This is an ambitious book, whose objective is to revamp economics, particularly in terms of how markets function. The target is ‘mechanical’ economics, which views individuals as rational automatons with no agency or consciousness, and equilibrium as a necessary and sufficient condition to understand their interactions. Markets are modelled as machines, responding systematically when levers are pulled.  The claim is that this is a flawed worldview, which leads to frequent financial crises and many other dysfunctions, as a result of the application of flawed investment strategies and regulatory oversight.

Schotanus argues that these failings arise because orthodox economics ignores the reality of consciousness in markets. Specifically, it avoids the mind/body problem, a central issue in philosophy ‘s history.  Financial practitioners often talk of markets having human characteristics – they are bullish, bearish, skittish, or in some other emotional state. The book’s main argument is that this is not a way of speaking, but a reality: markets are conscious entities.  The Market Mind Hypothesis (MMH) is that markets are conscious in the same way that human are conscious, hence the claim that “markets are minds and minds are markets”. Economic concepts can be practically applied to minds, and cognitive concepts can be applied to markets. For example, Schotanus sees markets as collective entities which are conscious under normal circumstances of price discovery, but in periods of illiquidity, when price discovery is suspended, they are comparable to the human brain in a vegetative state.

This may seem absurd, but it is not. The extension of consciousness, or very basic consciousness, beyond humans to animals, elementary particles (as in panpsychism), artificial intelligence or even the universe itself are all features of mainstream contemporary academic research, albeit highly contested features. Schotanus is not alone and calls on an extraordinary breadth of sources. The roots of the project are most evident in two areas, the philosophy of mind and cognitive science, in particular the ‘extended mind’ thesis. This asserts that minds do not reside exclusively in the brain or bodies but extend into the physical world. As a result, the mind encompasses objects in the external world which store information, such as a diary, a calculator or a Bloomberg terminal. Schotanus pushes the boundary of the mind and consciousness out further, to incorporate markets.  Of course, the view that markets can be viewed as natural self-organising entities is well-established in economics.  An important further claim in the book is that a full understanding of markets requires restoring agency to individuals, a more explicit treatment of mental causation of individual behaviour and the way that thoughts and beliefs alter the world and market behaviour itself, all of which support the market as a conscious entity.

Does the project succeed? The book cites glowing reviews from the glitterati, so my position outlined below is a minority one. I am sympathetic to some of its arguments but have the following concerns.  It’s a very hard book to read. I have postgraduate qualifications in economics, finance and philosophy, and a few decades under my belt as a market practitioner, so at least some of the subject matter is familiar to me. Nevertheless, it took several weeks to do the book justice, because it was a persistent struggle to follow the main argument. In many paragraphs, I wanted to challenge every sentence. Perhaps there are legitimate responses to the challenges, but more stylistic discipline from the author would have helped.

Here are a couple of examples where I struggled:  “…portfolioism also views the universe itself as a portfolio. Like economics’ traditional market portfolio, this ‘universal’ portfolio contains all assets but cannot be fully observed. So God is the ultimate Mr. Market or Mr. Universe managing (some would say passively) what was created in his market portfolio”. Fans of speculative metaphysics will love this, but pragmatists may view it as speculative nonsense and a distraction. Consider also the quote from Daniel Loeb, who stated that “Bridging the crypto world with the old is akin to finding a portal…between two distinct worlds in the multiverse”. Really? How on earth would we know? How does this help us understand whether bitcoin is a good investment. The book is saturated with claims of this nature, and they detract from the overall clarity.

At the core of the book is an analogical argument: markets and minds are similar, and we can better understand one on the basis of another. Arguments from analogy can be compelling and are often used in science. However, they can also be an obstacle to successful research programmes.  As Nelson Goodman observed, if you look hard enough then everything is similar to everything else, sometimes rendering the concept meaningless on application. When superficially robust analogies are in fact flawed, they obstruct successful research programmes. A recent example has been the intellectual resources devoted to establishing that the brain is like a computer – but it isn’t, and these resources were largely wasted.

For all the formidable intellectual resources Schotanus draws on, I am unpersuaded that minds really are like markets and vice versa in ways that help us significantly to advance our understanding of either. An important issue is that for all the progress made in cognitive science, the philosophical challenges associated with the mind/body problem remain material. We do not understand markets perfectly, but I suspect that we understand them better than we do the mind and consciousness (even allowing for advances in cognitive science), so the MMH seeks to explain the partially-known with a more fundamental mystery. Schotanus helpfully provides a list of research questions which he argues the MMH can resolve. If these prove empirically successful, the author’s contentions become more plausible. However, it was unclear to me how many of them were specific tests of the MMH hypothesis rather than interesting questions in their own right, and what progress has been made to date.

I also found it problematic that some authors are wrongly cited as supporting the central thesis or ignored. Take, for example, Schiller’s research suggesting that investor narratives drive markets, which is drawn on as a support for the MMH. However, Shiller’s conclusion is not that markets are conscious entities, rather that these narratives should be quantified to enhance the more orthodox financial frameworks which Schotanus abhors. Moreover, the targeting of ‘mechanical’ economics is an over-simplification. There is much more to economics than what Robert Lucas thinks, and by ignoring it Schotanus is pushed into highly speculative territory, when less contentious resources can be drawn on. For example, a central feature of the book is how markets disseminate information, so it is surprising that there is no mention of Stiglitz’s views, which I suspect do not align with the book’s main themes.  There is also no mention, for example, of John Davis and others’ work on the individual in economics, which takes a critical view of the orthodox stance, without appealing to consciousness. Similarly, Margaret Morrison’s work on how economic theory shapes economies makes no reference to collective market consciousness, and neither does Guala’s and others’ work on performativity.

I am intrigued as to what direction this project will take in the future but would guess that the challenges lying ahead are considerable.