The Specificity of Finance

February 8, 2007

One disadvantage of setting a motto in the line of “social studies of…” is that it places great emphasis on the specificity of the object to which it applies: finance, in the case set out to be discussed in this blog. I remember that the discussion on the specificity of finance motivated heated debates among the (relatively) young researchers that initiated the Parisian social studies of finance seminar in 1999. Is there something wrong with finance, something that deserves a particular and differentiated sociological attention? Or are we done with what’s already available there in order to study financial activities just as any other economic activity involving people working for money?

Of course, our early gatherings, and the manifestoes that they produced (almost everybody there were young doctoral students coming from a variety of academic “chapelles”), ended up with a resounding “yes”. Yes, there is a specificity of finance, hence a need to build a proper sociology of finance. “Social studies” rather than plain “sociology”, probably because the group included an important number of political scientists, economists and impure sociologists: note for instance that, in France, social studies of finance owes a lot to the French-style economics of conventions. Some may also recon in this label an explicit and well-informed “clin d’oeil” to the social studies of science. This, of course, was to emphasize the role of mathematical and computational tools in the construction and transformation of the financial world: the construction of financial products, but also the development of the financial services industry as a whole, the modification of behaviors and professional careers, the creation of risk and so forth.

Well, that seminar in Paris (once held at the Mines, then at Jourdan, and now at CEVIPOF) has been working on an almost monthly basis for now almost seven years, and most of the people that were there at the beginning actually didn’t get bored and still go (this post is a blatant plug). And, from time to time, “la question de la spécificité de la finance” still pops-up, happily unsolved, fresher than ever. David Martin made special efforts to keep the question alive within the seminar, as did Vincent Lépinay earlier on, before leaving to the US.

My summary of the debate (if I dare): there is something rather specific with formalism in finance. And specificity is not just about “traders do use maths” or “there are lots of figures there”. It is about the very nature of what financial action is. A “financial action” is (but then you guess that you may need a theory of action that is not very conventional) a conditional action (literally, an action with an option), like insurance, but whose underlying assumptions are prone to purposeful and organized drift (i.e. trading). The consequence is that you can get (or loose) a lot of money with little, if you get yourself the proper formalistic (and not only social) tinkering that can enact this particular grammar of gain, or of action at large (funnily enough, “action” in French does also mean ‘stock’). Against this, of course, the evidence that finance is more complicated than that, that in finance there are a lot of things that do have nothing to do with that but a lot with other many things and sorts of action, etc.

On the overall, the question of the specificity of finance, I think, may probably not be a very healthy thing as such, but I prefer to salute it as a non-superfluous way of keeping alive an intellectual inquiry about what is done, by whom and how, in financial markets (unless you think that ‘money, by the dominant’ is a sufficient response).

5 Responses to “The Specificity of Finance”

  1. danielbeunza Says:

    Interesting. Not having arrived at the study of finance through the Parisian maze of the chapelles, for some time I never understood this question.

    Why study finance? Well, for someone like myself, smack in the middle of New York City, the issue was kind of redundant. Take the subway to go to my doctoral seminars at NYU, get off at Christopher Street, walk east and — bang! the Twin Towers were right there, saluting the passer-by. At night, they even blinked. My question, as a phd student in organization theory, was more like, How could I possibly not study finance?

    Now, however, I see Fabian’s point. If I may rephrase, I think it boils down to this: the key to finance is speculative market activity. Like scientists, traders participate in controversies. But unlike scientists, traders don’t cite each other. They participate in controversies through prices. They say “the market went up too much, so I buy.” It is this socializing in anonymity (and this constituting of society in the process) that I find fascinating.

  2. fabianmuniesa Says:

    If you say that finance is about people engaged into controversies in pricing (just as any economic activity?) or about people socializing for work purposes (just as in many kinds of jobs?), well, you loose the specificity of the topic (and probably the possibility of defending that you need a specific sort of sociology for that). The point would thus rather be about finance itself being a specific kind of “being” (and not just a matter of money, sociality, or fancy parts of fancy towns). The argument I was trying to put forward for discussion is that (from a “pragmatist”, “socio-relationist” or “ANT-ish” point of view, indeed) the grammar of action of a financial action is somehow specific — with its specificity linked to its conditional character and to the tradability of its conditions.

    That said, why is there more finance in Lower Manhattan than in Mantes-la-Jolie remains a most legitimate sociological question.

  3. […] an earlier plug about this seminar, see this blog’s first post.) Posted by fabianmuniesa Filed in uncategorized Tags: Social Studies of Finance Leave a […]

  4. REUTER Charlie Says:

    My own take on this issue is that finance describes a number of converging real-world objects:
    – a ‘scientific field’, with its own methodological rootings and pre-conceptions (an orientation in greek philosophy)
    – a (technical) culture
    – a professional pratice that is clearly distinguishing economics from finance: economists are researchers, finance relates to either researchers or practitioneers.
    – a legal and economic domain with some sort of independance from other legala nd economics domains
    – a network of human beings across fields and disciplines that push their own agendas
    – the ability to short-circuit the reality of human interactions (make it more abstract), either social or economic interactions for instance.

    to that extend, I beleive that the social study of finance is more than just a social study of something; it is already an epistemology and a political study, unlike for most other objects.

  5. REUTER Charlie Says:

    … and to build on D. Beunza’s point, why do prices converge? Or put differently, under which conditions do they converge (thanks to and beyond anomymous trader’s controversies)? Is their existence (convergence) just a tool to facilitate exchange or is it transforming the exchange to a point that finance’s contribution to real world is transforming (so that the study of finance is ‘specific’)? Is price an economic or a financial object? Is barter economic and pricing financial?…..

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