Performativity-bashing

July 14, 2010

OK, a last follow-up from me on the latest instance of ‘performativity-bashing’.

Daniel did the right thing in this post by showcasing an empirical social studies of finance research paper that uses the notion of performativity to explain an aspect of the crash. It is the right thing to do because producing better research is the best answer to criticisms. However, dealing with some of the critical points helps to sharpen the message of performativity and, in general, that of social studies of finance.

First, the claim that performativity is ‘just like’ Merton’s self-fulfilling prophecy was made, time and time again by none others than Donald MacKenzie and myself. I presented the paper about the Black-Scholes formula and CBOE about a dozen times and each time, without fail, I stated that the fundamental process at the basis of performativity is not different from self-fulfilling prophecy. That said, the empirical and conceptual innovation is that we show in detail how self-fulfilling prophecy comes about, how it becomes institutionalized, under what conditions it is ‘reversed’ and we expose the crucial role that non-human actors play in the process.

Second, we hear time and again the claim that social studies of finance is ‘sympathetic to the markets’ and the fact that SSF researchers analyze market devices in such great detail is an indication that they actually ‘go native’. The reason behind the detailed analysis is very different, of course. Understanding the intricacies of the analyzed subject is a crucial part of the strand of sociology of science from which the social studies of finance. This intellectual landscape includes, for example, Leviathan and the Air-Pump (Steven Shapin and Simon Schaffer), Andrew Pickering’s work on particle physics, Harry Collins’ works on the detection of gravitational waves and Donald MacKenzie’s research on missile guiding systems. This is very partial list, of course, but the similarities between the pieces are obvious. All these works are empirical, they strive to understand the techno-scientific knowledge embedded in the machines/devices studied and, critically, they identify and analyze the reflections of the larger political, social and cultural circumstances where these technologies were developed. This last point should be made again, for the benefit of the ‘attackers’: if you want to gain better understanding of the processes through which the financial crisis came about then you really have to understand the nuts and bolts of the business. And, no: simply saying that ‘it’s all greed’ or that ‘the models are always wrong’ (or their more elaborate, but not less simplistic, academic equivalents) is not nearly good enough. Instead, by understanding the minute details of, say, how credit derivates are designed sheds new light on the macro conditions of neo-liberalism and gain better understanding of the crash.

Lastly, people sometimes assign agency to ‘economics’ when it comes to performativity. The fact that economic theory is being ‘made accurate’ does not mean that the theory or ‘economics’ operated so that this aim is achieved. Instead, performativity is the result (which is frequently unintended) of hybrid networks of actors who operate so as to promote a variety of agendas (scientific, political, commercial, etc.). There is no single ‘big brother’, economist or otherwise, which pulls the strings to make theories come true. Funnily enough, a piece that is presented frequently as a fierce criticism of performativity, the one by Philip Mirowski and Edward Nik-Kah,  does just that: it shows how a collaboration between economists, politicians and other professionals brought about the establishment of a market that performed economic theories.

PS – These arguments, of course, would not make any difference to the avid ‘performativity bashers’. In fact, answering them would make as much sense as shouting at the TV when Fox News is on. It’s still fun, though.

19 Responses to “Performativity-bashing”

  1. mlenglet Says:

    Should I be a bit sarcastic?

    I definitely think that criticisms about the “native” aspect of SSF is in fact a very good proof that SSF say things that are not reachable by other fields of research in finance. Epistemological jealousy may indeed result from frustrations generated by methods and discourses remaining stuck on/over/by the surface of financial things and objects (it is very funny to see that such criticisms have already been raised towards phenomenology, in the field of philosophy). Would performativity-bashing be the long-awaited institutional acknowledgment that SSF have performed so well (…) that they should now be treated as a genuine and honourable field of research (who knows…)?

    SSF provide the necessary stance and tools to resituate the ontological thickness of a complex reality – the status of which still being under discussion (what is a financial practice? what is a financial object? etc.). Precise descriptions that are produced in the field are necessary to the understanding of practices, and their relations to the tools within which they tend to be more and more encapsulated. Which does not mean they should bluntly replace the different “institutions”, the enactment of which they somehow contribute to – rather that they offer a complimentary view unveiling places that otherwise would remain in the unseen. In times when black-box trading develops in financial markets, it may well be worth it to gain access to those remote places.

    Suggestion: let’s fully assume the nativity of our academic descriptions – for they “decorticate” and deconstruct a world most people cannot access and do not understand (these realities being rather complex even for those working as genuine natives). Let’s develop our descriptions within the cables of the financial industry: a modest though rigorous description may in the end be the best way to provide influx and make things differ within the (main)stream of financial activities.

  2. Yuval Says:

    Marc, many thanks for this. I agree with everything. The point you raise, to note that tools (or clusters of tools) do not replace institutions is very important. We do not want to engage in some sort of twisted ‘ANT colonialism’ where we tell our actors (or fellow academics)that their beliefs that institutions matter are wrong. Indeed, the very fact that they believe in institutions make the latter matter.
    It would be good to hear more about how we can develop our descriptions ‘within the cables of the financial industry’. I sense that an example is hiding behind this statement. Am I right?

    • mlenglet Says:

      Yuval – Well indeed you’re right, I was referring to my recent / current attempt at describing algorithms (here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1616043).

      But apart from the algorithmic object, which makes for an easy “cable” metaphor, I think there is a developing interest in gaining new representations on finance (strictly speaking). Indeed, cables make for an important part of contemporary markets / intermediaries / clients / products / etc. and they are those small bits and pieces that are not “important”. Hence my interest in these modest beings.

      As regards the description stuff, I’ll come back to you later… paper still under construction…But just to make a point, I have the feeling that even classical publications such as Institutional Investor’s Journal of Trading now seem interested in heterodox approaches to financial objects.

  3. Erica Says:

    Aside from conservative critiques about performativity, I think the problem is not with high profile researchers using the concept, but with what I have been seeing myself – an unsophisticated use of performativity as either the end-all-be-all or as the new favorite pet critical theory. MacKenzie’s excellent credit crisis paper was great work, but when I hear other graduate students say “I work on performativity” it just makes me cringe. It is these disciples, if you will, who I think are causing problems for the concept. But then again, you need some followers to promote the concept out in the world, so it’s a double edged sword.

    The bigger problem is that in expanding the concept as something of a political banner, it starts to mean nothing. Moreover, it should be SSF as a multi-valenced technique that is the coordinating label, not one or the other theory in the SSF toolbox that will be the hot new theory of 2006 and then fade away. But perhaps we need to promote some other tools alongside performativity for people to think of the work in this way.

    For example, maybe SSF tool #2 should be ‘market coordination’ per your prior work. #3 could be Knorr-Cetina’s scopic systems, #4 her concept of shared reflexivity. (I would nominate my own ‘strategic visibility’ work but the paper’s not done yet.) I don’t know about ANT; that’s an argument for someone else. However, when will Martha step up and write the guide to SSF?

    Well, that’s my $0.02.
    Things are getting interesting at least.

    PS – to add fuel to the fire, I’ve also heard the critique “Isn’t performativity just institutionalization by another name?” But again, that’s a question for someone else to mull over.

  4. Chris Jefferis Says:

    Erica – I’m close to agreeing with your last question.

    I think the real innovation of SSF is not performativity, which is an illustrative term that refers to an occasional phenomena of the application of models, but that financial models can be researched as social structures.

    SSF generates brilliant research but the packaging in the concept of performativity doesn’t help to generate broader understanding.

  5. Yuval Says:

    Erica, I completely agree with the ‘tool box’ approach. Also, as you say, when a concept/theory/method become successful in analysing a set of phenomena then one of the inevitable outcomes is that it’s being used out of context sometimes. This last point also agrees with Chris’ point about the less-than-perfect ‘packaging’ of performativity. But, I would like to take your insight as a directive: I would rather direct my efforts at producing excellent research than spend a lot of energy explaining performativity for the Nth time.

  6. Will Davies Says:

    In answer to the second of the three criticisms, which implies some form of leftist slant, it’s interesting that sociologists are comfortable becoming intimately acquainted with production, but not with finance.

    It might be worth reminding these critics (whoever they may be, and Woolfgang Streeck had just such an outburst at SASE this year) that one of the most famous moments in volume one of Capital is where Marx invites the reader to follow him into the factory, in his effort to unveil the mystery of capital. There is an ethnographic component (albeit, supplied via Engels’s access to the Manchester bourgeoisie) and an express desire to root around in obscure foreign territory.

    I don’t see why performativity scholars can’t claim to be working in a similar spirit of curiosity and enquiry, even if they don’t conclude with express critique. Maybe there is just greater division of intellectual labour, and critique is supplied by others.

    • Erica Says:

      Good point. And of course to be political is just fine–I’m a centrist, so that’s not really my thing–but my point for those who want it to be more political, to give Stark a hat tip, is that we need enough diversity and productive friction among the SSF researchers to be able to challenge one another and get interesting controversies. As I had commented in a previous post, I think we should aim for what organization studies have done, with a diverse perspective. If anyone has gone to EGOS I’m sure you can think of many different viewpoints being valid there. (My thinking is that the more traditionalist reaction against SSF might be better explained by cultural theories about why people oppose new artistic movements or related work on scientific controversies, but that’s a thought for another time.)

      Since you mention Marx, what’s really interesting to me right now is that while sociology has had a long tradition of studies of the economy and of firms, as finance has become bracketed off from economics, we sociologists lost sight of it. Not that people didn’t use financial data at times, but there’s a rich area there for study with quite new and different concepts for things that we don’t get from a traditional economic sociology view. (E.g., the idea of investment commodity in the finance sense, as I’ve been writing about lately.) So it’s a new area for theory generation that I quite like.

      (Also, my own hesitation to use the word performativity should not be construed as me being opposed to other people using it. It’s more of a practical matter. I find it to be a bit blunt these days, like the concept of culture, so it seems less productive for me to spend three pages explaining what I mean with performativity when I can just use a more discrete term like reactivity and get on with it. Strategically also, US journals would tend to be less receptive at present…)

  7. dstark Says:

    Yuval,

    A minor point. I was not aware that you and Donald MacKenzie had claimed “that performativity is ‘just like’ Merton’s self-fulfilling prophecy.” If so, I think you should retract it instead of reminding us about it. Your AJS paper is not at all “just like” Merton’s. And stating that it is only contributes to confusion about the concept.

    I do understand that there is a relationship between your notion of performativity and Bob Merton’concept of self-fulfilling prophecy. But to claim that there is a direct, unbroken, and unmediated affilation (in effect, a mimicry) denies an entire generation of work in Science and Technology Studies that made real advances because it made serious departures from the Mertonian framework. Your AJS paper is a part of that body of work and it is misleading to now position it somehow outside of that.

    It’s also a mistake to reduce your contribution to a mere description of showing “in detail” how it came about. As I mentioned once to Donald at a conference in Konstance, it is not the case that the Black-Scholes (Merton) theoretical paper performed option markets. Instead, as you show, it was the use of the rolled up pieces of paper that traders carried onto the floor that did so. An analysis of market devices is not just some new “detail” appended to Mertonian theory.

    Daniel and I make reference to Merton’s self-fulfilling prophecy in the context of runs on banks. And we suggest that it would be interesting to analyze that phenomenon focusing on the material practices that are likely to be critical. In particular, we think about lines at banks. It’s when they stretched outside the door and around the corner that the prophecy was signaled. We expect that bank managers are now aware of this problem and that there are probably protocols that prescribe actions to mitigate these effects.

    • Yuval Says:

      David, thanks. I definitely don’t want people to get the (wrong) impression that all we did was to add an empirical footnote to Merton’s insight. So, just to sharpen the point: although the fundamental mechanism in performativity of economics is similar to that of Merton’s self-fulfilling prophecy, our innovation lies, I believe, in the fact that we reveal and analyse the crucial role that market devices play in the process. From this perspective, by the way, our 2009 paper provides an even wider scope of relevant market devices, not only on the trading floor, but also in the clearinghouses, in the back offices and at the SEC.

  8. dstark Says:

    Yuval, I take this as a retraction. Exemplary in its forcefulness and clarity. A very strong statement. I’m a bit concerned that it will be lost, buried down here in a long list of comments. I’m new to Socializing Finance, but would I be out to line to suggest that you include something like your statement in a new post — not as a retraction, of course, but as a clarification. I think it’s important because we do want to make a debate that clarifies the positions (and concepts) rather than confusing them. Nice to join you here. David

  9. danielbeunza Says:

    Welcome David! I take your point to be that the AJS piece is actually even *more* of a contribution that Yuval implied. And that’s very welcome.

    Having said so, I should add that I don’t think the point will be lost on readers. In my view (and just as STS would predict) the one thing that people remember from blogs was the stuff that gets debated. Especially, if the comment is coming from you.


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