedures instead of 46, or 300 days instead of 1,420, or for 36.7 instead of 36.9 per cent of the value of the claim?Footnote ³⁰ Economists (and other social scientists, medics, and so on) often encase their decisions as to what ‘matters’ in the terminology of ‘statistical significance’. A detailed exploration of the problems posed by statistical significance is beyond the scope of this article. Suffice it to say that the decision as to when a number is to be regarded as ‘significant’ is just that: a decision.

The methodology underlying legal indicators has been contested from the beginning by individuals (see Perry-Kessaris Reference Perry-Kessaris2003a; Reference Perry-Kessaris2008a; Davis, Reference Davis2004; Taylor, Reference Taylor and Linsey2005; Arrunada, Reference Arrunada2009), by the Bank's own Independent Evaluation Group (2008), by members of an international society of Francophile lawyers and by members of the French judiciary (see Kerhuel and Fauvarque-Casson, Reference Kerhuel and Fauvarque-casson2009, p. 817) to name but a few.Footnote ³¹ But to no avail, it seems, since the indicators continue to exhibit a ‘striking’, lack of ‘sophistication’ (Twining, Reference Twining2009, p. 6). There is no doubt that a ‘price’ is paid for the ‘conversion from words to numbers’ (Desrosières, Reference Desrosières and Touffut2007, p. 123). Quantification takes forward the process of metaphoricisation that begins with mathematisation. It serves to ‘constrain, reduce and delimit the space of possible interpretations of the world’, and simultaneously ‘reconfigures the world, creating new objects that enter human social circulation’ (p. 121). Indicators ‘tend to become “reality” by an irreversible “ratchet effect”’ by which the ‘conventions’ behind the numericisation ‘are forgotten’ and the ‘quantified object’ (indicator) is naturalized' (p. 122). These ‘objects’ are both ‘resistan[t] to criticism’ and capable of encouraging social cohesion ‘by encouraging (and sometimes forcing)’ people to use them in favour of ‘some other language’ (p. 123). For example, very little attention is paid to the standard error of indicators – that is: To what extent do these indicators corroborate each other, and are we sure that if we conducted the surveys again we would get the same result? One set of indicators about which we do have some such information is the World Bank's Governance indicators. As I have shown elsewhere, and as the producers themselves note, the numbers are not at all reassuring (Perry-Kessaris, Reference Perry-Kessaris2003a, pp. 13–14). Yet these empirical missiles are regularly used by the Bank and others to determine just about anything from who should get aid, to whether China was a suitable venue for the Olympics– just Google it and see.

It is, therefore, reassuring and significant in equal measure that in July 2010, the vice-presidents of the World Bank endorsed the development of a new Oversight Process for Ranking Indicators. A document outlining the Process was duly circulated in November of the same year, against the following ‘background’:

Under this new ‘corporate framework for oversight and quality control’ any ‘new products and associated indicators’ are to be reviewed in a five-stage procedure. Furthermore, any existing ‘products’ which have not undergone ‘extensive external and internal evaluations processes’ may be also be reviewed (World Bank, 29 November 2010).Footnote ³² Time will tell what impact this laudable attempt at quality control will have on the volume and nature of indicators produced by the Bank.