Using a model can make markets conform less well to it.

Evidence

The strong, Barnesian sense of “performativity,” in which the use of a model (or some other aspect of economics) makes it “more true,” raises the possibility of its converse: that the effect of the practical use of a theory or model may be to alter economic processes so that they conform less well to the theory or model. Let me call this possibility which is not explicit in Gallon’s work “counterperformativity.” An aspect of economics is being used in “realworld” processes, and the use is having effects, but among those effects is that economic processes are being altered in such a way that the empirical accuracy of the aspect of economics in question is undermined. — Donald MacKenzie, An Engine, Not a Camera, 92

Categorization

• DEFINE: Defines counterperformativity — the converse of Barnesian performativity and a central analytical tool of the book.
• SEED: Counterperformativity could anchor an essay on how trading models containing self-defeating dynamics (e.g. crowding) erode their own validity.
• XREF: connects to: Market efficiency fails once attention becomes scarce, requiring corrective intervention — Yves Citton, The Ecology of Attention, 177; The Black-Scholes model gained market traction slowly, not through instant self-fulfilling prophecy. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 111; Observing economics used in markets does not prove it shapes them. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 88 (+14 more)

Broader Connections

• A market model can shape markets actively rather than merely describing them #expands (0.95) — Donald MacKenzie, An Engine, Not a Camera, 1165
• Market conditions moved toward the model’s assumptions partly because of the model itself #exemplifies (0.92) — Donald MacKenzie, An Engine, Not a Camera, 1155
• A model’s own applications can undermine its descriptive accuracy #contradicts (0.92) — Donald MacKenzie, An Engine, Not a Camera, 151
• Traders arbitraging model discrepancies directly improved the model’s econometric test results #exemplifies (0.90) — Donald MacKenzie, An Engine, Not a Camera, 146
• Market actions based on efficient-market models can create anomalies those models cannot explain #exemplifies (0.88) — Donald MacKenzie, An Engine, Not a Camera, 1166
• The model’s assumptions became more realistic as markets restructured around it #contradicts (0.85) — Donald MacKenzie, An Engine, Not a Camera, 741
• Judging whether markets conform to a model is itself a contested process. #expands (0.72) — Donald MacKenzie, An Engine, Not a Camera, 114