The City, Summer School, and the Social Studies of Finance

Done! The first LSE Summer School in the sociology of finance officially ended last week. Three very intense and demanding weeks. But successful. Probably, my best teaching experience ever.

So what made the course so special? To address this, I’ll rely on the slides that the students put together for the review session. To start, what was the course about? The slide by Supriya Shahra and her team makes clear course combined social and technical concepts, introducing unconventional notions such as performativity, resonance, framing, and sustainability in finance. So rich, in fact, that it makes the orthodox “homo economicus” approach to financial decision-making look primitive… like a Nearthental version of a human being.

For a more theoretical take on the course, check out the slide by Jaakob Laage-Thomsen and his team. It shows a French sociologist, Bruno Latour, and a Nobel Prize economist, Myron Scholes, working together. The slide makes clear that financial models should not only be critically examined (as behavioral critics repeat to exhaustion) — but also celebrated. And that the divide between studying and intervening is very blurry indeed: as Michel Callon wrote, “transporting a theoretical statement from one point to another and implementing it requires the intervention of new actors who will contribute to (or oppose) the actualization of the socio-technical agencements implied in the statement” (Callon p. 29). The sessions by both Yuval Millo and Juan Pablo Pardo Guerra, it seems, hit home with the students.

One final highlight was the speakers. We had at least one representative from almost each institution in the City of London. Including: a global head of securitization from a bank, a private equity investor with two decades of experience, two regulators, a book author on the sociology of accounting, a former risk manager, a consultant and expert on bank culture, an executive in responsible investment, a consultant in the same topic, and two executives from a rating agency. The speakers really gave a first-hand, straight-from-the-trenches view of what finance is about. In this, we were lucky to have the collaboration of Nina Andreeva, a PhD student at Cambridge with a former life as banker in the City.

All in all, the overriding message from the course remains simple: that there is a new and distinctive way to think about financial markets. Different from orthodox economics and its emphasis on rational choice. Different as well from behavioral finance and its focus on individuals and mistakes (or “biases”). And even different from mainstream economic sociology of networks and institutions, as much as we like that literature. The social studies of finance seeks to incorporate technology like formulae and machines in our understanding of markets. It conceptualizes markets as controversies. It locates why management, culture, practice, are critically important to the calculative processes of a bank. And it provides a balanced take on markets – in between the “markets always get it right” approach from economics, and the “this is how people get it wrong” from behavioral finance. The hope here is that the ideas in the course will not have helped students understand what went wrong with financial markets during this credit crisis, but also that there is a way to reconstruct finance so that it does better.

Finally, the future. As the last one of the speakers left the room, I shook hands with the students, posed for the group photo, and experienced the predictable sense of “now what?” that comes with every end of course. Where to go from here? We sure as hell are going to repeat the course next year. Perhaps the LSE might also make it an executive summer course. But Nina and I are already thinking other forms of engagement (sociology breakfasts in the City, anyone?). Regardless, the next stop is New York. All of us, including Donald MacKenzie, Yuval, Juan Pablo, NIna and myself, will be meeting again for our workshop on market microstructure at the NYSE. To them, it’s a “see you soon.” To the students, it is best of luck!