Judging whether markets conform to a model is itself a contested process.

Evidence

Because of the complexities of econometric testing, the extent of the “fit” between a theoretical model and patterns of prices cannot be determined by simple inspection. “There just isn’t any easy way to test a theory,” said Fischer Black (1982, p. 32). Knowledge of whether patterns of prices have moved toward greater conformity with a theory is the outcome of a difficult, and often a contested, process. It is therefore tempting to set the issue aside, and to abandon the strongest meanings of performativity (Barnesian performativity and counterperformativity). However, to do that would involve also abandoning a central question: Has finance theory helped to create the world it posited for example, a world that has been altered to conform better to the theory’s initially unrealistic assumptions? — Donald MacKenzie, An Engine, Not a Camera, 114

Categorization

• DEFINE: Introduces Barnesian performativity and counterperformativity as the strongest, hardest-to-test senses of performativity.
• XREF: The empirical difficulty of confirming Barnesian performativity echoes the circularity problem in testing CAPM and market efficiency raised two paragraphs earlier. — connects to: Using a model can make markets conform less well to it. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 92; A market model can shape markets actively rather than merely describing them — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1165; Market conditions moved toward the model’s assumptions partly because of the model itself — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1155 (+6 more)

Broader Connections

• A market model can shape markets actively rather than merely describing them #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 1165
• Market conditions moved toward the model’s assumptions partly because of the model itself #complicates (0.80) — Donald MacKenzie, An Engine, Not a Camera, 1155
• Competing schools within the MPS hold irreconcilable definitions of the market #exemplifies (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 149
• Neoliberals disagree sharply among themselves about what a market is #exemplifies (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 151
• The model’s assumptions became more realistic as markets restructured around it #exemplifies (0.72) — Donald MacKenzie, An Engine, Not a Camera, 741
• The market is an inescapable belief-structure one cannot step outside #complicates (0.72) — Fredric Jameson, Postmodernism, or, The Cultural Logic…, 483
• Economic models resist testing because agents self-select into treatments #responds-to (0.70) — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1935
• Markets carry explicit traces of the specific pricing models they use #complicates (0.70) — Donald MacKenzie, An Engine, Not a Camera, 899