Configuring Financial Markets

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Please cite the paper as:
Ken Zimmerman, (2012), Configuring Financial Markets, World Economics Association (WEA) Conferences, No. 3 2012, Rethinking Financial Markets, 1st November to 31st December, 2012

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We are caught between those who celebrate financial markets and calculative agents and those who denounce them. Many economists are in the former camp; many social scientists in the latter. This paper begins with a conclusion: “a pox on both your houses.” Financial markets and calculative agents are not natural, as that term is generally applied. And they certainly are not just human creations or embedded in society. Financial markets and calculative agents exist because they are formatted and constructed (performed, to use Callon’s term) in the ongoing interactions by which all collective existence (all living together) is made. Financial markets and agents are very real but for reasons that have been seldom examined or even talked about. Callon contends that primarily disciplinary economics produces markets and the calculative agents that inhabit them.

That is one of the things I will consider in this paper. But I will also follow Callon’s advice to “…explore the diversity of calculative agencies forms and distributions, and hence of organized markets. … [the market] is a many-sided, diversified, evolving device which the social sciences as well as the actors themselves contribute to reconfigure.” The central question is how are calculative agencies equipped, by economics and otherwise to carry out their calculations and thus establish the markets we see every day?

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1 response

  • Aaron Pitluck says:

    Dr. Zimmerman,

    Thank you for contributing an interesting paper. I don’t really have a comment, but I do have two questions that may help readers such as myself understand your paper in the context of this conference.

    The first four pages focus on the argument that economic theory has had a large influence on the way that financial markets function. What then are the implications of your argument for the regulation of financial markets? Are you simply arguing that economic theory has contributed to the building of financial markets (p.1) and therefore, since we have experienced a crisis, we should be looking to financial economists to repair the damage? Or are you arguing that we should turn to the practitioners who have ‘translated’ these economic theories? Or am I altogether mistaking the implications of your paper for this conference’s theme of regulatory reform?

    Secondly, pages 4-6 make a clear-cut argument that the material taught in business schools is much to blame. Although I do not have any personal experience as either a teacher or student in a business school, nevertheless I suspect you are overstating the influence that higher education could have on business practices. Imagine the counter-factual. Imagine that we could radically reform business school education to include business ethics—something that many business schools have done since 2008—and then take a large step further and reframe all of the school’s course content to emphasize social capitalism and the ideas of this conference’s problematique. I suspect that the rewards of such monumental effort would be rather slim; on-the-job training in corporations, inter-firm market competition, and organizational hysteresis would mean that corporations would continue to behave more or less the same as before. Note that I am NOT claiming that social change is impossible; rather, I am suggesting that corporate behavior is structured less by two years of higher education in management and more by market and institutional rules (e.g., see Neil Fligstein, 2001, The architecture of markets : an economic sociology of twenty-first-century capitalist societies, Princeton University Press).

    On the other hand, some nice corroboration of your anti-MBA argument is Karen Ho’s (2009) Liquidated (Duke U Press)which would add to your list the importance of organizational culture in investment banks and the cultural attitudes created by investment banks’ recruitment practices.