The MPIfG’s Research Program
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The mostly macro-oriented research perspective on growth models finds a more micro-oriented counterpart in the Institute with the research in the sociology of markets cluster. The endemic instability of capitalism emerges also from capitalists’ continuous drive into uncharted territory, a drive institutionalized through the mechanisms of economic and social competition, and the profit orientation of economic decision-making. Furthermore, motivated by social status competition and the marketing efforts of companies, consumers strive for new consumer experiences, thus opening the space and the demand for a seemingly unending stream of new products. The fundamental uncertainty underlying capitalist economies moves increasingly into the focus of research as a driver and underlying condition of destabilization.
In recent years, the MPIfG has contributed to the understanding of the role of perceptions of the future, focusing on the expectations of actors as a crucial driver and coping mechanism of capitalist dynamics. Contrary to the dominant understanding in macroeconomics, expectations are not seen as determined by information from the past, but rather as based on contingent imaginaries of future outcomes. “Fictional expectations” shape capitalist dynamics if actors assign credibility to particular perceptions of the future and base their decisions on these perceptions. Given the uncertainty of the future and its malleability, fictional expectations can at the same time provide orientation for decisions and thus reduce uncertainty, as they can increase uncertainty through the enlargement of the realm of imagined possible outcomes. Looked at from this perspective, the instability of capitalism emerges from its inherent future orientation combined with the indeterminacy of that future.
When investigated in detail, the importance of imagined futures can be detected in any realm of economic decision-making and policy-making. It holds for investments that need to be based on assessments of future profitability, for innovations where R&D departments and investors must envision the technological and market feasibility of projected new products, and even for the use of fiat money whose value depends on the expectation that it can be used in future purchases to obtain valuable products for it. Decisions on human capital formation depend in part on imaginaries of future career opportunities. The value of financial products – be they bonds, stocks, or derivatives – depends on assessments of future performance, including the assessment of expectations of other market participants. Understanding the processes of formation of expectations and the change in expectations is highly relevant to understanding macroeconomic processes of innovation, economic growth, consumer demand, speculative bubbles, monetary stability, and economic crises. Research on future expectations also connects to studies on technology, since expected technological advances feature prominently among the imagined futures of economic actors.
In addition, technologies of prospection like forecasting, scenario analysis, or capital budgeting are important anchors for the formation of the narratives on which expectations are based. The perspective is equally relevant for the understanding of policy processes, where political decisions find legitimacy in promised outcomes of policy decisions and stumble into crisis if the expectations raised become disappointed. The current political situation can be interpreted as one in which the imagined futures of neoliberal reforms have been exhausted, not least because of the social inequalities they produced. Putting expectations front and center of an analysis of capitalist dynamics contributes to understanding the eternal processes of change that are experienced as instability but also underwrite the great stability of the system itself. Capitalism can incorporate any imaginary that promises future profits. It is in normative and in substantive terms unassuming and thus particularly flexible.
While the cornerstones of this theory of expectations and its relevance for capitalist dynamics have been laid out, future research at the Institute will continue to engage this perspective in the investigation of important empirical phenomena of contemporary capitalism and strive to make further theoretical enhancements. This holds, for instance, for the question of the sources and conditions of credibility of particular expectations, the relationship between expectations and past experiences and between expectations and institutions, as well as the change in expectations in crisis situations. Empirically, research projects investigate, for instance, the role of future expectations in economic policy decisions and the significance of calculative tools designed to create images of the future used in the decision-making of businesses. The Institute will also direct its efforts towards making the work on expectations fruitful for the understanding of dominant growth models and their stability and change.
In addition, the Institute will develop a new research field on wealth and wealth inequality that connects to work already done on bequests and estate taxation. The flip side of the demand deficit due to the distributional shift away from labor income towards capital income is a condition of capital abundance. This finds expression in the large increases in investable savings at the top of the wealth distribution and swelling levels of wealth inequality. The accumulation of wealth and the growing disconnect between saving (which increases) and investment (which becomes rarer) is one of the determinants of secular stagnation and of the instability of growth.