Pragmatist like Charles Peirce and William James to knowledge to be beliefs that had cash value – ie, that you would be willing to act upon. Last week, account-holders in Britain’s fifth largest mortgage lender, Northern Rock, brought to light a perverse way of looking at the Peirce-James definition of knowledge by acting on beliefs that had no-cash value, thus triggering the first bank run in Britain since 1866. This got me thinking of the relationship between individual and collective confidence, and by implication, on the relationship between knowledge individually held and knowledge collectively held. Money, for example – the stuff of bank runs – expresses a fiduciary relationship between citizens and the state. I know what I can currently buy for a pound sterling even though this knowledge ultimately depends in some mysterious way on what I believe I can buy for a pound sterling. Confused? There is worse to come. What I can buy for a pound sterling also depends on what you believe I can buy for a pound sterling, and on what your neighbour believes I can buy for that sum, and on what your neighbour’s neighbour believes, so on. In a sense, then, knowing exactly what I have when I have a hundred pounds in my account – knowledge that I will act upon when I sign my next credit card slip – is dependent on a complex web of beliefs that link me up with the whole British social fabric as well as a number of Pushtun Tribesmen lost in the mountains of Waziristan whose minds is currently focused on poundings more than on pounds.
We are, of course, dealing here with the difference between the real and the nominal economy. In the real economy, when I buy a chair to sit one, as the purchaser, I am the only point of reference needed to judge whether the chair is strong enough to carry my weight. You may not believe that it will carry my weight, but this will not in itself alter the load-bearing disposition of the chair. My own belief on the matter may not be justified, but again, this will not alter the properties of the chair. How different the nominal economy in which what you believe constrains what I can legitimately believe. As Keynes once pointed out, those who make money in stock markets are not those who have some detached knowledge of whether prices will rise or fall in some abstract universe of their own making, but rather those who sense whether you will believe that prices will rise or fall and will act accordingly.
Should we treat the nominal economy as suis generis? I think not. Consider some other situations in which your beliefs are conditioned by the beliefs of those you interact with.
In all the above cases, the confidence with which a belief is held – and hence acted upon – depends on how collectively it is held. And as last week’s bank run on Northern Rock demonstrated, confidence is a fragile thing delicately perched at the edge of chaos, but no less real in its effects for that.
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