I define the Econosphere sociologically. My definition of the Econoshere is simple: The Econosphere is an exclusive society made up of finance and economics people who believe that their society is the only society that exists, and are oblivious to the other universes, (such as societies) around them. The Econosphere has a social order that cannot be challenged or upset at any cost.
Noah Smith describes “derp” as the insistence on holding a set of beliefs in light on contradictory evidence. In the field of Economics, the primary defense of maintaining social order in the Econosphere is the herping of derp. Derp did not originate from the Econosphere, but the Econosphere “herps” a lot of derp. It does so mainly in an effort to reject ideas of the existence of alien life – or life outside of itself.
Inside their universe, there may be more micro-levels of organic society, but that organic society with its functions only effects the Econosphere, since that’s the only society that exists.
This is not to suggest that ALL economists and finance people only realize the Econosphere. That’s not true. There are plenty of (mostly younger) economists who are questioning if there is truly life outside of their planet, which is a paradigm shift from the field of Economics from 1870 to present. Such people risk having burning effigies of Marx on their front lawns. Like Yuri Gagarin however, they are proud, and noble explorers of the universe outside of the grasp of the Econosphere.
My favorite (and most personally loathed) example of the Econosphere is from Intro to Microeconomics: the Labor versus Leisure model.
The theory goes that as wages go up, labor will constrain its quantity, and instead chose leisure activities over labor. In other words, higher wages mean that everyone goes on vacation more often (Whoo Hoo!). If the demand for labor goes up when everyone is on vacation, then wages will go up just enough to entice labor to provide more quantity. In other words, offer labor enough money without breaking the bank, and they’ll come back to work (Whoo Hoo!) If the demand for goes down, then wages will decrease to get everyone off their lazy bums to come back to work, because they’re all drinking Margaritas in Tahiti with the wages that they don’t have (Awww).
All of this is within an indifference curve, and is a simplified version of course, but that’s the gist of labor microeconomics, as a pure example of Econosphere thinking.
This version of reality only exists in the Econosphere, because when you look at whether or not this exists in other worlds (say, the social world), it’s a flerp of derp. Other than there is no empirical data in the real, social world to support this idea, it has been the paradigm for labor economics for some time. This is why economists today are scratching their loins trying to figure out why wages aren’t going up in a higher labor market demand (let’s forget about how labor demand is measured is flawed for a moment). This is also why many economists think that unemployed workers are drinking Margaritas on a beach somewhere with no wages.
This is an example of Econoshere and it’s relationship with derp. It’s the “representative agent” problem. A banker deciding to hit the beach because he/she has so much money that they don’t have to work is not the same as the fast-food worker who is just trying to survive. Yet they are often treated the same. In the Econosphere, there is no social world with its institutions and social forces influencing decisions in everyday life. There is no class, status, or power. There are no screaming kids that need food or daycare from their working parents. Markets always clear “efficiently,” even if it’s not “justly.”
Heck! In the Econosphere, time and space doesn’t even exist! All economic exchanges happen instantly! The Econosphere doesn’t even have space! The market is this magical place where everything happens as it should. The commodities market in North Dakota is in exactly the same space as the commodities market in Illinois.
The mere suggestion that there is a social history, that culture plays a role in decision making, that a laborer is an agent for the well-being of their entire household, or that children cannot chose to be born into a family that is allowed to be lazy beach-bums with Margarita-sipping parents, and you’re a Philistine! A Heretic! Burn in the center of the Econosphere Square, you Heterodox Thinker!
What firm wouldn’t consider the cost of production BEFORE they go into debt to produce if they want to stay in business? Yet even the suggestion that prices are pre-determined by firms BEFORE production begins and you get evicted from the Econonosphere into the Leper Colony of Thorstein Veblen.
While the Econoshere does not seem to realize that life exists outside of their world, the rest of the universe knows that the Econosphere exists, as was shown by the Great Recession. Not much in the social world seems to effect those within the Econosphere (their troubles are basically of their own making), however, the Econosphere effects everything else; and many times, those living within the Econosphere don’t even realize what they’ve done (or are doing) to the rest of the universe.
The Econonopshere even has its own magic fairies; mythology and “gods,” named “Market Forces.” Market Forces are this magical effect on its organic society that no one can explain, and are a scapegoat for anything that doesn’t compute in their world. When markets crash, it’s the god of Market Forces smiting the irrational actions of Hedge Funds, the Fed, or bubbles (Market Forces! You Mighty Smiter, you!). When the market booms, it’s the god of Market Forces rewarding diligence, rationality, and good math.
The Econosphere has an idol, a symbol for this magic fairy of Market Forces, just as the Ancient Mayans and Christians had idols & symbols. The main idol for the magic fairy of Market Forces is this:
Nothing is “man made” (as Stiglitz suggests) in the Econosphere. The god of Market Forces created the market (and in less than 7 days, making it more efficient than God!) No man-made stuff there! All the institutions of the Econosphere (the Fed, banks, hedge funds, regulators, etc) were also created by magic fairies. There’s a social order in the Econosphere that includes a place in the hierarchy for magic fairies named “Market Forces.”
So my theory is that the Econonosphere herps mega-flerps of derp in order to maintain their world view and their social order. Anything else would be revolution!