Economic theory and actual market practice cannot be radically separated in derivatives

Evidence

Michel Gallon’s critic Daniel Miller argues that economic sociology and anthropology should “radically separate out the market as a ritual and ideological system constructed by economists and the actual practice of economies” (D. Miller 2002, p. 224). In the sections above, we have seen a range of performative effects of financial economics. They vary in importance and in the extent to which they approximate to strong, Barnesian performativity. Nevertheless, it is clear that in at least some contexts most obviously in the derivatives markets the radical separation called for by Miller is impossible. The economic theory of derivatives and the “actual practice” of derivatives markets are interwoven too intimately. — Donald MacKenzie, An Engine, Not a Camera, 1182

Categorization

• XREF: Directly responds to Miller’s critique of Callon — the core sociology-of-finance debate over whether markets and their theories are separable; connects to Callon’s ‘performation’ concept. — connects to: Economic theory succeeded in derivatives markets partly by making markets conform to it — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 9; Economic theory, not trader demand, forged the proposal for the stock-options exchange — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 63; Financial economics actively alters markets rather than merely describing them — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 64 (+8 more)
• DEFINE: Clarifies the scope of Barnesian performativity: its strong form is approximated most fully in derivatives markets.
• DEEPTHINKING: This is the book’s central boundary-of-thesis statement — where performativity does and does not reach, against critics who would dismiss the whole program.

Broader Connections

• Option pricing theory did not describe markets but remade them in its own image #expands (0.90) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 182
• Derivatives do not reflect risk but actively produce contingencies and value #expands (0.85) — Aris Komporozos-Athanasiou, Speculative Communities, 390
• Derivatives are promissory instruments that embrace rather than tame uncertainty #complicates (0.80) — Aris Komporozos-Athanasiou, Speculative Communities, 61
• Antitrust law’s presumptions cannot be isolated from prevailing economic theory #exemplifies (0.80) — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1146