Finance and the humanities
September 27, 2011
A recent conference in Duke University posed a fascinating yet difficult challenge. The event was hosted by Ian Baucom at The Franklin Humanities Institute. And its goal was to seek ways for social scientists and humanities scholars to collaborate in re-thinking finance in the wake of the credit crisis. Charles Piot, from Anthropology, co-organized the event.
The invitation, however, did not come with an instruction manual. And so as I arrived to our rather splendid digs in Durham (The King’s Daughters… best European hotel west of Paris), the nagging question on my mind was, what are the common interests between myself and the humanities? I’ll leave that as an open question. Rather than writing a full-blown conference report (a website with video is in the making), I’d just like to highlight two presentations and will leave my own presentation for another post.
First, the presentation of Mary Poovey and Kevin Brine. The two of them are writing a history of the “naturalization” of financial models. They ask a very relevant question: how did complex ideas as discounted cash flow end up seeming unproblematic to us? In my view, this important project should also consider the ways in which investment firms do not fully naturalize models. David Stark and I detected that sophisticated arbitrageurs use models without blindly believing in them. Their trades still blow up, of course, but they do when their “reflexive devices” fail to work.
The day included other fascinating presentations. Caroline Hardin built on existing work on arbitrage to put together what could be a Marxist theory of quantitative finance. Bill Maurer gave a fascinating account of payment, weighting in on current politics with historical arguments in favor of the Federal Reserve.
But most of the questions went to Karen Ho, on banker’s morals. Many academics, she notes, ask themselves how investment bankers sleep at night. Yet in viewing them as immoral, they are just projecting their own morality. In fact, she argues, bankers have an acute but different sense of social good. How do they help society? According to themselves, they facilitate creative destruction. Make prices more efficient. In effect, they are socialized into a peculiar morality: hierarchical classification. They are at the pinnacle as the moral order of capitalism. The rest of economy fat slow and dumb. And they are the guardians.
Ho, the author of Liquidated, was not just brilliant but also useful. The morals of “social sorting” explain, for instance, the rogue trader at UBS. Like Jerome Kerviel in Societe Generale, the latest rogue was a mid-level employees in a middle-office. As the Financial Times put it, “middle class blokes in Thomas Pink shirts.” Surely, not a coincidence? As a recent book by Vincent Lepinay contends, knowledge flow within tough, meritocratic, successful investment banks… is nearly impossible.