CSI – ENSMP
1Finance as circulating formulas
rdthPaper presented at the Columbia conference, May 3-4 2002.
Very provisional draft, please do not circulate without permission. A longer version will be circulated before the conference.
in this paper, we describe how a financial innovation launched by a French bank has triggered a series of major changes in the financial industry.
We have followed the various loci of this innovation, the places where it took shape and where it reshaped the bank itself (the trading of the new product, its accounting and its own economy) , the financial market and even the labor market of the financial operators. As we track this formula along its numerous places of impact, we observe how it slowly transforms into a social form as it stabilizes.
We use this analysis to develop a model of changes that links four different levels formulation (or formulas in the making) – formulas – formalism – form
The locus of Finance
The discourse on "financial globalization" raises question about the locus of this enactment of
circulation of securities (bonds, equities and all the more refined recent innovations of the last twenty years) which stand for goods, people working in the companies securitized, companies themselves etc, these latter being far less mobile than the lines of calculus of an account. But these lines are nonetheless deeply rooted and firmly located in a series of places that call for
attention if one wants to understand how this new mobility of capital transforms these places and, conversely, how these places shape this mobility.
We want to scrutinize these places because we know that different market configurations and 2market organization have effects on the market values. It is a way to build a bridge with
economists but it is also a way to deepen our understanding of the ways markets work. Hence the places of Finance seemed very good entry points to understand two intertwined elements. First, the huge variety of markets and the irreducible qualities of different market organizations.
Second, the material conditions that hold these organizations together. The thickest description of one of the numerous financial markets that one can observe would bring a rich set of information and an unprecedented understanding into the necessary conditions for a market to hold water. It would balance the naïve picture of a financial sphere detached of all worldly realities, and maneuvering the real beings (blood and flesh) from above. So we decided to build our way into Finance through a simple question, where does it happen? But this said, it is necessary to warn the reader. The presentation of our way into Finance could raise expectations about the conditions and places of Finance, and I am afraid it will not fulfill any of these expectations.
1 As we were finishing this paper, we discovered the amazing Melville' short stories Bartleby and its
mesmerizing formula "I would prefer not to". It literally moves the world : the narrator, the office, the relationship between the copyists. It is in all the meaning attachable to this word a moving formula. 2 See Michel Callon' introduction to the Laws of the Markets and the cement market analyzed by Dumez and
Jeunemaître in the same book.
Demonstrating the irreducible qualities of markets with different configurations is not possible. The experimental conditions are not met and the focus we adopt to compare different markets doesn't allow for a simulation. As we will see, it is definitely the limit of this analysis : it claims to speak the tongue of the economists, the tongue of prices, but it can't set any definite experimental conclusion.
The second warning targets the meaning one should give to "practical conditions" of Finance. A sociologist, an anthropologist or an historian can not but feel at ease when it comes to explaining practices with conditions, surroundings, in a nutshell the "frame" that support the actions. It is the social sciences lingua franca and one would hardly dare raise any doubt
about its fruitfulness. But our research steps aside of this long standing tradition. Fortunately, it meets another tradition that has studied fields and objects very close to Finance. As resorting to the "practical conditions" of Finance opens on a wide variety of sociologies, we have to explain in which sense we use it. A slight "detour" to the science studies will help us clarify the use "practical conditions of Finance". But before bringing to the fore the apparatus of SSS, we need to say how it will be useful for our study of Finance.
The entry chosen so far – conditions of financial activities - could lead us into different kind of approaches. Either focusing on cultures (see Abolafia, Hasselstrom and Assoun for a good illustration of its outcome), on careers (see Godechot, Kleiner) or on networks (see White, 1984) we would have grasped Finance through a common feature and we would have run the risk of downplaying the specific traits of the financial practices as such. One of the striking feature of the new interest for the sociology of Finance lies in its sometimes naïve discovery of a world that share most of the non financial world characteristics. Of course Finance is full of cultures (male dominant, aggressive, etc), of course, one can find nearly all the structures ruling the non financial spheres in Finance, but is it worth these painful field works, these aggressive interviewee behaviors – when they are not really exhausting – if one squeeze out
of these moments nothing more than that ? If getting into Finance should teach us nothing more than the information that traders too use nicknames (see Hassoun, 2001), then it may not be worth all that noise.
So, pulling back Finance to its social conditions may not be such a progress and we may miss completely what it produces, the kind of novelty that Finance bring forth and to paraphrase 3Whitehead, the "event-Finance" may slip into our fingers as we try to catch it using
categories that were not forged with a view to understand it.
As a balance to the loci and conditions of Finance, we needed to understand what was specific to Finance in order to seize it at its joint and not too arbitrarily. We decided to focus on the formulas of Finance. It didn't amount to put an end to the rigorous attempt to step aside of the sloppy discourse around "globalization". It is simply the recognition of the nature of financial markets we came to analyze. We wouldn't make justice to this activity if we were to cut it into ready made categories. Instead, the focus on the formulas of Finance allowed us to investigate the tension between the dislocation of Finance (slight price changes in Tokyo flow to Madrid in a couple of second and there it triggers huge changes on markets physically unrelated to Tokyo prices) and the very material conditions of its places (at each step of this long chain running from Tokyo to Madrid an individual must facilitate this quick process, a machine must work properly to issue a stable account of the process, etc ). Formulas are tied to the
circulation, they are invented to bridge gaps, to take advantage of discrepancies and incoherence on the various financial markets. Their greed looks at all the financial places at once and they are relentless. But they are also tied to the "material conditions"; they flow
instantly, at the speed of the light or … of an electrical signal but they are attached to this signal. If the electric power of the bank breaks down, formulas fall down.
3 On Whitehead, see the forthcoming study of Isabelle Stengers. The notion of event and the consequences it has for the social sciences is found in Whitehead, Alfred North. 1925 (réédition 1967). Science and the Modern
World : Lowell Lectures. New York: MacMillan.
These twofold formulas seemed like the accurate threads to follow for all these reasons. But there is one more reason that pushed us in their direction. If we wanted to understand the dynamics of financial markets – and it looks like a non trivial dimension with respect to the
changes that have been occurring over the last 20 years – we needed to find the origin of these 4changes. Drawing on a principle provided by Michel Callon, we didn't find better vessel to
track the changes than the financial products themselves.
The focus on the circulating formulas allows to cast light on a couple of questions raised by the changes that took place over the last 20 years.
What are the causes of these changes?
How did the changes in different places were mutually related?
The answer to these questions immediately directs us towards a social theory. The focus on formulas also implies a special social theory that needs to be clarified.
The science studies framework : the locus of generality 5The Science Studies have investigated for now more than two decades the places of science ;
this strand of research has cast light on places that seemed irrelevant with regard to the generality of scientific statement. Going against a rigid epistemology and exploring the laboratories and the other places where sciences are elaborated, it helped understand how general formulas could flow from the dirty places of the labs to more stable realms and more stable forms. Thanks to a renewed attention to the materiality of sciences, the science studies opened the door for a description of formulas equipped with instruments, people, rules etc. At 6this stage, it is not our purpose to go into a detailed analysis of the varieties of this strand of
research, rather to use it in its endeavor to explain how the general formulas of Finance are neither free floating and self demonstrating (a thesis defended by the epistemologist and the
"anti-globalization" chorus) nor pure social constructs (a thesis defended by some social
science researchers). To sum our understanding of science studies and the way we use it, formulas make differences to the world, but they are also very expensive and demanding when 7they aim at being general.
4 The focus on the products (shifting, redefined, transitory) is a methodology that doesn't apply only to Finance. It is a general methods to describe changes as soon as we can detect the circulation of an item, be it a service, a good, a person or a formulas. 5 Geography is far ahead of what is available in sociology of Finance. See for example Leyshon, Andrew and Nigel Thrift. 1997. Money/Space : Geographies of Monetary transformation. London: Routledge. Thrift, Nigel.
1998. “Virtual Capitalism : The Globalisation of Business Knowledge.” Pp. 161-186 in Virtualism. A New
Political Economy, edited by J. carrier and d. Miller. Oxford: Berg. 6 The social science spectrum is very wide. Sometimes Science Studies take up "materiality" in a critical stance, as a way to look down upon science and its arrogance. In this case, materiality is used as a downplaying of the undue claims of Science: its sharpest version is a teinted with irony and goes usually like this "science is nothing more than an mundane practice, have a look at the labs, at the trash of the scientists and at their notebooks, they are nothing more than tickering", for a critical perspective on Science, see Pinch, Trevor and Harry Collins. 1994. Tout ce que vous devriez Savoir sur la Science. Paris: Editions du Seuil..
There is another way into materiality and another use of it : it is not critical but it draws from the observation of its centrality in the circulation of general formulas a lesson about the ingredients of the World. From our point of view, the most promising analysis of this materiality takes advantage of the field of sciences (the ability to scrutinize the everyday work of scientists, the memory of their activity, the tracking of their records etc) to draw far reaching conclusions and helpful results with a view to reshape social theory. See Galison, Peter. 2000. “Einstein's Clocks: The Place of Time.” Critical Inquiry 26(Winter):355-389 and Galison, Peter. 1997. Image
and Logic. Chicago: Chicago University Press.
7 (faire un point sur le fait que les formules déforment)
From formulas to forms. The stabilization of formulas
The focus on formulas prevents from difficulties that arise when one forgets them and looks only at the practical conditions of their exercise.
In the course of this research we encounter emerging formulas that circulate across universes that can be deformed and reshaped. Of course, there can be cases where the universes crossed by formulas are not as sloppy. Cases where the world is already well stabilized and quite inflexible. It is even the majority of the cases. Formulas can leave the world unchanged and they can fail at moving it of even an inch. If we were to qualify these stable worlds, we could say that they are already occupied by forms that resist against the changes propelled by the moving formulas. The thrusts of the formulas have to defeat the ruling forms. But when the stability of the forms is too firm, it can't accept any reshaping. Not flexible enough, it breaks and it lets the field to the new formulas or it resists and the candidate formulas can't perform the world. It is really a conflict between competing forms and formulas just as there are conflicts of conatus in a spinozian world. Each formula that succeeds at grounding itself into a form and at securing its existence can live longer : it develops new formulas that back its strength, it literally produces new formalisms that theorize its reality. Otherwise, it can be superseded by any formulas that manages to ally sufficient ennemies to the current form. At this stage, a more precise definition is necessary to explain how forms, formalisms, formulas and formulas in the making – we call it, improperly, formulations are linked together.
The formulation is still very tentative and shifty. It is taking shape but it can very easily fall apart if the conditions for its holding are not met. The formulation claims a right to the existence but it can't claim the existence : it is still hesitating, it is on the side of the blur and the fuzzy. The bank is rife with these kinds of beings : it constantly produces new formulations that will either fall back into the darkness or take on an extra consistency and become a formula. The meaning of formulation are not fixed : still ambiguous, they can be pulled in different directions.
At the other end of the spectrum, one finds the form.
It is fixed, it is the realm of the routines and of the sleek combinations. Its investment is behind it : it is constantly maintained, cared for and sometimes repaired but it uses its current achievement to promote itself. The form is ruling a part of the world and as such it is superior to the candidates that rush to supersede it. The form is capitalizing on its past. It displays its existence as the best manifestation of its power. But, in contrast with the previous steps of this stabilization, the form is a composite of different matters. Whereas the formulation and the formula were primarily statements, the form is a much more complex being. In a famous 89article, Laurent Thévenot has described how the notion of form investment could be used to
8 Thévenot, Laurent. 1986. “Les investissements de forme.” Pp. 21-71 in Les conventions économiques, vol. 29,
Cahiers du Centre d'Etude de l'Emploi. Paris: PUF. 9 ? nous proposons une définition élargie de l’investissement qui puisse rendre compte de toute cette gamme d’opérations de mise en forme, en même temps que des immobilisations de capital habituellement désignées par
ce terme. Le domaine de validité de la forme ainsi constituée apparaît ainsi, à côté de sa stabilité, comme une caractéristique fondamentale pour l’analyser ? (p.22). dans la suite de cet article l’auteur s’efforce de suivre tout
le continuum des formes qui peuvent opérer cet investissement. La généralité de la forme est ainsi un élément central de sa force. Les conflits de formes et de formules se jouent aux nombres d’alliés qu’elles réussissent à
mobiliser derrière elles. Leur généralité tient grandement à ce nombre d’alliés. Mais ces alliés dépendent aussi largement des prises que l’arrangement propre de ces formes –formules réservent. ? Et d’abord pourquoi avoir
retenu le terme de forme qui peut paraître excessivement ambigu par la multiplicité des oppositions dans lesquelles il s’inscrit ? la réponse nous amène à un premier point caractéristique de notre recherche depuis les travaux passés réalisés sur le codage : notre souci à traiter de la capacité à entrer en équivalence (Thévenot, 1983) des êtres que nous souhaitons appréhender. Par extension, nous nous sommes servis de ce terme pour nommer d’un terme générique les êtres dotés de cette capacité. Nous l’avons choisi parce que nous entendions appréhender une variété d’êtres très étendue qui comprenne non seulement des catégories cognitives ou des outils de classement, mais également des êtres sociaux, coutumes, représentations sociales, personnes collectives
describe a wide variety of economic organizations. The organization of enduring stability, enduring enough not to impose the new construction of a framework for the economic activities, can be well conveyed through this metaphor of a form. This metaphor accounts also for the necessity to guide the daily activities with paths already trac