Financial models construct the markets they purport only to describe.
Evidence
“We have taken science for realist painting,” writes Bruno Latour, “imagining that it made an exact copy of the world. The sciences do something else entirely paintings too, for that matter. Through successive stages they link us to an aligned, transformed, constructed world.” (1999, pp. 78-79) If finance theory is one of Latour’s sciences and this book’s conjecture is that it is then simply to praise it is not to add much to humanity’s conversations about markets, and simply to denounce it is to coarsen those conversations. To try to understand how finance theory has “aligned, transformed [and] constructed” its world which is also everyone’s world, the world of investment, savings, pensions, growth, development, wealth, and poverty may, in contrast, contribute a little to conversations about markets. — Donald MacKenzie, An Engine, Not a Camera, 120
Categorization
- DEFINE: Frames the performativity thesis via Latour: knowledge systems align, transform, and construct their worlds rather than copying them.
- XREF: Directly anticipates the book’s title and central thesis; connects to Callon’s ‘performativity of economics’. — connects to: Finance creates intangible commodities that exist only through valuation techniques — Ève Chiapello, Financialisation of Valuation, 104; A market model can shape markets actively rather than merely describing them — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1165; Using a model can make markets conform less well to it. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 92 (+7 more)
Broader Connections
- Financial pricing formulas actively construct the markets they purport to measure
#corroborates(0.98) — Max Haiven, Cultures of Financialization, 84 - A market model can shape markets actively rather than merely describing them
#corroborates(0.95) — Donald MacKenzie, An Engine, Not a Camera, 1165 - Financial economics actively alters markets rather than merely describing them
#corroborates(0.90) — Donald MacKenzie, An Engine, Not a Camera, 64 - Financial theories can become true by guiding the practices they describe
#expands(0.90) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 38 - A financial model can be written into regulation to enact its own assumptions
#exemplifies(0.85) — Donald MacKenzie, An Engine, Not a Camera, 742 - Market conditions moved toward the model’s assumptions partly because of the model itself
#exemplifies(0.85) — Donald MacKenzie, An Engine, Not a Camera, 1155 - Financial instruments shape markets rather than merely read them
#corroborates(0.85) — Max Haiven, Cultures of Financialization, 401 - Using a model can make markets conform less well to it.
#complicates(0.80) — Donald MacKenzie, An Engine, Not a Camera, 92 - Markets carry explicit traces of the specific pricing models they use
#corroborates(0.80) — Donald MacKenzie, An Engine, Not a Camera, 899