"Linking Skepticisms" About the Finance Sector

Frank Pasquale

Brian McKenna published an interesting piece in the Society for Applied Anthropology Newsletter, which is reprinted here. He quotes Financial Times Managing Editor Gillian Tett on one underexplored reason for lack of public attention to "financial innovation" pre-2008: "Once something is labeled boring, it's the easiest way to hide it in plain sight." He also reproduces a fascinating reflection from Annelise Riles, whose work Collateral Knowledge: Legal Reasoning in the Global Financial Markets will soon be released:

I think Tett’s diagnosis should cause academics to ask some hard questions about why we did not do more to highlight and critique the problems in the financial markets prior to the crash. For myself, for example, fieldwork in the derivatives markets had convinced me long before the crash that all was not well in these markets. My husband (also an ethnographer of finance) and I often joked way back around 2002 that our research had convinced us not to put a penny of our own money in these markets.

But our own disciplinary silo made us feel that it was impossible to counter the enthusiasm for financial models out there in the economics departments, the business schools, the law schools, the corridors of regulatory institutions. There surely was some truth to our sense that no one wanted to hear that markets were not rational in the sense assumed by the firms’ and regulators’ models. But maybe we should have tried a bit harder; it turns out many other people also had doubts and thought they too were alone. What might have happened if we had all found a way to link our skepticisms?

At this point, it may well be the case that most financial economists have so barren a theory of the social purpose of financial markets that they really are only teaching people how to succeed within the current system, rather than improving the system overall. It’s a bit like a divinity school run by “believers,” rather than a religious studies department trying to study the religious (to borrow a distinction from Paul Kahn’s Cultural Study of Law).

More voices—from sociologists, anthropologists, heterodox economists, etc.—are needed. Gillian Tett, Karen Ho, and a few legal scholars like Riles and Funmi Arewa approach financial markets via modes of social inquiry that maintain a critical edge about their subjects. The RWER also provides good insights on what a renewed discipline of economics would look like.

Ultimately, we need a new sociology of expertise at agencies. We can no longer rely on government assurances that only the people who engineered the financial mess can help us find our way out of it. We need to consult those who have studied those engineers, limned their deformations professionelles, and considered alternative ways of structuring society’s capital allocation. As politics declines, capital allocation is the most important determinant of a society’s future.

In the finreg space today, I think there are at least three groups that are doing much to "connect skepticisms" about the financial system. The first are "knowledgeable professionals working within the system," and in their ranks I'd include Mike Konczal, Jennifer Taub, Lawrence Baxter, and a few other bloggers and Roosevelt Institute scholars. Alternatively, something approaching a public option or "utility model for banking" is being advanced by Ellen Brown, Matt Stoller, Timothy Canova, and many European thinkers. Finally, libertarians not captured by the Kochtopus have many interesting things to say: I'd include in their ranks Amar Bhide, Nicole Gelinas, and Russ Roberts. To the extent we can begin to recognize that TBTF companies are essentially state actors, I can foresee fruitful interactions among all these intellectual spheres of influence.

X-Posted: Concurring Opinions.
Posted 2:06 PM by Frank Pasquale [link]