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).