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The South Atlantic Quarterly1112, Spring 2012

10.1215/00382876-1548221 2012 Duke University Press

True vision is the art of seeing the invisible.

Jonathan Swift

Few phenomena have visibly destabilized the USeconomy like the 2008 credit crisis, which threat-

ened a battery of economic agentsfrom banks

such as the late Bear Stearns to individual mort-

gage borrowers. As Ben Bernanke, chair of the

US Federal Reserve, has observed, the circulatory

processes that motivate the credit markets hadbecome paralyzed due to the evaporation of what

the financial community refers to as liquidity.Liquidity is more than a memorable metaphor forthe fluidity of capital. It is financial shorthand for

assessing the markets capacity to circulate capi-

talthis circulatory pump being a distinguish-

ing feature of capitalism and also its lifeblood.

The stilled heart of the liquidity crisis was that

financial institutions, fearing their counterparties

might be covertly insolvent, were hoarding rather

than circulating capital, even as the accumulation

of delinquent loans eroded their capital positions.

The result was a pernicious cycle that erased vir-

tually all available credit. The disappearance of

liquidity determined that the buying and selling

of the assortment of securities that animates the

Edward LiPuma and Benjamin Lee

A Social Approach to theFinancial Derivatives Markets


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290The South Atlantic Quarterly Spring 2012

flows of capital through the economy had ground to a halt. The systemic

peril was that the Euro-American financial system would collapse, threaten-

ing a global depression, which in turn would almost certainly foment politi-cal unrest. The situation was so grave that the Federal Reserve and the US

Treasury, in an uneasy alliance with European monetary authorities, began

to implement what would turn out to be a succession of rescue plans and

bailouts in an effort to avert economic cataclysm.

The seemingly impossible volatility of the financial markets and theirnear implosion resonated across the complicated space where the science

of the market and the markets use of science cohabit. The crisis laid bare

the underlying and underappreciated foundations of the financial field,

calling into question the formal model of markets that many academics had

canonized as settled science and most practitioners had taken to be the only

approved operational paradigm. The history of science reports that this is

not the first time that impossible events have undermined an established

paradigm, even as that history confirms that adherents never see, let alone

anticipate, the gathering storm. Systemic crises have their own logic: they

allow theorizations once excluded from the main conversation to enter the

common roomin this case, a kind of collective permission to entertain

a more social approach. Especially as neoclassical economics and Marxismhave usually elided the field of finance and the sphere of circulation, the

critical question is, what would a social approach to finance look like?

With this objective in mind, our aim is twofold: to lay out the topogra-

phy of what we see as the embedded problems that underlie an attempt to

theorize and thematize the global financial markets, and to suggest a course

of understanding nurtured by theoretical traditions usually excluded from

the discussion, let alone commingled in ways that disregard disciplinaryborders. This requires that we animate a conversation among theorists,

such as Pierre Bourdieu, Frank Knight, Max Weber, John von Neumann,

Andrei Kolmogorov, and others who have resided on isolated islands of

social science. Similarly, we seek to deanalytify the space of understanding

by aggregating phenomena, exemplified by ritual, play, and work, whose

analysis has been predicated on their separation. Our hope is that outlining

such an approach will serve as a catalyst in the development of an analysis

of finance that honors the complex socialities inherent in the ascent of cir-

culatory capitalism.


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LiPuma and Lee A Social Approach to the Financial Derivatives Markets 291

The Financial Crisis

The crisis part of the narrative is as clear and as brutal as the foreclosure

signs on neighborhood homes, the ascending unemployment rate led by

layoffs in the housing and financial sectors, and the governments costly

rescue of finance institutions, government-sponsored agencies (i.e., the

Federal Home Loan Corporation), and automotive companies. Many in

the financial community are educated and literate, and as the threat of sys-

temic implosion subsided, there appeared a stream of news articles, tele-

vision shows, and books seeking to autopsy the crisis. These first respond-

ers probed the genesis of the troubled instruments, especially collateralized

debt obligations (CDO) and credit default swaps (CDS). Analysts examinedthe governments role in first assuming a laissez-faire regulatory posture

and then stepping in with a gargantuan bailout. The accommodative mone-

tary policies of the Federal Reserve during Alan Greenspans regime and

the economic model on which the Fed was based were dissected at length.

Such narratives were complemented by big-picture accounts o how the

events leading up to the TARP (Troubled Asset Relief Program) unfoldedand by smaller reflections that chronicled the extinction of the legendary

institutions of Bear Stearns, Lehman Brothers, and Merrill Lynch.

On the technical front, there were attempts to discern how the credit

markets surrendered their liquidity and why the mathematically delineated

econometric models engineered to depict and predict the behavior of these

credit markets failed. A thematic and theoretic connectivity marks all

these accounts. Thematically, the common riff is how greed set loose in an

unregulated shadow banking system motivated increasingly by reckless

speculation led to the crisis and the bailout. Theoretically, these commen-

taries presuppose a social they do not account for, framing their accounts as

teleologies of the immediate visible present. The narratives relate the immedi-ate presentation of events and personalities, recounting through vignettes

how the escalation of greed-driven deals in a permissive environment led

us to the precipice.

What these and economistic analyses bracket is the invisible socialitythat shapes the Euro-American financial system. Against this asocial stand-

point, we would submit that it is impossible to grasp the financial system

and the crisis it engendered without grasping this sociality. The inverted

frame of this query is why we believe that the economic prevails over othervenues of sociality to the point of eclipsing them. The dominant under-

standing here is that what is economic is so godly powerful that it over-


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rides other considerations, so that analysis can theorize and model the eco-

nomic independent of other dimensions of social life. Family, country, the

construction of ones subjectivity, institutional position, and peer groupstandingall contributors to what we have referred to as the socialare,

on this view, exogenous and subordinate to the economic. However natu-

ral this may now seem, the eclipse of the social was not always the ortho-

dox economic view, and in calling for a reconsideration of the social we are

not alone. Gillian Tett, who covers global markets for the Financial Times,observes in her epilogue to Fools Goldthat the finance worlds lack o inter-est in social matters cuts to the very heart of what has gone wrong and

that the path to a deeper understanding entails rethinking the culture of

finance. Tett concludes that the crisis stemmed not only from techni-

cal factors but also from a failure to see that the economic is intrinsically

embedded in the social. We concur with her diagnosis and attempt here

to thematize and theorize how we might frame an analysis of finance that

addresses its sociality.

From a social approach, the guiding thesis is that the reality pro-

duced by, and productive of, the social constitutes the foundation for the

production of financial markets, including the derivatives market. What

this means is that the circulation of financial instruments by agents andinstitutions rests on sociohistorically created concepts, embodied dispo-

sitions and classifications, generative schemes, layered motivations, deep-

seated compulsions, and strategies of subjectivity: what we call the cultures

of circulation. Here we speak of the evolving culture of financial circula-

tion that has taken shape since the early 1970s. This culture is realized in

the increasingly global idea of financial markets and financial practices

exemplified by and embodied in a regime of workthat define these mar-kets and assign them with specific trajectories. Most remarkably, there is

a directional dynamic toward the fabrication of a regime o labor/work

founded on the use of derivatives to make increasingly speculative wagers

in a relentless quest to generate profits outside the sphere of production.

In our view, a social approach would grasp derivatives markets as the

product of the interrelationship between three realizations of the trajec-

tory of the post-1973 financial field: the sociality embodied in the agents

that work within that financial field, the sociality embodied in institutions,

and the sociality implicit, inherent, and buried in the structure of finan-

cial practices. These socialities are inscribed institutionally in competitionsfor status, conceptions of work and play, secular initiation rites, senses of

belonging and self-identity, ideas of fairness and just compensation, quasi-


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formed schemes for balancing ones life plan based on a career in finance

with familial attachments, notions of public/government service and phi-

lanthropy, and schemes for the construction of agents subjectivity basedon monetary acquisitiveness. Paradoxically, for financial agents and institu-

tions, the more successful the inculcation of the financial habitus and the

more those agents share a common ensemble of standpoints, generative

schemes, and dispositions, the more the social is obscured from their field

of vision. Thus our intention is to clarify why the more socially embeddeda financial practice is, the less social it appears for those invested in it.

At issue is what kind of social is it that does not appear as such from an

insiders perspective?

Sciencemore precisely, the scientization of modern financeis

implicated in the process of rendering the social invisible in a specific self-

valorizing manner. Finances creation of a financial field that does not

appear to be social begins unexpectedly, with the axiomization of expected

utility in John von Neumann and Oskar Morgensterns Theory of Gamesand Economic Behavior. Casting aside its social limitations, which vonNeumann and Morgenstern underline in passages bracketed in the subse-

quent canonization of expected utility, a succession of finance economists

have used von Neumann and Morgensterns treatise as the foundation forportfolio theory, which assumes that we can analyze the behavior of any

ensemble of assets (say, a portfolio composed of credit default swaps, debt

obligations, and gold) independent of the social. To override the possi-

bility of social differenceagents might value/price the same asset(s) dif-

ferently based on social considerations, especially the trustworthiness of

their counterpartyportfolio theory universalized the expected utility-

driven market through the installation of a formal supposition of arbi-trage, which decreed that no asset can simultaneously have two prices/

values. The price of any asset and therefore of any ensemble (portfolio) of

assets exists independent of the counterparties, of a markets embedded-

ness in the global political economy, or even of vacillations of supply and

demandmeaning that markets are inherently liquid and thus immune

to systemic risk. Finances most cherished constructsfrom the effi-

cient market thesis and the methodology for calculating portfolio risk to

the pricing of assets (capital asset pricing model) and derivatives (a Black-

Scholesbased pricing formula)so deeply rely on the nonarbitrage stipu-

lation that textbooks in finance refer to it as the fundamental theorem offinance.

Grasping the markets sociality is sufficiently complicated that eco-


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nomic and financial accounts have ignored the issue, offering instead a for-

mula that conceals a supposition of asociality under the apparent neutrality

of a straightforward empirical definition. The standard narrative definesthe market by what it does: it is an institution in which some aggregation

of rational agents engages in transactions that define an assets price. The

formulation, which simply means that buying and selling a thing sets its

price, depicts one effect of peoples action when they make a market. How-

ever, behind the curtain of what can be expressed in the object language ofordinary experience lie several theoretical problems that the empirically

defined, descriptivist formulation cannot begin to address. The problems

are so difficult and multidimensional that the path o least resistance is to

ignore them, leading to the observation by Douglas North that economic

journals are replete with analyses of market behavior, but not of the market

itself: the construct these analyses presuppose. North says this omission

is peculiar; we think it is necessary and motivatedas is the literatures

omission of any analysis of the work that makes markets happen. But first

we take the problems generated by the inevitable, unavoidable tensions and

friction that characterize the production of complex social entities such

as the marketentities that seek to integrate different forms of sociality,

originating at different levels of abstraction. The assumption that the prob-lems do not exist or cannot be addressed because they are mathematically

intractable will no longer holdthat is the price for conceptualizing the

market.

So, where does a market come from? How is it produced and repro-

duced? Answering these questions is essential because markets are social

inventions and because financial actions take place within a frame of their

own design. The speculative wagers that roiled the financial markets couldnever have been created, consecrated, and circulated without a specialized

structurethat is, a real social entity that enframes the actions of those

who participate. But how does a field produce and reproduce collective

agents such as credit derivative, mortgage, or merger acquisition markets?

We have deliberately called this space a social totality: the name intended tocapture the reality of a system of relations and properties sustained by the

collective genesis and implications of the actions o individuals. These indi-

viduals, importantly, produce totalitieshere, a financial field comprised

of specific markets. The Callon group has described this production of a

quasibounded economic space through a notion of framing, which empha-sizes the necessity o identifying the totalities that enframe the production

of social practices. Certainly the most problematic aspect of the founda-


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tion of markets is the embedded processes by which agents objectify, by

virtue of their participation, the totalities or frames in which they partici-

pate. What invisible aspect of work produces the whole? At issue is howparticipants objectify themselves collectively through the reproduction of

an imaginary frame/object that then appears to these agents as an indepen-

dent reality that stands apart from them and exerts an impersonal determi-

nation over them.

What renders totalities such as the market particularly remarkable isthat the participants need not know one another personally; instead, their

relationship is technologically mediated, which has the effect of mask-

ing the underlying sociality of their production and of amplifying agents

sense that the market exercises an objective, quantifiable determination

over what they can and cannot do. This machinery has itsel become part

of the markets sociality. It not only interconnects agents; it mediates their

sociality in a historically specific and novel way. As the social comes into

focus, we see that an underlying social aspect of securitization is the real-

ization of what we call anonymous sociality. This is the attribution of a cul-turally specific socialitya mutually expected repertoire o beliefs, desires,

and strategic judgments about the markets behaviorto an anonymous

counterparty whose only self-presentation need be the electronic trace ofanothers trade on a screen. This anonymous, faceless counterparty is the

counterpart to other agents sensibility that the market exercises an imper-

sonal and objective determination over their behavior.

Socially, the view that the market imposes its determinations on indi-

vidual agents is the agents unwitting recognition that they produce a mar-

ket as a totality. This totality is necessarily more than and different from the

sum o its parts because markets possess systemic properties. The suppo-sition that a market is collective and social means that we cannot grasp its

systemic properties by tallying up the actions of those who inhabit it. Indi-

viduals actions are important, but they define a different register of social

reality. What this underscores is that any adequate theorization would need

to grasp the systemic properties of a totality such as a market on its own

termsit is never reducible to nor the aggregation of anything smaller.

This is important now because a markets systemic properties are what

define the conditions for its systemic failurewhich is nothing less than

failure of the totality. The breakdown of totality begins to explain why the

seizing up of the credit markets provoked a turn to the social by a finan-cial community that normally shuns any reference to the social. Consider

the reported causes and conditions of the extraordinary contraction in


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liquidity. According to the finance sectors own assessment, the breakdown

in liquidity turned on systemic properties, principally the relative inter-

connectivity of the counterparties, the overall nontransparency of their bal-ance sheets, and high multiples o leverage across the market. No soli-

tary instance o interconnectivity, nontransparency, or excessive leverage

motivated a near-universal withdrawal of participants faith in the credit

markets; rather, as our interviews repeatedly demonstrated, it was their

native intuition about their overall cumulative effect, amplified by theircomplexity and technologically mediated character.

It is difficult for participants to discern the systemic properties of

social totalities. The financial markets, especially, are produced in ways that

naturalize and normalize these properties. This would not make a differ-

ence except that the creators of the efficient market thesis see it as a scien-

tific description of reality. However, a scientific perspective that excludes

the production process of totalities, like the market, cannot begin to take

account of their systemic social properties, including the potential and con-

ditions for systemic risk and failure. At best, this perspective can recognize

systemic implosions as unfortunate and unexpected outcomes, as the noise

in the system that somehow became a deafening roar. No less an authority

than Alan Greenspan confirmed this point, when in testimony beforeCongress, he expressed shocked disbelief that there was a flaw in the

invisible-hand thesis that markets are constitutionally efficient and self-

correcting, and therefore immune to systemic failure of the kind that had

propelled the economy into a tailspin. Some say the visible boot of what

most of us know as economic reality had left its imprint on the maestro.

There is a second problem the descriptivist definition of the market

obscures: the dynamic relationship between the types of financial instru-ments and agents acts of classification. The issue is how the financial field

evolves generative schemes that agents intuitively access to typify what

are often singular, one-of-a-kind, situationally tailored derivatives. How

do agents collectively accept the typification of such a product? This is of

more than scholastic interest: recall that a genesis of the credit implosion

was that the financial field securitized mortgage and credit obligations as

though their primary differences were immaterial. So it is a touch ironic

that mainstream financial institutions skip the assignment of singular

derivatives to specific general categories as a transparent and unproblem-

atic exercise. The social, sometimes contentious and negotiated act of clas-sifying a tranche of CDOs appears, especially retrospectively, to be nothing

more than a technical exercise. This conflation of type and token obscures


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the social act of classification and renders it impossible to explain the dialec-

tical, often contested processes by which agents create new derivative deals

on the model of past productions even as they fit singular derivatives toestablished types in order to price and sell them. From another angle, mar-

kets will appear efficient and the social can remain invisible when financial

agents believe as an article of unconsidered faith that totality, types, and

tokens are harmoniously and unquestionably aligned (i.e., agents collec-

tively understand this singular derivativehere, nowas a type of deriva-tive that, in concert with other such derivatives, is constitutive of the mar-

ket as a totality). Alternatively, as the crisis illustrated, markets become

inefficient and the social miraculously visible when a faith that was once

taken for granted evaporates, and with it the liquidity on which the markets

depend.

The final problem is how can we grasp the perpetual framing and

reframing of a totalitythe social practices that produce and reproduce the

objectification of the marketwhen the same sentient subjects simulta-

neously and intimately inhabit, create, and analyze that totality? The same

knowing subjects surrender themselves to financial markets, which they

actively produce and reproduce through generative schemes. This is impor-

tant because these schemes, especially those animating the work of specu-lation, are comprised of economically rational calculations, other modes

of rationality (that center on competition and ones social persona, for

example), and also a structure of desire bordering onsometimes cross-

ing over intodrives for self-fulfillment, self-worth, and identity. What

makes this all the more important is that one of the most normalized

schemes is agents own market analysis. The agents themselves produce

constant streams of analysis (fundamental and technical) about how mar-kets workwhich, among other things, hides the social.

What these mechanisms o invisibility suggest is that an understand-

ing of the financial markets entails an understanding of this underlying

ideology: that is, the complex economic ideology that has evolved to con-

ceal the social through a common faith in presuppositions that, much like

the silencer on a gun, dispose agents to ignore the social or mistake it for

something else. A social analysis would seek to trace this concealment to

the presuppositions about the sociality of communication that underwrite

agents interpretations of economically meaningful events and informa-

tion, and to the type of discourses they construct (retrospectively) to explainfinancial outcomes. We see such an explanation as part of the foundation of

the analysis because these ideologies are the cornerstones of what we call


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the illusio: that is, the forms of misrecognition of the social that are compo-nents of the real relations of the production o high finance. Adherence to

this illusiois, and has been, an imperative of the financial field. Talk of thesocial was redacted from discussion (at least by the ratified members of the

field) until the present systemic crisis opened a crack in its defense mecha-

nismsfor example, business school textbooks that present the efficient

market thesis as settled science. Years into the crisis (2010 to 2011), inter-

views with business school professors indicated an unwavering allegianceto the efficient market thesis.

Here we lay out a complicated agenda for making the social visible.

On another level, however, the issues are straightforward. Mainstream

accounts of the financial markets presuppose and rest on a sociality they

cannot account for. They cannot and do not account for the production and

the reproduction of a derivatives market or the character of a regime of

work oxygenated by what is, historically speaking, a newly minted ethos

of speculation. These omissions of the social are compensated for by the

illusioof an efficient market, composed of rational actors who communi-cate perfectly and bolstered by the symbolic capital gleaned from using

mathematical models derived from the truly scientific natural sciences.

Then along comes a systemic crisis that emphasizes the failures of thisthesis, demonstrating the constitutive power of the social and the argu-

ment for laying out a more socially informed account.

Theorizing the Economic Socially

The reading of the economic and of finance presented here grows out of an

attempt to grasp the encounter between the global financial markets andcommunity-based, production-centered economic enclaves on the mar-

gins of circulatory capitalismin places such as the former Bantustans

of South Africa or in the southern areas of the Philippines. About this

encounter, there had long been an informal division o intellectual labor.

Anthropologists and sociologists worried about the non-Western, margin-

ally and partially capitalist, frequently struggling postcolonial economies,

whereas economists focused on market-driven, capital-intensive, globally

integrated economic sectors wherever they appeared. So anthropologists

and rural sociologists studied the Amazonian Indian populations work-

ing on rubber and coffee plantations in Brazils interior, while economistsstudied Brazils burgeoning finance and petroleum sectors. There are no

disciplinary rules about economic subjects, but in general the division


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held, with only a few scholars camping consistently on the others terrain.

Importantly, this division o intellectual labor corresponds to a theoreti-

cal vision of the social. The idea is that sociality underlies the economiesthat anthropologists and sociologists study; gift-based economies espe-

cially are so intrinsically social that it is pointless to use the concepts and

tools developed for large-scale capitalist markets. The countervailing idea

is that where capitalist markets are concerned, the economic is an indepen-

dent domain, which renders it possible to craft methods and models thatfixate on the economic. The focus of formal economic analysis is produc-

tion, whereas anthropologists foreground the sociology of exchange. An

accepted distinction between formal and substantive economics enshrined

this vision and division of the world, which corresponded to two noncon-

versant literatures.

A genuinely social approach would reject this theoretical division in

favor of the argument that all economies are substantive. It is important to

be clear about this. The critical argument is that although capitalism, now

exemplified by the markets for financial derivatives, is qualitativelydifferentfrom any other economic regime, it is nonetheless fundamentally social.

Significantly, the economic aspects of the social are fundamentally differ-

ent, but no less social for being so. Nothing illustrates this more clearlythan the social processes required to sanction agents to isolate the eco-

nomic by placing themselves in contexts that valorize those dispositions

that sublimate or eclipse their investments in the social. However natural

it now seems to those who watch CNBC, who pour over the Wall Street Jour-nal, or who have an MBA, it requires a tremendous amount of social laborto produce people (such as those we interviewed), who, enframed within

the market, voluntarily sacrifice their relationship with their spouses andtheir children to earn money speculatively on bets that, on account of their

enormous sequestered wealth, have little marginal value for them. As

history and anthropology have demonstrated, for most of the history of

humankind and across the entire wealth of cultures, this design o behavior

was unimaginable. While financial markets are powerfully economic in the

most robust sense of the term, they also involve questions concerning the

(re)production of the market, the creation of agents subjectivities, agents

senses o belonging and fairness, an ethos of speculation, notions of anony-

mous sociality, and much more that is intrinsic to financial markets but

goes far beyond the economic realm. From the perspective of theoretical practice, the social became

invisible because it was exiled and excommunicated from the kingdom of


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finance by the scientization of economics. The premise was that markets

are, for all theoretical purposes, efficient, closed, and complete. They oper-

ated systemically according to purely economic principles and rational deci-sion making under uncertainty. Certainly those in the financial workplace

were aware of many instances when market prices, like circus animals who

had forgotten their manners, seemed to veer (sometimes wildly) off course,

but they assumed and economics affirmed that these gyrations were tem-

porary, episodic, and too small to spawn earth-rattling crises. In fact, theirresolution (through arbitrage) proved that markets were systemically effi-

cient, inherently rational, and therefore asocial. Many in finance proclaimed

the triumph of the efficient market thesis, moving them to brush off data

that did not affirm the model. After the 2008 financial meltdown, there

arose a realization that the behavior of financial markets rested on modes

of unacknowledged sociality. Some commentators observed that liquidity

is a religion; it depends on faith and trust, on a collective belie in the

markets. To right things, we (used in its collective sense) need to restore

peoples faith in the markets, redeem their broken trust, and purify the

markets by exorcising greed. Disseminated across the electronic media,

these unalloyed references to religion, faith, redemption, shaping a collec-

tivity that transcends the individual, and everything the financial commu-nity conceptualizes as the inverse of all that is economic add up to a tacit

admission that the social does, indeed, have constitutive power.

Now it turns out that religion is an unexpectedly apt metaphor: the

modern American circulation of faith is an unregulated market where

all commitments are over-the-counter bets on salvation. It declares what

anthropologists steeped in gift-based exchange have known since the

work of pioneers in their field (especially Marcel Mauss and Claude Lvi-Strauss): totalities, like markets, are social fictions made real by the magic

o belief and sustained through the name we have canonized for the power

o belieffaith. From our standpoint, it is neither an accident nor a meta-

phor that a crisis-torn market began to speak in prayers, its commentators

drawn to formulations that suture the health of the market to expressions

of faith and belief. Even more, in calling for the restoration of faith and

belief, these commentators, without intending to, invoke a performativity

that attends religions frequent accompanist: ritual. We take the financial

communitys self-assessment as a sign of where to look analytically.

If we pose the question what is a market?, the answer is neithersimple nor obvious. The market as a social totality or frame is simulta-

neously a practical construct, a site of work, and a particular kind of object


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constructed by economic theory. This complex, multifaceted conception

of the market frames the actions of financial firms and individual partici-

pants, of the regulatory policies crafted by the Federal Reserve and theTreasury, of the picture drawn by the media, and of finance economics

scientization of the market. The players share this image of the market,

unconditionally; they circulate this image without thinking they are cir-

culating an image, switching fluidly among the various facets, their collec-

tive belie influencing their market behavior even as it underwrites theirconfidence in their interpretations of the behavior of anonymous copar-

ticipants. Circulation and syncopation o belief are essential: indeed, the

theorization that underpins a genuinely social approach is that markets

as totalities are ontologically real social fictions that agents quasiautomati-cally produce through collective belief. The centrality o belie is the under-

lying, unacknowledged theme that runs throughout US Treasury secretary

Henry Paulsons account of the struggle to restore faith in troubled credit

markets. The supposition guiding his actions is that agents decisions to

restart making a market under uncertainty turn on the revival of their col-

lective faith in a markets integrityor, more socially, totality.

The confluence of the realand thefictionalthrough the power of col-

lective beliefs, as well as agents faith in the totality they have instantiated,indicates that markets have a performative aspect. They are defined by a

dialectic between rites of self-objectification, large and small and most of

all continuous, and the production of a financial habitus that encourages

agents to have faith in a markets integrity. That agents objectify liquidity as

the normal state of financial markets goes hand in hand with concepts, dis-

positions, and positions that normalize their collective faith in the totality

or frame. Liquidity is the finance fields representation of sociality, objec-tified in the notion of the counterparty and the risks posed by those on

the other side of a trade (i.e., counterparty risk). The ethnography reveals

a constant interplay between the objectification of abstract risk by way

of mathematical modeling and through agents attempts to discern what

others with similar models are doing. The totality constructs itself out of

the interplay between overlapping models and the iteration of the models

that agents share and attribute to others or to counterparties that comprise

the market. There is every reason to believe that the market as a totality lies

at the intersection of specific real-time trades and the imaginary commu-

nity constructed out of everyones beliefs about, and faith in, what others(counterparties) are doing with respect to similar trades and deals. This

intersection is technically mediated by, for example, Bloomberg machines,


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which everyone knows everyone else has. What is so intriguing and unex-

plored is how the syncopated objectification of the local and the totality per-

formatively produces the market. The market appears as the aggregation ofindividual trades, even though agents ability to consummate these indi-

vidual trades presupposes and turns on a faith-based liquidity whose social

properties are effaced by the objectification. The most ironic and paradoxi-

cal aspect of market-centric views of the market is that they lack an account

of the markets production, insofar as they reduce it to a naturally occurringresult of the sum o individual acts o buying and selling. A better argu-

ment is that totalities are created performatively, either by what we nor-

mally think of as ritualthat is, practices that link existential events to the

cosmologicalor by what amounts to a secular ritualization of the every-

day that links existential events (like executing a trade) to science.

We must first understand that ritual is not synonymous with reli-

gion. Religions foreground the use of ritualoften molding it into a named

eventbut they do not possess a monopoly on ritual or an exclusivity agree-

ment on its functionality. We must also recognize that events can possess

the properties and produce the effects of ritual, without being expressly

defined as ritual. Thus understood, rituals are enhanced, transparent ver-

sions of a more general, event quality of ritualization or, more precisely,rituality, present in any social practice. This turns out to be importantbecause if there is one lesson that can be drawn from the analysis of ritual,

it is that rituality allows social practices to posit what they effectuate. In this

way, rituality creates a performative impulse in which the participants in an

event presuppose the reality of the social totality that the event helps create

or effectuate, by assuming that the eventhere, nowis simply a replica

of previous performances. The performative aspect of the practice is cen-tral because it shapes the illusion that the totality created socially (e.g., the

market) occurs naturally. The event summons the participants to believe,

to have faith that the totality indexically presupposed by this specific event

is as real as the existential, lived event itself. There is a cognitive and dispo-

sitional obligation to assume that the efficient market is as real as the trade

I have just efficiently made. By this means, the specific trade figures what it

and all the trades (classified as) like it collectively effectuate. The capacities

and dispositions of agents collectively to subscribe to the same understand-

ing (e.g., of the market) without any collective intention depends on the

socialization of agents through their immersion in the distinctive habitusof the financial field and the hard work o its institutions (exemplified by

the full-bore training of recruits). Note that the economistic account of the


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market is an empirically robust illusion: insofar as the rituality of practice

engenders a succession of events that successfully instantiates the market

(it remains liquid), its social foundations can remain concealed. Until, aswitnessed, a crisis of faith in the market ensues, at which time the consti-

tutive power of the social seems to appear from nowhere and remains until

the state of emergency subsides.

Thematizing the Financial Field

Understanding the credit crisis begins with a look at the financial tools that

agents devised. Technically, the liquidity crisis in the credit markets stems

from the collapse of CDOs and others forms of structured debt. The CDOs

were not created or traded on a regulated exchange such as the Chicago

Mercantile Exchange; rather, they were over-the-counter market products.

This means that they were neither standardized instruments nor subject to

regulation. In the straightforward version, a mortgage lender would origi-

nate a portfolio of mortgages of whatever quality and duration, an invest-

ment bank (the now-defunct Bear Stearns specialized in such loans) would

bundle these loans into a package, and the credit quality of the loan port-

folio would be evened out and upgraded by purchasing insurance (e.g.,from Ambac Financial Group), thus securing a AAA rating, after which the

investment bank peddled the CDO to buyers, warehoused it until a buyer

was found, or retained it for the banks own account. In this manner, some-

where in the neighborhood of $1 trillion of suspect loans circulated through

the financial system.

The key problem is that circulatory capital is subject to a treadmill

effect. One property of this effect is that what seems rational in the shortterm for individual actors is systemically irrationalalthough invisibly so.

In the CDO market, the treadmill took the following form. On account

of their outsized returnson what appeared to be AAA instruments

the overall demand for CDOs increased exponentially. Demand increased

because the CDOs had a healthy risk premium for AAA-rated bondsthe risk premium being the difference between the CDOs interest rate

and the rate of a risk-free Treasury bond. Increasing demand depresses

buyers rates of return (as more participants bid for the same securities),

which should lead to a decline in profitability: lower interest rates, lower

return. Many participants refused to acquiesce to the lower returns dic-tated by a systemwide decline in risk premiums, objectively because their

incomes and positions depended on earning outsized profits and subjec-


16/28


tively because they were immersed in the speculative habitus permeating

the financial sector. Given the enormous quantities of available capital at

that time, one alluring strategy to sustain profitability was to employ lever-age. Leverage consisted o borrowing less costly short-term money in order

to purchase longer-term CDOs. By borrowing capital, investors could put

more money to work in what they considered to be their best investment

strategy. This strategy was successful so long as the return on the CDOs

was greater than the cost for the borrowed capital. But the strategy had anenormous systemic flaw: because it was undertaken by many institutions

simultaneously, it only augmented the demand for CDOs, which pushed

rates even higher, which in turn motivated an acceleration in the supply of

mortgages being fabricated and circulated, leading to an ever-increasing

demand to initiate new mortgages no matter the solvency of the borrowers.

The added supply of mortgages served to further depress risk premiums.

Worse, the decline in premiums and therefore profitability encouraged

the addition of even more leverage, perpetuating the treadmill until many

firms were leveraged at ratios they can, to this day, barely acknowledge. In

effect, speculators offset the risk of declining profits by taking actions that

amplified the risk of systemicfailure. And that is precisely what happened;

that is the technical view of the financial iceberg visible above water. Below the waterline lies a more complex social reality. One way to

deconstruct this reality in order to visualize its character is to emphasize

critical dimensions of the production of the social. A good way to begin

making the social visible is to foreground the character of the speculative

ethic that drives the culture of financial circulation. This ethic has emerged

as a critical, cutting, and capricious edge of Euro-American capitalism. In a

2004 work, Financial Derivatives and the Globalization of Risk, we illustratedthat the events of 1973 began to tilt financial power and profit toward circu-

lations of speculative capital. From 1973 on, this speculative ethicwhich

has long been one strand of Euro-American culturehas become some-

thing more powerful: a culturally valorized ethos instrumental in struc-

turing the design and practices of the financial field. The obvious mani-

festation of this speculative ethic/ethos is the willingness with which so

many banks and hedge funds made enormous, precipitously leveraged

bets. Complementing the rise and valorization of this ethos has been the

creation of speculative capital: large pools of mobile, nomadic, opportunis-

tic capital whose sole purpose is to underwrite wagers on market volatility.The result is a financial field that has redirected its energy toward fabri-

cating platforms (i.e., the leveraged derivative deal) that motivate the pro-


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duction of risk-driven instruments (e.g., CDOs), which agents then use to

speculate with but also on. Speculation has now, accordingly, assumed a

life o its own. The second dimension of our interpretation is workin the extended

socially infused sense of the term. We foreground work on the understand-

ing that work imbricates cultural notions of a life plan, the structuring of

the financial field, the production and reproduction of finance through the

real-life actions o its participants, and the dispositions that define andmotivate subjects. For those in finance, work is often the ensemble of prac-

tices around which they arrange and invest in their lives and life plans. But

what kind of work is it whose purpose is to assemble and allocate capital

in order to make enormous speculative bets on market volatility through

the fabrication and circulation of risk-driven derivatives? More, what kind

of work product is it in which the object produced is a contractual relation

about the relative volatility of another relation, such that profits are noth-

ing more than others losses? Put historically, why is trading derivatives dis-

placing banking in terms of compensation and prestige?

The third dimension is the fields representation of the economic

that agents and institutions understand, respect, and valorize. This socially

exclusive representation or paradigm is the fields illusio. By this, we meanthe entwining and coevolution of an ensemble o ideologies that misrec-

ognize the social and legitimate an asocial conception of work, specula-

tion, and more generally the practice of the agents who inhabit financial

markets. The field assembles three ideologies into a notion of an efficient

market. It is no accident that the crystallization of the thesis corresponds

with the formation of derivatives markets in the 1970s or that its ascen-

sion to power mirrors their explosive growth. The first moment is the ide-ology that the market is essentially a closed, complete, and self-regulating

economic space. Everything social lies beyond the fields perimeter, mean-

ing that the social has no constitutive power in the formation or behavior

of the market. The second layer o ideology says that investors are ratio-

nal; their decision making under uncertainty proceeds cognitively, one

might say almost scholastically, guided by the laser of utility maximization.

Analysis can thus grasp market behavior by reference to the positing of

an abstract actor: a transhistorical and transcultural agent whose actions

are an objective reflection of the markets objective economics. What is

remarkable about the positing of such an abstract agent is that its imagi-nation is not only specific to capitalism but also one of capitalisms deep

performative subjects. A closed complete system requires economically


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rational actors, just as it would take the aggregation of economically ratio-

nal acts to produce a closed space. The illusios final layer is a communi-

cation ideology that maintains its messages are transparent. Informationand knowledge are precisely the same; accordingly, market prices always

reflect all available useful information. The illusioarises from the concate-nation and coproduction of these ideological streams. It moves financial

agents to believe, or at the least to accept as an article of faith that a market

is a bounded, complete economic space in which prices are always the out-come of transparent, perfectly liquid communication among rational deci-

sion makers. For those in finance and beyond, a quasimagical reverence for

the revelatory power of mathematical statistics amplifies their faith in this

worldview. John Cassidy, writing about how markets fail, says that adher-

ents canonical commitment to the efficient market doctrine elevates the

doctrine to a secular faith. So the illusiois not a misreading of the socialbases of the financial field and its agents, but a realrelation o its produc-tion. It is part of the fields DNA. Lest anyone think we are dancing on the

bones of the dead, the efficient market thesis put to rest by the inefficiency

of the credit and housing markets, the reality is that finance economics

goes on as if nothing material has happened. Numerous essays continue

to assume as an article of scripture that markets are efficient. There is, inthis, a suspension of disbelief. For the real signature of the illusio is thatthose who are caught up in it, who are deeply invested in its authenticity

and authority, cannot think the world in other terms. They proceed as they

have always done; the beauty of the efficient market doctrine is that those

enmeshed in its web are endowed with transscientific certainty that they

do not have to take the credit markets disintegration into consideration

because it was a one-off event.

Developing These Themes

We have argued that the denial of the social is a necessary feature of the cul-

ture of financial circulation. Nothing exemplifies this more than the denial

of the performativity that is constitutive of the markets (totalities), in which

the practices of speculation unfold as the artistry of the deal. Each act of

buying and selling a financial instrument performatively objectifies that

instrument through the typification of the token. The act of classification

defines this specific singularity as a type. The classification predisposesthose with a sense of a given market to adjust their expectations to the

probabilistic assessments of that instrument. The elision of performativity


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leads economistic accounts of the market to misrecognize the way in which

each transaction instantiates and foregrounds the market(s) that it presup-

poses. For the transaction to be prosecuted, it must appear as though themarkets liquidity was unquestionable and the transactions success pre-

ordained. Accounts of the market from within the financial closet have

no notion of this performative dimension. They cannot thus entertain the

question of discovery: what are the conditions for the inculcation of similar

capacities and dispositions, which motivate the collectivitys faith in a realfinancial market comprised of anonymous agents conditioned to function

as reliable and predictable counterparties? So defined, the analytical objec-

tive would be to show how existing cultural capacities and dispositions per-

formatively objectify the field of finance, and how through its markets and

institutions, the field capitalizes on, and further refines, these capacities

and dispositions for those who participate in this regime of work. Accord-

ing to the approach developed here, to begin with an analytical definition

of the market annuls the performative objectification of the real, which

brings the market as the site of the speculative ethic into existence as a

viable entity.

It follows from this that a principal aim must be to grasp the socio-

genesis of this speculative ethic/ethos, rooted in what is essentially a trans-cultural problematic of decision making under uncertainty when a value

(e.g., money or status) is at stake. When such decisional uncertainty is

attached to a context, the result is riskthat is, the chances that the agent(s)

involved will suffer some negative outcome. The design of a speculative

ethic constitutes a calculus for organizing decisions when uncertainty is

present. What is sociologically interesting about the ways in which people

deal with the risks attached to circulation/exchange is that they presupposethe preexistence of a totalityfor example, a group, a market, a field

that the practices are actually instrumental in valorizing and reproducing.

Semiotically, the practices re-create and circulate the token instances of

totality as perfect indexical icons of the type. In societies in which there is

neither capitalism nor a regulatory state, ritual as exemplified in ritualized

exchange is the dominant means by which agents discern and disarm the

risks attached to an exchange/circulation. What ritualization does for these

exchanges, the scientization of the market attempts to do for derivatives

transactions.

In a parallel manner within a wholly different framing, a derivativetransaction presupposes the integrity (closure and completeness) of a spe-

cific market (e.g., credit) as an instance of a totality (i.e., the derivatives


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market) composed from the sum of these specific markets. The parties that

execute the trade organize their practice as though the markets efficiency

guarantees that there is no other possible outcome: that is, there is alwayssufficient liquidity and negligible counterparty risk such that wagers can

be made and paid. Within the financial field, hard science has become the

designated means of discerning and mitigating risk. Statistical models and

technical analysis have become the chosen means of dealing with decision

making under uncertainty. Several separate strands have come together,creating the space of the culture of financial circulation. Not the least is the

progressive harnessing of the mechanics of speculation through the use

of a mechanistic model that sacrifices honoring the complexities of finan-

cial practices for mathematical tractability. The sociological evolution of

this economistic paradigm has been toward a mathematical scientization

of finance. On the level of the totality, it sees the social as exogenous to the

structures and practices of the market; on the individual level, the social is

the source of the irrational, the animal spirits that (under the right con-

ditions) will motivate numerous agents to make similar bad decisions that

radically violate the canons of utility maximization. As exemplified by the

housing crisis, this behavior may overpower the markets self-regulating

tendency, leading to a euphoric bubble followed by a panic-driven crash.The scientization of the market has led to a dominant view, which objec-

tifies it as a purely economically constituted totality, populated by agents

endowed with utility-maximizing subjectivities. So conceived, it becomes

legitimate to analyze financial practice using formal mathematical equa-

tions based on the study of the diffusion o inorganic particles. This extraor-

dinary result has evolved into an equally extraordinary and supporting divi-

sion o labor in which quants (quantitative analysts) devise mathematicalmodels of the volatility of financial instruments about which they have

no market-trading experience; whereas traders having firsthand market

experience use models whose mathematics they barely understand.

The scientization is complemented by educational processes, which

inculcate the speculative ethic in respect to a view o how financial markets

function. This view is encapsulated in the message circulated by financial

channels, such as CNBC, which laud the desire for profit, inveigh against

regulations that would limit speculation, and argue that speculation is

inherently good for the markets and thus for the economy and in turn

for the nation. The peculiar logic is that the speculative ethic is a nationalsocial good, such that its endorsement is patriotic. No less important is the

academe where the speculative ethic is being produced and legitimated


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through the reorganization o business school education and curriculum.

The cornerstones o business school education have become the notions

that the market is the best custodian of the US economy, that financialmarkets are inherently efficient, that (competitive) markets spur innova-

tion as exemplified by the plethora of new financial instruments, and that

speculation is both creative and necessary to promote market efficiency

and stimulate innovation. The redirection o business school education is

also an instrumental part of the reallocation o intellectual capital awayfrom industrial managerial sectors and toward the financial field. This ref-

ormation of the business school was part and product of a Euro-American

shift toward the speculative; it assumes that there are agents who construct

their subjectivity through arduous work regimes that center on the specu-

lative acquisition of money.

This construct has a history. A more social account would reveal

that the speculative ethos did not materialize from empty space. We would

argue that the ethos derives from and conjoins two narratives that have per-

meated American culture. The first extols the virtues of taking a chance,

especially the willingness to accept risk, to have the fortitude to chance

the odds to improve ones lot in life. This narrative implies a social and

financial universe in which probabilities matter greatly. The second narra-tive assumes that agents can master chance and subdue probabilistic out-

comes through knowledge, skill, and hard work. These virtues allow agents

to arbitrage the future, to turn a risk-free profit by offsetting uncertainty

with hard-won knowledge and honed skills so that agents decision making

is true. In this mediation, traders are portrayed neither as gamblers nor as

traditional bankers (who relied on lending money to long-standing, sol-

vent, socially connected clients); their speculations lie at the intersectionof mathematically calculated risks and their willingness to bear the existen-

tial burden of an enormous wager. The speculative ethos draws from, and

then combines, both of our native narratives in ways that make it appear

familiar, burnishing the illusion that there is nothing unusual about the

appearance of financial agents who, armed with risk-driven derivatives, use

mathematical modeling to leverage large pools of speculative capital in a

quest to profit by gaming market volatility.

From the outset, there has been a more-than-incidental kinship

between financial economics and poker. Many of the influential theo-

rists (e.g., von Neumann) who sought mathematically to tame the mar-kets uncertainty, were avid poker players. The confluence of calculation

(pot odds) and speculation (betting rounds) that distinguishes poker served


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as an inspiration. In the public culture, pokertraditionally impugned as

morally reprehensible because it was gamblinghas now become a legiti-

mate practice and profession on an increasingly cosmopolitan stage. It isworth recalling that in the 1960s and early 1970s congressmen, federal

regulators, and moral activists castigated and rebuffed initial attempts to

develop a financial futures and options market because they viewed betting

on money as tantamount to gambling, which lacked any social merit. In

the ensuing years, however, the speculative wager has become not only anacceptable but a morally cleansed activity. Nothing exemplifies this more

that the emergence of what its adherents call poker nation: as its citizens

only quasimetaphorically referred to a community whose self-defining

act and determination is the risk-driven wager. It is reasonable to con-

ceptualize the ascension and valorization of this virtual community as a

foregrounding of speculation through a new social imaginary: the poker

nation. This community of players has been providing itself with an insti-

tutional grounding, but what defines it fundamentally is the circulation of

a shared understanding and habitus, a mode of circulation, which the pres-

ence of the Internet and its plethora of official sites amplify. What we are

suggesting is that there is the imagined community in which each poker

game becomes a microcosmic instance of an encompassing poker macro-cosm, much in the manner that Benedict Anderson describes acts of read-

ing as engendering the imaginary of a national peoplehood or the way acts

o buying and selling aggregate into the market. One way of grasping this

new imaginary is as an aspect of a postmillennial pop culture. Another way

is as an advertising gambit aimed at luring people into indulging in gam-

bling tournaments and online sessionsboth of which are proving rather

lucrative for their investment backers. But these observations, howeveraccurate, do little to explain why at this moment gambling and speculation

have come out of the back room and assumed such a visible and marketable

place in the public sphere. Another, more socially attuned way of appreci-

ating this emergence of the poker nation is as an unveiling, namely, that

tipping point at which the emergent habitus of risk-taking and speculation

becomes conscious o its own immanence and thus objectifies that habi-

tus in games that reproduce within a fixed finite event, like a poker tourna-

ment, a forum for speculating. The suggestion is that the construction of

a community founded on a speculative ethos is reflecting and reproducing

at the level of entertainment a transformation in the deeper character ofcapitalism.

Understanding the sociogenesis of a speculative ethos feeds into a


23/28


second and complementary aim of grasping the character of the financial

field. The goal is to grasp the objectification of relations that incorporate

design and dimensions into the field. This entails an account o how thefinancial field enframes positions (e.g., trader, quant, or risk manager) that

embody a specific logic, perspective, necessity, subjectivity (e.g., persons

who necessarily produce their subjectivity through the acquisition of money

and only contingently through the acquisition of status, power, objects, or

social relations). What is interesting about the dimensions of the finan-cial field is that they are elastic, meaning that agents collective objectifica-

tion depends on the context. Even more important is the performativity

that is, the generative schemes for putting a deal togetherthrough which

agents objectify the various markets (e.g., credit, mortgage, or currency)

as fractional totalities within the larger social imaginary of the market.

This objectification leads to the illusio, the prophecy that is self-fulfillingbecause collectively shared, that a universe of reliable stranger counter-

parties populates a specific market. So long as the financial agents share

and act on this belief, their religion (illusio) will remain intact, that mar-ket will stay liquid, and their collective faith will remain invisible. Pricing

a portfolio (of CDOs, for example) on a market-to-market basis will, under

these social conditions, provide a reasonable assessment of a firms balancesheet. Each successfully executed transaction reaffirms the collective belief

in the imagined community of reliable counterparties that it presupposes.

Collective belie is the operative concept insofar as it is impossible in the

OTC markets to know or verify that the counterparties are reliable or will

remain so over the term of the contract. Collective belie is thus reinforced

by a speculative ethic that motivates and incentivizes risky wagers that con-

tinually engender evolving portfolios of unquantifiable exposure. All this contributes to an understanding o how the speculative ethos

becomes embedded in, and an essential part of, a regime of work. The ani-

mation of the ethos transpires only through the social practices and gen-

erative schemes employed by those in the financial field. It follows that we

can understand the speculative ethos only if we elucidate the production

and realize the dispositions that are embodied in this work regime. Such

theorization accomplishes two things. First, it shows that in the immediate

financial field, the way agents deal with decision making under uncertainty,

their willingness to take on existentially frightening levels of risk, their

capacity to acquire and propensity to use financial information (a mathe-matical model), and indeed everything connected to the primary directive

of making a profit all depend on the sociohistorically specific production of


24/28


the culture of financial circulation. Insofar as agents expressly pursue the

objective of maximizing profit, there will be something that they can inter-

pret as economically rational behavior. Second, this theorization leads to anethnographic account that illustrates the presence and power of other modes

of rationality, and beyond that, dispositions and drives that tip decisions

inasmuch as every decision about investing retains a degree of uncertainty

because there are aspects of the future we cannot predict or hedge against

(e.g., a terrorist attack)in one direction or another. There appears to be abroad ensemble of social and psychosocial interests that deeply inflect the

practices of those in the financial field. These lead to other forms of ratio-

nality and other motivations that insert themselves into practices, some-

times coinciding, sometimes competing, with an agents economic intent.

Without such an account, it is all too easy (as the recent literature indicates)

to end up trying to explain the collective acts that precipitated the crisis

either as the immediate efficacy of a cause (i.e., unbridled greed), or as a

consequence o irrationalities that skew economic decision making.

A feature of the financial workplace is that work is about much more

than making a living. Work provides an organizing purpose and identity for

the worker, and charting a career path is an essential element of an indi-

viduals life plan. For those in finance, work appears to substitute for thefulfillment once derived from family, friends, community, and churchto

the degree that agents depend on their jobs as their principal source o iden-

tity and as a mainspring of their self-esteem and self-investment. Within

this frame, an agents sense of selfself-worth, self-esteem, and position-

ing in financial spacebecomes attached to his or her earned compensa-

tion, named position (e.g., chief financial officer, hedge fund founder and

codirector, or foreign market strategist), and success in climbing the careerladder. This idea of work as a constitutive element of self-construction

urges agents, and indeed often drives them, to compulsively invest energy

and hours in their work beyond what is necessary to make a comfortable

living or support a family. What is at stake for them is more than income,

access to worldly amenities, or even status: their work becomes who they

are. Their work conjoins with their understanding of who they are. As our

and other interviews attest, an identification of work with the self radiates

from the statements and actions of those who choose to surf the specu-

lative bubble. But precisely what kind of social and economic work is it

whose purpose is to accumulate and allocate speculative capital to makebig leveraged bets on market volatility through the fabrication and circu-

lation of risk-driven derivatives? What kind of work produces an object


25/28


that is a contractual relation about the relative volatility (price swings) of

another relation, such that one agents profits are nothing more than other

agents losses, be they deferred or transferred? Such a job does not easilyfit into what historically has been considered work. As the financial econo-

mist John Kay concludes, the work that is derivatives creation and trading

turns on an ensemble of special behaviours very different from the norms

of either everyday business or traditional finance. In essence, a Euro-

American culture of capitalism in which circulation, especially the trafficin derivatives, has emerged as cutting edge seems to be producing a new

regime of work and a new species of worker enframed within a re-formed

financial field. A social analysis begins to apprehend what goes into the cre-

ation of a novel, complex, and significant work regime founded instrumen-

tally on risk-driven derivatives and socially on a speculative habitus.

Conclusion

The social approach outlined here seeks to access the forms of sociality

that interlink the social imaginary of the market and the instantiation of

financial markets with the habitus of work and the production of subjects,

and to do so in a manner that captures the imbrication of work, play, andritual that imbues finance with a character that is simultaneously familiar

yet historically its own. It inserts a disruptive voice that reformulates the

scale of analysis and restores to the conversation those things social that

economistic perspectives must exclude as the condition of their own pro-

duction. What our preliminary investigation suggests is that an approach

that renders the social visible would see a financial (i.e., derivatives) market

as a performatively constructed frame for circulation(s) that creates, evenas it is created by, a sociospecific habitus of work. This financial habitus is

founded subjectively on an embodied speculative ethos and a monetized

subjectivity and objectively on speculative capital and risk-driven instru-

ments and their collective institutionalization in the politics of the repro-

duction of a circulation-centered capitalism.

Notes

1 Ben Bernanke, Troubled Asset Relief Program and the Federal Reserves Liquidity

Facilities, US House of Representatives, Committee on Financial Services, November

18, 2008, available at www.federalreserve.gov/newsevents/testimony/bernanke20081118a.htm.

2 The present analysis is based on what is now three years of ethnographic research


26/28


among derivatives traders, the documentation and analysis of the public culture of

finance, a deconstruction of the mathematical statistics used by finance economics

(e.g., Black-Scholes equations), a review of secondary sources on the financial mar-

kets and the credit crisis, and the fact that we trade financial derivatives for our own

accounts.

3 Gillian Tett, Fools Gold: How the Bold Dream of a Small Tribe at J. P. Morgan Was Cor-

rupted by Wall Street Greed and Unleashed a Catastrophe (New York: Free Press, 2009).

4 Charles Gasparino, The Sellout: How Three Decades of Wall Street Greed and Government

Mismanagement Destroyed the Global Financial System (New York: Harper Business,

2009).

5 William Fleckenstein and Frederick Sheehan, Greenspans Bubbles: The Age of Ignorance

at the Federal Reserve (New York: McGraw-Hill, 2008); and David Wessel, In Fed We

Trust: Ben Bernankes War on the Great Panic(New York: Crown Business, 2009).

6 Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington

Fought to Save the Financial Systemand Themselves(New York: Viking, 2009).

7 Kate Kelly, Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall

Street (New York: Portfolio, 2009); and Lawrence McDonald, A Colossal Failure of

Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Random

House, 2009).

8 John Cassidy, How Markets Fail: The Logic of Economic Calamities (New York: Farrar,

Strauss and Giroux, 2009); David Leinweber, Nerds on Wall Street: Math, Machines,

and Wired Markets(New York: John Wiley, 2009); Pablo Triana, Lecturing Birds on Fly-

ing: Can Mathematical Theories Destroy the Financial Markets?(New York: John Wiley,

2009); Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delu-

sion on Wall Street (New York: Harper Business, 2009); and Nassim Taleb, Fooled by

Randomness: The Hidden Role of Chance in Life and in the Markets(New York: Random

House, 2004).

9 Tett, Fools Gold, 25254.

10 Philip Mirowski, Machine Dreams: Economics Becomes a Cyborg Science (Cambridge:

Cambridge University Press, 2002).

11 John von Neumann and Oskar Morgenstern, Theory of Games and Economic Behavior

(Princeton, NJ: Princeton University Press, 1966).

12 This originates with Harry Markowitz, Portfolio Selection: Efficient Diversification of

Investments(New Haven, CT: Yale University Press, 1959); and William Sharpe, Capi-

tal Asset Prices: A Theory of Market Equilibrium under Conditions of Risk,Journal of

Finance19, no. 3 (1964): 42542.

13 See, for example, Frank K. Reilly and Keith C. Brown, Investment Analysis and Portfolio

Management, 9th ed. (Austin, TX: South-Western Cencage Learning, 2009), 77.

14 Eugene Fama provides the classic statement and Arthur OSullivan and Steven Sheffrin

a similar treatment. See Eugene F. Fama, Foundations of Finance: Portfolio Decisions and

Securities Prices(New York: Basic Books, 1976); and Arthur OSullivan and Steven Shef-

frin, Economics: Principles and Tools, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2003).

15 Douglas North, Economic Growth: What Have We Learned from the Past?, Carnegie-

Rochester Conference Series on Public Policy6, no. 1 (1977): 4.

16 The Callon group is a group of sociologists of finance working out of the Paris-based


27/28


school founded by Michel Callon. Michel Callon, ed. The Laws of the Markets (Lon-

don: Blackwell, 1998); Bruno Latour, Reassembling the Social: An Introduction to Actor-

Network-Theory(Oxford: Oxford University Press, 2007); and Donald A. MacKenzie,

An Engine, Not a Camera: How Financial Models Shape Markets (Cambridge, MA: MIT

Press, 2006).

17 See The Financial Crisis Inquiry Report 2011(New York: Public Affairs, 2011).

18 US House of Representatives Committee on Oversight and Government Reform,

The Financial Crisis and the Role of Federal Regulators, 110th Cong. (2008) (state-

ment of Alan Greenspan, chair of the Federal Reserve), available at http://democrats

.oversight.house.gov/index.php?option=com_content&task=view&id=3470&Itemid=2

(accessed December 1, 2011).

19 Marshall David Sahlins, Stone Age Economics (Chicago: Aldine-Atherton, 1972); and

Sahlins, How Natives Think: About Captain Cook, for Example(Chicago: University of

Chicago Press, 1995).

20 Henry Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial

System(New York: Business Plus, 2010).

21 Since risk is a relation that objectifies itsel in other relations, notably the wager inter-

nal to financial derivatives, its function in defining and stimulating liquidity is insepa-

rable from the moment of objectification. Thus the production of derivatives, by amal-

gamating context-specific risks in order to model and price them, objectifies risk in an

abstract form. Even the notion of counterparty risk is inherently plural and frequently

social, inasmuch as it may encompass an open-ended ensemble of otherwise incom-

mensurable risks, from a run-of-the-mill bankruptcy to a governments seizure of a

counterpartys assets to a terrorist attack.

22 See, for example, Stanley Tambiah, The Magical Power o Words,Man3, no. 2 (1968):

175208; Stanley Tambiah, Form and Meaning of Magical Acts, in Modes of Thought:

Essays on Thinking in Western and Non-western Societies, ed. Robin Horton and Ruth H.

Finnegan (London: Faber, 1973), 199229; Stanley Jeyaraja Tambiah, A Performa-

tive Approach to Ritual, in Culture, Thought, and Action: An Anthropological Perspective

(Cambridge, MA: Harvard University Press, 1985); Victor Turner,The Forest of Symbols:

Aspects of Ndembu Ritual(Ithaca, NY: Cornell University Press, 1967); Victor Turner,

The Ritual Process: Structure and Anti-structure(Chicago: Aldine, 1969); Roy Rappaport,

Ritual and Religion in the Making of Humanity(Cambridge, UK: Cambridge Univer-

sity Press, 1999); Michael Silverstein, Metapragmatic Discourse and Metapragmatic

Function, in Reflexive Language: Reported Speech and Metapragmatics, ed. John Lucy

(Cambridge: Cambridge University Press, 1993), 3358; Joel Robbins, Ritual Commu-

nication and Linguistic Ideology: A Reading and Partial Reformulation of Rappaports

Theory of Ritual, Current Anthropology, 42, no. 5 (2001): 591614; and Michael Silver-

stein, Private Ritual Encounters, Public Ritual Indexes, in Ritual Communication, ed.

Gunter Senft and Ellen B. Basso (Oxford, England: Berg, 2009), 27191.

23 Benjamin Lee and Edward LiPuma, Cultures of Circulation: The Imaginations of

Modernity, Public Culture14, no. 1 (2002): 191213.

24 Mohamed El-Erian, When Markets Collide(New York: McGraw-Hill, 2008), 2021.

25 Edward LiPuma and Benjamin Lee, Financial Derivatives and the Globalization of Risk

(Durham, NC: Duke University Press, 2004).


28/28


26 Lee and LiPuma, Cultures of Circulation.

27 Cassidy, How Markets Fail, 33.

28 Benedict Anderson, Imagined Communities: Reflections on the Origin and Spread of

Nationalism(Durham, NC: Duke University Press, 2000).

29 John Kay, What a Carve Up (book review), Financial Times, July 31, 2009.

lipuma and lee

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