How is finance different from science?

July 8, 2008

It is no secret to the readers of this blog that the field of the social studies of finance is built on the shoulders of science and technology studies. An intriguing question came up in last week’s Imagining Business workshop — how are the two different?

Almost all studies in SSF look at finance as if it were science. Thus, financial theory is the key driver of modern markets (in Yuval and Donald MacKenzie’s work), market devices are viewed as observation instruments (in Knorr Cetina and Alex Preda’s work), and trading rooms are studied as laboratories (my own work with David Stark). And so on. Indeed, this was the entire premise of the Oxford workshop on visualization: what do we learn about business visualizations from an science and technology perspective?

In a very intriguing presentation, Michael Lynch urged everyone to think different. The science metaphor, he said, is by now established. Let us ask how is business (here, I read “finance”) different from science. Give the STS study of business its own categories and intellectual agenda, so it can “give back” to the study of science. What distinct mechanisms should we focus on? The problem of accountability, Lynch suggested, might be one.

I have one in mind… but at this point I’m curious. What do other readers/ writers of this blog think?

7 Responses to “How is finance different from science?”

  1. dk.au Says:

    Good question.

    The obvious response (taking my cue from Stengers’ sympathetic reading of Popper) is the orientation: Science is about a putting at risk, finance about the circumscription and delegation of risk. But the distinction breaks down with a bit of prodding: eg. the ever increasing integration of science and the market (cf. Mirowski, Ravetz. etc.)

  2. marthapoon Says:

    Hmmmm… I’m not sure the demarcation question is the most helpful way of phrasing this discussion. IS or IS NOT science is a question about the nature of finance…

    Might it not be better to ask about the degree to which the analytic methods developed within in STS are / are not appropriate to the study of financial situations and leave the demarcation question up to the actors?

  3. yuvalmillo Says:

    Yeah, I think that Martha’s point is good. Using STS concepts when studying financial markets can be beneficial, but that in itself does not imply that financial markets are necessarily a science. That said, I think that there is some mileage in studying the different and similar practices of science and financial markets. For example, (Daniel knows where this is going, as well as everyone else who has been to the SSF workshop…) markets can be seen as public experiments where the various hypotheses of investors, as well as their different methodological and epistemological approaches, are tested. This point of similarity does not end here because, just like in science, the methodological validity of the ‘laboratory’ is frequently tested (e.g. investors claim that the market does not price assets correctly). There are many more relevant points here and this can (and should) be a good discussion.

  4. marthapoon Says:

    It seems to me that the whole question of the relationship between finance and science is really an internal question about the relationship of SSF to STS within the social sciences. STS has an important institutional footing – conferences, funding opportunities, and so on – so it is important for pragmatic reasons that we situate our research movement with relatioship to these structures. But I would be very cautious about making this question the central intellectual or analytic question of SSF. In my opinion, that would be mistaking the cart for the horse…

  5. panik Says:

    There is a fun (non-academic) polemic by Simon Jenkins in The Guardian (http://www.guardian.co.uk/commentisfree/2008/jul/09/economics.globaleconomy) on whether economics is a (pseudo?)science or not.

  6. yuvalmillo Says:

    Martha, it’s not STS about which we should think strategically; it’s not even economic sociology: it’s financial economics. Currently, mainstream financial economics is the first port of call when ‘the public’ want to understand markets. This is the position against which SSF should visualise itself.

  7. marthapoon Says:

    Yuval, I agree with you. But in looking over new currents of interest in studies of finance being generated within STS (several meetings have been reported on in the blog), without a guiding statement(hint, hint) that is not where the field will be going.
    The temptation to fall back into familiar conversations seems to be quite strong…


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