The South Atlantic Quarterly 111:2, Spring 2012

DOI 10.1215/00382876-1548221 2012 Duke University Press

True vision is the art of seeing the invisible.
Jonathan Swift
Few phenomena have visibly destabilized the US
economy like the 2008 credit crisis, which threat-
ened a battery of economic agentsfrom banks
such as the late Bear Stearns to individual mort-
gage borrowers. As Ben Bernanke, chair of the
US Federal Reserve, has observed, the circulatory
processes that motivate the credit markets had
become paralyzed due to the evaporation of what
the fnancial community refers to as liquidity.1
Liquidity is more than a memorable metaphor for
the fuidity of capital. It is fnancial shorthand for
assessing the markets capacity to circulate capi-
talthis circulatory pump being a distinguish-
ing feature of capitalism and also its lifeblood.
The stilled heart of the liquidity crisis was that
fnancial institutions, fearing their counterparties
might be covertly insolvent, were hoarding rather
than circulating capital, even as the accumulation
of delinquent loans eroded their capital positions.
The result was a pernicious cycle that erased vir-
tually all available credit. The disappearance of
liquidity determined that the buying and selling
of the assortment of securities that animates the
Edward LiPuma and Benjamin Lee
A Social Approach to the
Financial Derivatives Markets
290The South Atlantic Quarterly

Spring 2012
fows of capital through the economy had ground to a halt. The systemic
peril was that the Euro- American fnancial system would collapse, threaten-
ing a global depression, which in turn would almost certainly foment politi-
cal unrest. The situation was so grave that the Federal Reserve and the US
Treasury, in an uneasy alliance with European monetary authorities, began
to implement what would turn out to be a succession of rescue plans and
bailouts in an efort to avert economic cataclysm.
The seemingly impossible volatility of the fnancial markets and their
near implosion resonated across the complicated space where the science
of the market and the markets use of science cohabit. The crisis laid bare
the underlying and underappreciated foundations of the fnancial feld,
calling into question the formal model of markets that many academics had
canonized as settled science and most practitioners had taken to be the only
approved operational paradigm. The history of science reports that this is
not the frst time that impossible events have undermined an established
paradigm, even as that history confrms that adherents never see, let alone
anticipate, the gathering storm. Systemic crises have their own logic: they
allow theorizations once excluded from the main conversation to enter the
common roomin this case, a kind of collective permission to entertain
a more social approach. Especially as neoclassical economics and Marxism
have usually elided the feld of fnance and the sphere of circulation, the
critical question is, what would a social approach to fnance look like?
With this objective in mind, our aim is twofold: to lay out the topogra-
phy of what we see as the embedded problems that underlie an attempt to
theorize and thematize the global fnancial markets, and to suggest a course
of understanding nurtured by theoretical traditions usually excluded from
the discussion, let alone commingled in ways that disregard disciplinary
borders. This requires that we animate a conversation among theorists,
such as Pierre Bourdieu, Frank Knight, Max Weber, John von Neumann,
Andrei Kolmogorov, and others who have resided on isolated islands of
social science. Similarly, we seek to deanalytify the space of understanding
by aggregating phenomena, exemplifed by ritual, play, and work, whose
analysis has been predicated on their separation. Our hope is that outlining
such an approach will serve as a catalyst in the development of an analysis
of fnance that honors the complex socialities inherent in the ascent of cir-
culatory capitalism.
LiPuma and Lee

A Social Approach to the Financial Derivatives Markets291

The Financial Crisis
The crisis part of the narrative is as clear and as brutal as the foreclosure
signs on neighborhood homes, the ascending unemployment rate led by
layofs in the housing and fnancial sectors, and the governments costly
rescue of fnance institutions, government- sponsored agencies (i.e., the
Federal Home Loan Corporation), and automotive companies.2 Many in
the fnancial community are educated and literate, and as the threat of sys-
temic implosion subsided, there appeared a stream of news articles, tele-
vision shows, and books seeking to autopsy the crisis. These frst respond-
ers probed the genesis of the troubled instruments, especially collateralized
debt obligations (CDO)3 and credit default swaps (CDS). Analysts examined
the governments role in frst assuming a laissez- faire regulatory posture
and then stepping in with a gargantuan bailout.4 The accommodative mone-
tary policies of the Federal Reserve during Alan Greenspans regime and
the economic model on which the Fed was based were dissected at length.5
Such narratives were complemented by big- picture accounts of how the
events leading up to the TARP (Troubled Asset Relief Program) unfolded6
and by smaller refections that chronicled the extinction of the legendary
institutions of Bear Stearns, Lehman Brothers, and Merrill Lynch.7
On the technical front, there were attempts to discern how the credit
markets surrendered their liquidity and why the mathematically delineated
econometric models engineered to depict and predict the behavior of these
credit markets failed.8 A thematic and theoretic connectivity marks all
these accounts. Thematically, the common rif is how greed set loose in an
unregulated shadow banking system motivated increasingly by reckless
speculation led to the crisis and the bailout. Theoretically, these commen-
taries presuppose a social they do not account for, framing their accounts as
teleologies of the immediate visible present. The narratives relate the immedi-
ate presentation of events and personalities, recounting through vignettes
how the escalation of greed- driven deals in a permissive environment led
us to the precipice.
What these and economistic analyses bracket is the invisible sociality
that shapes the Euro- American fnancial system. Against this asocial stand-
point, we would submit that it is impossible to grasp the fnancial system
and the crisis it engendered without grasping this sociality. The inverted
frame of this query is why we believe that the economic prevails over other
venues of sociality to the point of eclipsing them. The dominant under-
standing here is that what is economic is so godly powerful that it over-
292The South Atlantic Quarterly

Spring 2012
rides other considerations, so that analysis can theorize and model the eco-
nomic independent of other dimensions of social life. Family, country, the
construction of ones subjectivity, institutional position, and peer group
standingall contributors to what we have referred to as the socialare,
on this view, exogenous and subordinate to the economic. However natu-
ral this may now seem, the eclipse of the social was not always the ortho-
dox economic view, and in calling for a reconsideration of the social we are
not alone. Gillian Tett, who covers global markets for the Financial Times,
observes in her epilogue to Fools Gold that the fnance worlds lack of inter-
est in social matters cuts to the very heart of what has gone wrong and
that the path to a deeper understanding entails rethinking the culture of
fnance.9 Tett concludes that the crisis stemmed not only from techni-
cal factors but also from a failure to see that the economic is intrinsically
embedded in the social. We concur with her diagnosis and attempt here
to thematize and theorize how we might frame an analysis of fnance that
addresses its sociality.
From a social approach, the guiding thesis is that the reality pro-
duced by, and productive of, the social constitutes the foundation for the
production of fnancial markets, including the derivatives market. What
this means is that the circulation of fnancial instruments by agents and
institutions rests on sociohistorically created concepts, embodied dispo-
sitions and classifcations, generative schemes, layered motivations, deep-
seated compulsions, and strategies of subjectivity: what we call the cultures
of circulation. Here we speak of the evolving culture of fnancial circula-
tion that has taken shape since the early 1970s. This culture is realized in
the increasingly global idea of fnancial markets and fnancial practices
exemplifed by and embodied in a regime of workthat defne these mar-
kets and assign them with specifc trajectories. Most remarkably, there is
a directional dynamic toward the fabrication of a regime of labor/work
founded on the use of derivatives to make increasingly speculative wagers
in a relentless quest to generate profts outside the sphere of production.
In our view, a social approach would grasp derivatives markets as the
product of the interrelationship between three realizations of the trajec-
tory of the post- 1973 fnancial feld: the sociality embodied in the agents
that work within that fnancial feld, the sociality embodied in institutions,
and the sociality implicit, inherent, and buried in the structure of fnan-
cial practices. These socialities are inscribed institutionally in competitions
for status, conceptions of work and play, secular initiation rites, senses of
belonging and self- identity, ideas of fairness and just compensation, quasi-
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A Social Approach to the Financial Derivatives Markets293

formed schemes for balancing ones life plan based on a career in fnance
with familial attachments, notions of public/government service and phi-
lanthropy, and schemes for the construction of agents subjectivity based
on monetary acquisitiveness. Paradoxically, for fnancial agents and institu-
tions, the more successful the inculcation of the fnancial habitus and the
more those agents share a common ensemble of standpoints, generative
schemes, and dispositions, the more the social is obscured from their feld
of vision. Thus our intention is to clarify why the more socially embedded
a fnancial practice is, the less social it appears for those invested in it.
At issue is what kind of social is it that does not appear as such from an
insiders perspective?
Sciencemore precisely, the scientization of modern fnanceis
implicated in the process of rendering the social invisible in a specifc self-
valorizing manner.10 Finances creation of a fnancial feld that does not
appear to be social begins unexpectedly, with the axiomization of expected
utility in John von Neumann and Oskar Morgensterns Theory of Games
and Economic Behavior.11 Casting aside its social limitations, which von
Neumann and Morgenstern underline in passages bracketed in the subse-
quent canonization of expected utility, a succession of fnance economists
have used von Neumann and Morgensterns treatise as the foundation for
portfolio theory, which assumes that we can analyze the behavior of any
ensemble of assets (say, a portfolio composed of credit default swaps, debt
obligations, and gold) independent of the social.12 To override the possi-
bility of social diferenceagents might value/price the same asset(s) dif-
ferently based on social considerations, especially the trustworthiness of
their counterpartyportfolio theory universalized the expected utility-
driven market through the installation of a formal supposition of arbi-
trage, which decreed that no asset can simultaneously have two prices/
values. The price of any asset and therefore of any ensemble (portfolio) of
assets exists independent of the counterparties, of a markets embedded-
ness in the global political economy, or even of vacillations of supply and
demand meaning that markets are inherently liquid and thus immune
to systemic risk. Finances most cherished constructsfrom the ef-
cient market thesis and the methodology for calculating portfolio risk to
the pricing of assets (capital asset pricing model) and derivatives (a Black-
Scholesbased pricing formula)so deeply rely on the nonarbitrage stipu-
lation that textbooks in fnance refer to it as the fundamental theorem of
fnance.13
Grasping the markets sociality is sufciently complicated that eco-
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Spring 2012
nomic and fnancial accounts have ignored the issue, ofering instead a for-
mula that conceals a supposition of asociality under the apparent neutrality
of a straightforward empirical defnition. The standard narrative defnes
the market by what it does: it is an institution in which some aggregation
of rational agents engages in transactions that defne an assets price.14 The
formulation, which simply means that buying and selling a thing sets its
price, depicts one efect of peoples action when they make a market. How-
ever, behind the curtain of what can be expressed in the object language of
ordinary experience lie several theoretical problems that the empirically
defned, descriptivist formulation cannot begin to address. The problems
are so difcult and multidimensional that the path of least resistance is to
ignore them, leading to the observation by Douglas North that economic
journals are replete with analyses of market behavior, but not of the market
itself: the construct these analyses presuppose. North says this omission
is peculiar; we think it is necessary and motivatedas is the literatures
omission of any analysis of the work that makes markets happen.15 But frst
we take the problems generated by the inevitable, unavoidable tensions and
friction that characterize the production of complex social entities such
as the marketentities that seek to integrate diferent forms of sociality,
originating at diferent levels of abstraction. The assumption that the prob-
lems do not exist or cannot be addressed because they are mathematically
intractable will no longer holdthat is the price for conceptualizing the
market.
So, where does a market come from? How is it produced and repro-
duced? Answering these questions is essential because markets are social
inventions and because fnancial actions take place within a frame of their
own design. The speculative wagers that roiled the fnancial markets could
never have been created, consecrated, and circulated without a specialized
structurethat is, a real social entity that enframes the actions of those
who participate. But how does a feld produce and reproduce collective
agents such as credit derivative, mortgage, or merger acquisition markets?
We have deliberately called this space a social totality: the name intended to
capture the reality of a system of relations and properties sustained by the
collective genesis and implications of the actions of individuals. These indi-
viduals, importantly, produce totalitieshere, a fnancial feld comprised
of specifc markets. The Callon group has described this production of a
quasibounded economic space through a notion of framing, which empha-
sizes the necessity of identifying the totalities that enframe the production
of social practices.16 Certainly the most problematic aspect of the founda-
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A Social Approach to the Financial Derivatives Markets295

tion of markets is the embedded processes by which agents objectify, by
virtue of their participation, the totalities or frames in which they partici-
pate. What invisible aspect of work produces the whole? At issue is how
participants objectify themselves collectively through the reproduction of
an imaginary frame/object that then appears to these agents as an indepen-
dent reality that stands apart from them and exerts an impersonal determi-
nation over them.
What renders totalities such as the market particularly remarkable is
that the participants need not know one another personally; instead, their
relationship is technologically mediated, which has the efect of mask-
ing the underlying sociality of their production and of amplifying agents
sense that the market exercises an objective, quantifable determination
over what they can and cannot do. This machinery has itself become part
of the markets sociality. It not only interconnects agents; it mediates their
sociality in a historically specifc and novel way. As the social comes into
focus, we see that an underlying social aspect of securitization is the real-
ization of what we call anonymous sociality. This is the attribution of a cul-
turally specifc socialitya mutually expected repertoire of beliefs, desires,
and strategic judgments about the markets behaviorto an anonymous
counterparty whose only self- presentation need be the electronic trace of
anothers trade on a screen. This anonymous, faceless counterparty is the
counterpart to other agents sensibility that the market exercises an imper-
sonal and objective determination over their behavior.
Socially, the view that the market imposes its determinations on indi-
vidual agents is the agents unwitting recognition that they produce a mar-
ket as a totality. This totality is necessarily more than and diferent from the
sum of its parts because markets possess systemic properties. The suppo-
sition that a market is collective and social means that we cannot grasp its
systemic properties by tallying up the actions of those who inhabit it. Indi-
viduals actions are important, but they defne a diferent register of social
reality. What this underscores is that any adequate theorization would need
to grasp the systemic properties of a totality such as a market on its own
termsit is never reducible to nor the aggregation of anything smaller.
This is important now because a markets systemic properties are what
defne the conditions for its systemic failurewhich is nothing less than
failure of the totality. The breakdown of totality begins to explain why the
seizing up of the credit markets provoked a turn to the social by a fnan-
cial community that normally shuns any reference to the social. Consider
the reported causes and conditions of the extraordinary contraction in
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Spring 2012
liquidity. According to the fnance sectors own assessment, the breakdown
in liquidity turned on systemic properties, principally the relative inter-
connectivity of the counterparties, the overall nontransparency of their bal-
ance sheets, and high multiples of leverage across the market.17 No soli-
tary instance of interconnectivity, nontransparency, or excessive leverage
motivated a near- universal withdrawal of participants faith in the credit
markets; rather, as our interviews repeatedly demonstrated, it was their
native intuition about their overall cumulative efect, amplifed by their
complexity and technologically mediated character.
It is difcult for participants to discern the systemic properties of
social totalities. The fnancial markets, especially, are produced in ways that
naturalize and normalize these properties. This would not make a difer-
ence except that the creators of the efcient market thesis see it as a scien-
tifc description of reality. However, a scientifc perspective that excludes
the production process of totalities, like the market, cannot begin to take
account of their systemic social properties, including the potential and con-
ditions for systemic risk and failure. At best, this perspective can recognize
systemic implosions as unfortunate and unexpected outcomes, as the noise
in the system that somehow became a deafening roar. No less an authority
than Alan Greenspan confrmed this point, when in testimony before
Congress, he expressed shocked disbelief that there was a faw in the
invisible- hand thesis that markets are constitutionally efcient and self-
correcting, and therefore immune to systemic failure of the kind that had
propelled the economy into a tailspin.18 Some say the visible boot of what
most of us know as economic reality had left its imprint on the maestro.
There is a second problem the descriptivist defnition of the market
obscures: the dynamic relationship between the types of fnancial instru-
ments and agents acts of classifcation. The issue is how the fnancial feld
evolves generative schemes that agents intuitively access to typify what
are often singular, one- of- a- kind, situationally tailored derivatives. How
do agents collectively accept the typifcation of such a product? This is of
more than scholastic interest: recall that a genesis of the credit implosion
was that the fnancial feld securitized mortgage and credit obligations as
though their primary diferences were immaterial. So it is a touch ironic
that mainstream fnancial institutions skip the assignment of singular
derivatives to specifc general categories as a transparent and unproblem-
atic exercise. The social, sometimes contentious and negotiated act of clas-
sifying a tranche of CDOs appears, especially retrospectively, to be nothing
more than a technical exercise. This confation of type and token obscures
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A Social Approach to the Financial Derivatives Markets297

the social act of classifcation and renders it impossible to explain the dialec-
tical, often contested processes by which agents create new derivative deals
on the model of past productions even as they ft singular derivatives to
established types in order to price and sell them. From another angle, mar-
kets will appear efcient and the social can remain invisible when fnancial
agents believe as an article of unconsidered faith that totality, types, and
tokens are harmoniously and unquestionably aligned (i.e., agents collec-
tively understand this singular derivativehere, nowas a type of deriva-
tive that, in concert with other such derivatives, is constitutive of the mar-
ket as a totality). Alternatively, as the crisis illustrated, markets become
inefcient and the social miraculously visible when a faith that was once
taken for granted evaporates, and with it the liquidity on which the markets
depend.
The fnal problem is how can we grasp the perpetual framing and
reframing of a totalitythe social practices that produce and reproduce the
objectifcation of the marketwhen the same sentient subjects simulta-
neously and intimately inhabit, create, and analyze that totality? The same
knowing subjects surrender themselves to fnancial markets, which they
actively produce and reproduce through generative schemes. This is impor-
tant because these schemes, especially those animating the work of specu-
lation, are comprised of economically rational calculations, other modes
of rationality (that center on competition and ones social persona, for
example), and also a structure of desire bordering onsometimes cross-
ing over intodrives for self- fulfllment, self- worth, and identity. What
makes this all the more important is that one of the most normalized
schemes is agents own market analysis. The agents themselves produce
constant streams of analysis (fundamental and technical) about how mar-
kets workwhich, among other things, hides the social.
What these mechanisms of invisibility suggest is that an understand-
ing of the fnancial markets entails an understanding of this underlying
ideology: that is, the complex economic ideology that has evolved to con-
ceal the social through a common faith in presuppositions that, much like
the silencer on a gun, dispose agents to ignore the social or mistake it for
something else. A social analysis would seek to trace this concealment to
the presuppositions about the sociality of communication that underwrite
agents interpretations of economically meaningful events and informa-
tion, and to the type of discourses they construct (retrospectively) to explain
fnancial outcomes. We see such an explanation as part of the foundation of
the analysis because these ideologies are the cornerstones of what we call
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the illusio: that is, the forms of misrecognition of the social that are compo-
nents of the real relations of the production of high fnance. Adherence to
this illusio is, and has been, an imperative of the fnancial feld. Talk of the
social was redacted from discussion (at least by the ratifed members of the
feld) until the present systemic crisis opened a crack in its defense mecha-
nismsfor example, business school textbooks that present the efcient
market thesis as settled science. Years into the crisis (2010 to 2011), inter-
views with business school professors indicated an unwavering allegiance
to the efcient market thesis.
Here we lay out a complicated agenda for making the social visible.
On another level, however, the issues are straightforward. Mainstream
accounts of the fnancial markets presuppose and rest on a sociality they
cannot account for. They cannot and do not account for the production and
the reproduction of a derivatives market or the character of a regime of
work oxygenated by what is, historically speaking, a newly minted ethos
of speculation. These omissions of the social are compensated for by the
illusio of an efcient market, composed of rational actors who communi-
cate perfectly and bolstered by the symbolic capital gleaned from using
mathematical models derived from the truly scientifc natural sciences.
Then along comes a systemic crisis that emphasizes the failures of this
thesis, demonstrating the constitutive power of the social and the argu-
ment for laying out a more socially informed account.
Theorizing the Economic Socially
The reading of the economic and of fnance presented here grows out of an
attempt to grasp the encounter between the global fnancial markets and
community- based, production- centered economic enclaves on the mar-
gins of circulatory capitalismin places such as the former Bantustans
of South Africa or in the southern areas of the Philippines. About this
encounter, there had long been an informal division of intellectual labor.
Anthropologists and sociologists worried about the non- Western, margin-
ally and partially capitalist, frequently struggling postcolonial economies,
whereas economists focused on market- driven, capital- intensive, globally
integrated economic sectors wherever they appeared. So anthropologists
and rural sociologists studied the Amazonian Indian populations work-
ing on rubber and cofee plantations in Brazils interior, while economists
studied Brazils burgeoning fnance and petroleum sectors. There are no
disciplinary rules about economic subjects, but in general the division
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A Social Approach to the Financial Derivatives Markets299

held, with only a few scholars camping consistently on the others terrain.
Importantly, this division of intellectual labor corresponds to a theoreti-
cal vision of the social. The idea is that sociality underlies the economies
that anthropologists and sociologists study; gift- based economies espe-
cially are so intrinsically social that it is pointless to use the concepts and
tools developed for large- scale capitalist markets. The countervailing idea
is that where capitalist markets are concerned, the economic is an indepen-
dent domain, which renders it possible to craft methods and models that
fxate on the economic. The focus of formal economic analysis is produc-
tion, whereas anthropologists foreground the sociology of exchange.19 An
accepted distinction between formal and substantive economics enshrined
this vision and division of the world, which corresponded to two noncon-
versant literatures.
A genuinely social approach would reject this theoretical division in
favor of the argument that all economies are substantive. It is important to
be clear about this. The critical argument is that although capitalism, now
exemplifed by the markets for fnancial derivatives, is qualitatively diferent
from any other economic regime, it is nonetheless fundamentally social.
Signifcantly, the economic aspects of the social are fundamentally difer-
ent, but no less social for being so. Nothing illustrates this more clearly
than the social processes required to sanction agents to isolate the eco-
nomic by placing themselves in contexts that valorize those dispositions
that sublimate or eclipse their investments in the social. However natural
it now seems to those who watch CNBC, who pour over the Wall Street Jour-
nal, or who have an MBA, it requires a tremendous amount of social labor
to produce people (such as those we interviewed), who, enframed within
the market, voluntarily sacrifce their relationship with their spouses and
their children to earn money speculatively on bets that, on account of their
enormous sequestered wealth, have little marginal value for them. As
history and anthropology have demonstrated, for most of the history of
humankind and across the entire wealth of cultures, this design of behavior
was unimaginable. While fnancial markets are powerfully economic in the
most robust sense of the term, they also involve questions concerning the
(re)production of the market, the creation of agents subjectivities, agents
senses of belonging and fairness, an ethos of speculation, notions of anony-
mous sociality, and much more that is intrinsic to fnancial markets but
goes far beyond the economic realm.
From the perspective of theoretical practice, the social became
invisible because it was exiled and excommunicated from the kingdom of
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Spring 2012
fnance by the scientization of economics. The premise was that markets
are, for all theoretical purposes, efcient, closed, and complete. They oper-
ated systemically according to purely economic principles and rational deci-
sion making under uncertainty. Certainly those in the fnancial workplace
were aware of many instances when market prices, like circus animals who
had forgotten their manners, seemed to veer (sometimes wildly) of course,
but they assumed and economics afrmed that these gyrations were tem-
porary, episodic, and too small to spawn earth- rattling crises. In fact, their
resolution (through arbitrage) proved that markets were systemically ef-
cient, inherently rational, and therefore asocial. Many in fnance proclaimed
the triumph of the efcient market thesis, moving them to brush of data
that did not afrm the model. After the 2008 fnancial meltdown, there
arose a realization that the behavior of fnancial markets rested on modes
of unacknowledged sociality. Some commentators observed that liquidity
is a religion; it depends on faith and trust, on a collective belief in the
markets. To right things, we (used in its collective sense) need to restore
peoples faith in the markets, redeem their broken trust, and purify the
markets by exorcising greed. Disseminated across the electronic media,
these unalloyed references to religion, faith, redemption, shaping a collec-
tivity that transcends the individual, and everything the fnancial commu-
nity conceptualizes as the inverse of all that is economic add up to a tacit
admission that the social does, indeed, have constitutive power.
Now it turns out that religion is an unexpectedly apt metaphor: the
modern American circulation of faith is an unregulated market where
all commitments are over- the- counter bets on salvation. It declares what
anthropologists steeped in gift- based exchange have known since the
work of pioneers in their feld (especially Marcel Mauss and Claude Lvi-
Strauss): totalities, like markets, are social fctions made real by the magic
of belief and sustained through the name we have canonized for the power
of belieffaith. From our standpoint, it is neither an accident nor a meta-
phor that a crisis- torn market began to speak in prayers, its commentators
drawn to formulations that suture the health of the market to expressions
of faith and belief. Even more, in calling for the restoration of faith and
belief, these commentators, without intending to, invoke a performativity
that attends religions frequent accompanist: ritual. We take the fnancial
communitys self- assessment as a sign of where to look analytically.
If we pose the question what is a market?, the answer is neither
simple nor obvious. The market as a social totality or frame is simulta-
neously a practical construct, a site of work, and a particular kind of object
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A Social Approach to the Financial Derivatives Markets301

constructed by economic theory. This complex, multifaceted conception
of the market frames the actions of fnancial frms and individual partici-
pants, of the regulatory policies crafted by the Federal Reserve and the
Treasury, of the picture drawn by the media, and of fnance economics
scientization of the market. The players share this image of the market,
unconditionally; they circulate this image without thinking they are cir-
culating an image, switching fuidly among the various facets, their collec-
tive belief infuencing their market behavior even as it underwrites their
confdence in their interpretations of the behavior of anonymous copar-
ticipants. Circulation and syncopation of belief are essential: indeed, the
theorization that underpins a genuinely social approach is that markets
as totalities are ontologically real social fctions that agents quasiautomati-
cally produce through collective belief. The centrality of belief is the under-
lying, unacknowledged theme that runs throughout US Treasury secretary
Henry Paulsons account of the struggle to restore faith in troubled credit
markets.20 The supposition guiding his actions is that agents decisions to
restart making a market under uncertainty turn on the revival of their col-
lective faith in a markets integrityor, more socially, totality.
The confuence of the real and the fctional through the power of col-
lective beliefs, as well as agents faith in the totality they have instantiated,
indicates that markets have a performative aspect. They are defned by a
dialectic between rites of self- objectifcation, large and small and most of
all continuous, and the production of a fnancial habitus that encourages
agents to have faith in a markets integrity. That agents objectify liquidity as
the normal state of fnancial markets goes hand in hand with concepts, dis-
positions, and positions that normalize their collective faith in the totality
or frame. Liquidity is the fnance felds representation of sociality, objec-
tifed in the notion of the counterparty and the risks posed by those on
the other side of a trade (i.e., counterparty risk). The ethnography reveals
a constant interplay between the objectifcation of abstract risk21 by way
of mathematical modeling and through agents attempts to discern what
others with similar models are doing. The totality constructs itself out of
the interplay between overlapping models and the iteration of the models
that agents share and attribute to others or to counterparties that comprise
the market. There is every reason to believe that the market as a totality lies
at the intersection of specifc real- time trades and the imaginary commu-
nity constructed out of everyones beliefs about, and faith in, what others
(counterparties) are doing with respect to similar trades and deals. This
intersection is technically mediated by, for example, Bloomberg machines,
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which everyone knows everyone else has. What is so intriguing and unex-
plored is how the syncopated objectifcation of the local and the totality per-
formatively produces the market. The market appears as the aggregation of
individual trades, even though agents ability to consummate these indi-
vidual trades presupposes and turns on a faith- based liquidity whose social
properties are efaced by the objectifcation. The most ironic and paradoxi-
cal aspect of market- centric views of the market is that they lack an account
of the markets production, insofar as they reduce it to a naturally occurring
result of the sum of individual acts of buying and selling. A better argu-
ment is that totalities are created performatively, either by what we nor-
mally think of as ritualthat is, practices that link existential events to the
cosmologicalor by what amounts to a secular ritualization of the every-
day that links existential events (like executing a trade) to science.
We must frst understand that ritual is not synonymous with reli-
gion. Religions foreground the use of ritualoften molding it into a named
eventbut they do not possess a monopoly on ritual or an exclusivity agree-
ment on its functionality. We must also recognize that events can possess
the properties and produce the efects of ritual, without being expressly
defned as ritual. Thus understood, rituals are enhanced, transparent ver-
sions of a more general, event quality of ritualization or, more precisely,
rituality, present in any social practice. This turns out to be important
because if there is one lesson that can be drawn from the analysis of ritual,22
it is that rituality allows social practices to posit what they efectuate. In this
way, rituality creates a performative impulse in which the participants in an
event presuppose the reality of the social totality that the event helps create
or efectuate, by assuming that the eventhere, nowis simply a replica
of previous performances. The performative aspect of the practice is cen-
tral because it shapes the illusion that the totality created socially (e.g., the
market) occurs naturally. The event summons the participants to believe,
to have faith that the totality indexically presupposed by this specifc event
is as real as the existential, lived event itself. There is a cognitive and dispo-
sitional obligation to assume that the efcient market is as real as the trade
I have just efciently made. By this means, the specifc trade fgures what it
and all the trades (classifed as) like it collectively efectuate. The capacities
and dispositions of agents collectively to subscribe to the same understand-
ing (e.g., of the market) without any collective intention depends on the
socialization of agents through their immersion in the distinctive habitus
of the fnancial feld and the hard work of its institutions (exemplifed by
the full- bore training of recruits). Note that the economistic account of the
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A Social Approach to the Financial Derivatives Markets303

market is an empirically robust illusion: insofar as the rituality of practice
engenders a succession of events that successfully instantiates the market
(it remains liquid), its social foundations can remain concealed. Until, as
witnessed, a crisis of faith in the market ensues, at which time the consti-
tutive power of the social seems to appear from nowhere and remains until
the state of emergency subsides.
Thematizing the Financial Field
Understanding the credit crisis begins with a look at the fnancial tools that
agents devised. Technically, the liquidity crisis in the credit markets stems
from the collapse of CDOs and others forms of structured debt. The CDOs
were not created or traded on a regulated exchange such as the Chicago
Mercantile Exchange; rather, they were over- the- counter market products.
This means that they were neither standardized instruments nor subject to
regulation. In the straightforward version, a mortgage lender would origi-
nate a portfolio of mortgages of whatever quality and duration, an invest-
ment bank (the now- defunct Bear Stearns specialized in such loans) would
bundle these loans into a package, and the credit quality of the loan port-
folio would be evened out and upgraded by purchasing insurance (e.g.,
from Ambac Financial Group), thus securing a AAA rating, after which the
investment bank peddled the CDO to buyers, warehoused it until a buyer
was found, or retained it for the banks own account. In this manner, some-
where in the neighborhood of $1 trillion of suspect loans circulated through
the fnancial system.
The key problem is that circulatory capital is subject to a treadmill
efect.23 One property of this efect is that what seems rational in the short
term for individual actors is systemically irrationalalthough invisibly so.
In the CDO market, the treadmill took the following form. On account
of their outsized returnson what appeared to be AAA instruments
the overall demand for CDOs increased exponentially. Demand increased
because the CDOs had a healthy risk premium for AAA- rated bonds
the risk premium being the diference between the CDOs interest rate
and the rate of a risk- free Treasury bond. Increasing demand depresses
buyers rates of return (as more participants bid for the same securities),
which should lead to a decline in proftability: lower interest rates, lower
return. Many participants refused to acquiesce to the lower returns dic-
tated by a systemwide decline in risk premiums,24 objectively because their
incomes and positions depended on earning outsized profts and subjec-
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Spring 2012
tively because they were immersed in the speculative habitus permeating
the fnancial sector. Given the enormous quantities of available capital at
that time, one alluring strategy to sustain proftability was to employ lever-
age. Leverage consisted of borrowing less costly short- term money in order
to purchase longer- term CDOs. By borrowing capital, investors could put
more money to work in what they considered to be their best investment
strategy. This strategy was successful so long as the return on the CDOs
was greater than the cost for the borrowed capital. But the strategy had an
enormous systemic faw: because it was undertaken by many institutions
simultaneously, it only augmented the demand for CDOs, which pushed
rates even higher, which in turn motivated an acceleration in the supply of
mortgages being fabricated and circulated, leading to an ever- increasing
demand to initiate new mortgages no matter the solvency of the borrowers.
The added supply of mortgages served to further depress risk premiums.
Worse, the decline in premiums and therefore proftability encouraged
the addition of even more leverage, perpetuating the treadmill until many
frms were leveraged at ratios they can, to this day, barely acknowledge. In
efect, speculators ofset the risk of declining profts by taking actions that
amplifed the risk of systemic failure. And that is precisely what happened;
that is the technical view of the fnancial iceberg visible above water.
Below the waterline lies a more complex social reality. One way to
deconstruct this reality in order to visualize its character is to emphasize
critical dimensions of the production of the social. A good way to begin
making the social visible is to foreground the character of the speculative
ethic that drives the culture of fnancial circulation. This ethic has emerged
as a critical, cutting, and capricious edge of Euro- American capitalism. In a
2004 work, Financial Derivatives and the Globalization of Risk, we illustrated
that the events of 1973 began to tilt fnancial power and proft toward circu-
lations of speculative capital.25 From 1973 on, this speculative ethicwhich
has long been one strand of Euro- American culturehas become some-
thing more powerful: a culturally valorized ethos instrumental in struc-
turing the design and practices of the fnancial feld. The obvious mani-
festation of this speculative ethic/ethos is the willingness with which so
many banks and hedge funds made enormous, precipitously leveraged
bets. Complementing the rise and valorization of this ethos has been the
creation of speculative capital: large pools of mobile, nomadic, opportunis-
tic capital whose sole purpose is to underwrite wagers on market volatility.
The result is a fnancial feld that has redirected its energy toward fabri-
cating platforms (i.e., the leveraged derivative deal) that motivate the pro-
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A Social Approach to the Financial Derivatives Markets305

duction of risk- driven instruments (e.g., CDOs), which agents then use to
speculate with but also on. Speculation has now, accordingly, assumed a
life of its own.
The second dimension of our interpretation is workin the extended
socially infused sense of the term. We foreground work on the understand-
ing that work imbricates cultural notions of a life plan, the structuring of
the fnancial feld, the production and reproduction of fnance through the
real- life actions of its participants, and the dispositions that defne and
motivate subjects. For those in fnance, work is often the ensemble of prac-
tices around which they arrange and invest in their lives and life plans. But
what kind of work is it whose purpose is to assemble and allocate capital
in order to make enormous speculative bets on market volatility through
the fabrication and circulation of risk- driven derivatives? More, what kind
of work product is it in which the object produced is a contractual relation
about the relative volatility of another relation, such that profts are noth-
ing more than others losses? Put historically, why is trading derivatives dis-
placing banking in terms of compensation and prestige?
The third dimension is the felds representation of the economic
that agents and institutions understand, respect, and valorize. This socially
exclusive representation or paradigm is the felds illusio. By this, we mean
the entwining and coevolution of an ensemble of ideologies that misrec-
ognize the social and legitimate an asocial conception of work, specula-
tion, and more generally the practice of the agents who inhabit fnancial
markets. The feld assembles three ideologies into a notion of an efcient
market. It is no accident that the crystallization of the thesis corresponds
with the formation of derivatives markets in the 1970s or that its ascen-
sion to power mirrors their explosive growth. The frst moment is the ide-
ology that the market is essentially a closed, complete, and self- regulating
economic space. Everything social lies beyond the felds perimeter, mean-
ing that the social has no constitutive power in the formation or behavior
of the market. The second layer of ideology says that investors are ratio-
nal; their decision making under uncertainty proceeds cognitively, one
might say almost scholastically, guided by the laser of utility maximization.
Analysis can thus grasp market behavior by reference to the positing of
an abstract actor: a transhistorical and transcultural agent whose actions
are an objective refection of the markets objective economics. What is
remarkable about the positing of such an abstract agent is that its imagi-
nation is not only specifc to capitalism but also one of capitalisms deep
performative subjects.26 A closed complete system requires economically
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Spring 2012
rational actors, just as it would take the aggregation of economically ratio-
nal acts to produce a closed space. The illusios fnal layer is a communi-
cation ideology that maintains its messages are transparent. Information
and knowledge are precisely the same; accordingly, market prices always
refect all available useful information. The illusio arises from the concate-
nation and coproduction of these ideological streams. It moves fnancial
agents to believe, or at the least to accept as an article of faith that a market
is a bounded, complete economic space in which prices are always the out-
come of transparent, perfectly liquid communication among rational deci-
sion makers. For those in fnance and beyond, a quasimagical reverence for
the revelatory power of mathematical statistics amplifes their faith in this
worldview. John Cassidy, writing about how markets fail, says that adher-
ents canonical commitment to the efcient market doctrine elevates the
doctrine to a secular faith.27 So the illusio is not a misreading of the social
bases of the fnancial feld and its agents, but a real relation of its produc-
tion. It is part of the felds DNA. Lest anyone think we are dancing on the
bones of the dead, the efcient market thesis put to rest by the inefciency
of the credit and housing markets, the reality is that fnance economics
goes on as if nothing material has happened. Numerous essays continue
to assume as an article of scripture that markets are efcient. There is, in
this, a suspension of disbelief. For the real signature of the illusio is that
those who are caught up in it, who are deeply invested in its authenticity
and authority, cannot think the world in other terms. They proceed as they
have always done; the beauty of the efcient market doctrine is that those
enmeshed in its web are endowed with transscientifc certainty that they
do not have to take the credit markets disintegration into consideration
because it was a one- of event.
Developing These Themes
We have argued that the denial of the social is a necessary feature of the cul-
ture of fnancial circulation. Nothing exemplifes this more than the denial
of the performativity that is constitutive of the markets (totalities), in which
the practices of speculation unfold as the artistry of the deal. Each act of
buying and selling a fnancial instrument performatively objectifes that
instrument through the typifcation of the token. The act of classifcation
defnes this specifc singularity as a type. The classifcation predisposes
those with a sense of a given market to adjust their expectations to the
probabilistic assessments of that instrument. The elision of performativity
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A Social Approach to the Financial Derivatives Markets307

leads economistic accounts of the market to misrecognize the way in which
each transaction instantiates and foregrounds the market(s) that it presup-
poses. For the transaction to be prosecuted, it must appear as though the
markets liquidity was unquestionable and the transactions success pre-
ordained. Accounts of the market from within the fnancial closet have
no notion of this performative dimension. They cannot thus entertain the
question of discovery: what are the conditions for the inculcation of similar
capacities and dispositions, which motivate the collectivitys faith in a real
fnancial market comprised of anonymous agents conditioned to function
as reliable and predictable counterparties? So defned, the analytical objec-
tive would be to show how existing cultural capacities and dispositions per-
formatively objectify the feld of fnance, and how through its markets and
institutions, the feld capitalizes on, and further refnes, these capacities
and dispositions for those who participate in this regime of work. Accord-
ing to the approach developed here, to begin with an analytical defnition
of the market annuls the performative objectifcation of the real, which
brings the market as the site of the speculative ethic into existence as a
viable entity.
It follows from this that a principal aim must be to grasp the socio-
genesis of this speculative ethic/ethos, rooted in what is essentially a trans-
cultural problematic of decision making under uncertainty when a value
(e.g., money or status) is at stake. When such decisional uncertainty is
attached to a context, the result is riskthat is, the chances that the agent(s)
involved will sufer some negative outcome. The design of a speculative
ethic constitutes a calculus for organizing decisions when uncertainty is
present. What is sociologically interesting about the ways in which people
deal with the risks attached to circulation/exchange is that they presuppose
the preexistence of a totalityfor example, a group, a market, a feld
that the practices are actually instrumental in valorizing and reproducing.
Semiotically, the practices re- create and circulate the token instances of
totality as perfect indexical icons of the type. In societies in which there is
neither capitalism nor a regulatory state, ritual as exemplifed in ritualized
exchange is the dominant means by which agents discern and disarm the
risks attached to an exchange/circulation. What ritualization does for these
exchanges, the scientization of the market attempts to do for derivatives
transactions.
In a parallel manner within a wholly diferent framing, a derivative
transaction presupposes the integrity (closure and completeness) of a spe-
cifc market (e.g., credit) as an instance of a totality (i.e., the derivatives
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Spring 2012
market) composed from the sum of these specifc markets. The parties that
execute the trade organize their practice as though the markets efciency
guarantees that there is no other possible outcome: that is, there is always
sufcient liquidity and negligible counterparty risk such that wagers can
be made and paid. Within the fnancial feld, hard science has become the
designated means of discerning and mitigating risk. Statistical models and
technical analysis have become the chosen means of dealing with decision
making under uncertainty. Several separate strands have come together,
creating the space of the culture of fnancial circulation. Not the least is the
progressive harnessing of the mechanics of speculation through the use
of a mechanistic model that sacrifces honoring the complexities of fnan-
cial practices for mathematical tractability. The sociological evolution of
this economistic paradigm has been toward a mathematical scientization
of fnance. On the level of the totality, it sees the social as exogenous to the
structures and practices of the market; on the individual level, the social is
the source of the irrational, the animal spirits that (under the right con-
ditions) will motivate numerous agents to make similar bad decisions that
radically violate the canons of utility maximization. As exemplifed by the
housing crisis, this behavior may overpower the markets self- regulating
tendency, leading to a euphoric bubble followed by a panic- driven crash.
The scientization of the market has led to a dominant view, which objec-
tifes it as a purely economically constituted totality, populated by agents
endowed with utility- maximizing subjectivities. So conceived, it becomes
legitimate to analyze fnancial practice using formal mathematical equa-
tions based on the study of the difusion of inorganic particles. This extraor-
dinary result has evolved into an equally extraordinary and supporting divi-
sion of labor in which quants (quantitative analysts) devise mathematical
models of the volatility of fnancial instruments about which they have
no market- trading experience; whereas traders having frsthand market
experience use models whose mathematics they barely understand.
The scientization is complemented by educational processes, which
inculcate the speculative ethic in respect to a view of how fnancial markets
function. This view is encapsulated in the message circulated by fnancial
channels, such as CNBC, which laud the desire for proft, inveigh against
regulations that would limit speculation, and argue that speculation is
inherently good for the markets and thus for the economy and in turn
for the nation. The peculiar logic is that the speculative ethic is a national
social good, such that its endorsement is patriotic. No less important is the
academe where the speculative ethic is being produced and legitimated
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A Social Approach to the Financial Derivatives Markets309

through the reorganization of business school education and curriculum.
The cornerstones of business school education have become the notions
that the market is the best custodian of the US economy, that fnancial
markets are inherently efcient, that (competitive) markets spur innova-
tion as exemplifed by the plethora of new fnancial instruments, and that
speculation is both creative and necessary to promote market efciency
and stimulate innovation. The redirection of business school education is
also an instrumental part of the reallocation of intellectual capital away
from industrial managerial sectors and toward the fnancial feld. This ref-
ormation of the business school was part and product of a Euro- American
shift toward the speculative; it assumes that there are agents who construct
their subjectivity through arduous work regimes that center on the specu-
lative acquisition of money.
This construct has a history. A more social account would reveal
that the speculative ethos did not materialize from empty space. We would
argue that the ethos derives from and conjoins two narratives that have per-
meated American culture. The frst extols the virtues of taking a chance,
especially the willingness to accept risk, to have the fortitude to chance
the odds to improve ones lot in life. This narrative implies a social and
fnancial universe in which probabilities matter greatly. The second narra-
tive assumes that agents can master chance and subdue probabilistic out-
comes through knowledge, skill, and hard work. These virtues allow agents
to arbitrage the future, to turn a risk- free proft by ofsetting uncertainty
with hard- won knowledge and honed skills so that agents decision making
is true. In this mediation, traders are portrayed neither as gamblers nor as
traditional bankers (who relied on lending money to long- standing, sol-
vent, socially connected clients); their speculations lie at the intersection
of mathematically calculated risks and their willingness to bear the existen-
tial burden of an enormous wager. The speculative ethos draws from, and
then combines, both of our native narratives in ways that make it appear
familiar, burnishing the illusion that there is nothing unusual about the
appearance of fnancial agents who, armed with risk- driven derivatives, use
mathematical modeling to leverage large pools of speculative capital in a
quest to proft by gaming market volatility.
From the outset, there has been a more- than- incidental kinship
between fnancial economics and poker. Many of the infuential theo-
rists (e.g., von Neumann) who sought mathematically to tame the mar-
kets uncertainty, were avid poker players. The confuence of calculation
(pot odds) and speculation (betting rounds) that distinguishes poker served
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Spring 2012
as an inspiration. In the public culture, pokertraditionally impugned as
morally reprehensible because it was gamblinghas now become a legiti-
mate practice and profession on an increasingly cosmopolitan stage. It is
worth recalling that in the 1960s and early 1970s congressmen, federal
regulators, and moral activists castigated and rebufed initial attempts to
develop a fnancial futures and options market because they viewed betting
on money as tantamount to gambling, which lacked any social merit. In
the ensuing years, however, the speculative wager has become not only an
acceptable but a morally cleansed activity. Nothing exemplifes this more
that the emergence of what its adherents call poker nation: as its citizens
only quasimetaphorically referred to a community whose self- defning
act and determination is the risk- driven wager. It is reasonable to con-
ceptualize the ascension and valorization of this virtual community as a
foregrounding of speculation through a new social imaginary: the poker
nation. This community of players has been providing itself with an insti-
tutional grounding, but what defnes it fundamentally is the circulation of
a shared understanding and habitus, a mode of circulation, which the pres-
ence of the Internet and its plethora of ofcial sites amplify. What we are
suggesting is that there is the imagined community in which each poker
game becomes a microcosmic instance of an encompassing poker macro-
cosm, much in the manner that Benedict Anderson describes acts of read-
ing as engendering the imaginary of a national peoplehood or the way acts
of buying and selling aggregate into the market.28 One way of grasping this
new imaginary is as an aspect of a postmillennial pop culture. Another way
is as an advertising gambit aimed at luring people into indulging in gam-
bling tournaments and online sessionsboth of which are proving rather
lucrative for their investment backers. But these observations, however
accurate, do little to explain why at this moment gambling and speculation
have come out of the back room and assumed such a visible and marketable
place in the public sphere. Another, more socially attuned way of appreci-
ating this emergence of the poker nation is as an unveiling, namely, that
tipping point at which the emergent habitus of risk- taking and speculation
becomes conscious of its own immanence and thus objectifes that habi-
tus in games that reproduce within a fxed fnite event, like a poker tourna-
ment, a forum for speculating. The suggestion is that the construction of
a community founded on a speculative ethos is refecting and reproducing
at the level of entertainment a transformation in the deeper character of
capitalism.
Understanding the sociogenesis of a speculative ethos feeds into a
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A Social Approach to the Financial Derivatives Markets311

second and complementary aim of grasping the character of the fnancial
feld. The goal is to grasp the objectifcation of relations that incorporate
design and dimensions into the feld. This entails an account of how the
fnancial feld enframes positions (e.g., trader, quant, or risk manager) that
embody a specifc logic, perspective, necessity, subjectivity (e.g., persons
who necessarily produce their subjectivity through the acquisition of money
and only contingently through the acquisition of status, power, objects, or
social relations). What is interesting about the dimensions of the fnan-
cial feld is that they are elastic, meaning that agents collective objectifca-
tion depends on the context. Even more important is the performativity
that is, the generative schemes for putting a deal togetherthrough which
agents objectify the various markets (e.g., credit, mortgage, or currency)
as fractional totalities within the larger social imaginary of the market.
This objectifcation leads to the illusio, the prophecy that is self- fulflling
because collectively shared, that a universe of reliable stranger counter-
parties populates a specifc market. So long as the fnancial agents share
and act on this belief, their religion (illusio) will remain intact, that mar-
ket will stay liquid, and their collective faith will remain invisible. Pricing
a portfolio (of CDOs, for example) on a market- to- market basis will, under
these social conditions, provide a reasonable assessment of a frms balance
sheet. Each successfully executed transaction reafrms the collective belief
in the imagined community of reliable counterparties that it presupposes.
Collective belief is the operative concept insofar as it is impossible in the
OTC markets to know or verify that the counterparties are reliable or will
remain so over the term of the contract. Collective belief is thus reinforced
by a speculative ethic that motivates and incentivizes risky wagers that con-
tinually engender evolving portfolios of unquantifable exposure.
All this contributes to an understanding of how the speculative ethos
becomes embedded in, and an essential part of, a regime of work. The ani-
mation of the ethos transpires only through the social practices and gen-
erative schemes employed by those in the fnancial feld. It follows that we
can understand the speculative ethos only if we elucidate the production
and realize the dispositions that are embodied in this work regime. Such
theorization accomplishes two things. First, it shows that in the immediate
fnancial feld, the way agents deal with decision making under uncertainty,
their willingness to take on existentially frightening levels of risk, their
capacity to acquire and propensity to use fnancial information (a mathe-
matical model), and indeed everything connected to the primary directive
of making a proft all depend on the sociohistorically specifc production of
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Spring 2012
the culture of fnancial circulation. Insofar as agents expressly pursue the
objective of maximizing proft, there will be something that they can inter-
pret as economically rational behavior. Second, this theorization leads to an
ethnographic account that illustrates the presence and power of other modes
of rationality, and beyond that, dispositions and drives that tip decisions
inasmuch as every decision about investing retains a degree of uncertainty
because there are aspects of the future we cannot predict or hedge against
(e.g., a terrorist attack)in one direction or another. There appears to be a
broad ensemble of social and psychosocial interests that deeply infect the
practices of those in the fnancial feld. These lead to other forms of ratio-
nality and other motivations that insert themselves into practices, some-
times coinciding, sometimes competing, with an agents economic intent.
Without such an account, it is all too easy (as the recent literature indicates)
to end up trying to explain the collective acts that precipitated the crisis
either as the immediate efcacy of a cause (i.e., unbridled greed), or as a
consequence of irrationalities that skew economic decision making.
A feature of the fnancial workplace is that work is about much more
than making a living. Work provides an organizing purpose and identity for
the worker, and charting a career path is an essential element of an indi-
viduals life plan. For those in fnance, work appears to substitute for the
fulfllment once derived from family, friends, community, and churchto
the degree that agents depend on their jobs as their principal source of iden-
tity and as a mainspring of their self- esteem and self- investment. Within
this frame, an agents sense of selfself- worth, self- esteem, and position-
ing in fnancial spacebecomes attached to his or her earned compensa-
tion, named position (e.g., chief fnancial ofcer, hedge fund founder and
codirector, or foreign market strategist), and success in climbing the career
ladder. This idea of work as a constitutive element of self- construction
urges agents, and indeed often drives them, to compulsively invest energy
and hours in their work beyond what is necessary to make a comfortable
living or support a family. What is at stake for them is more than income,
access to worldly amenities, or even status: their work becomes who they
are. Their work conjoins with their understanding of who they are. As our
and other interviews attest, an identifcation of work with the self radiates
from the statements and actions of those who choose to surf the specu-
lative bubble. But precisely what kind of social and economic work is it
whose purpose is to accumulate and allocate speculative capital to make
big leveraged bets on market volatility through the fabrication and circu-
lation of risk- driven derivatives? What kind of work produces an object
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A Social Approach to the Financial Derivatives Markets313

that is a contractual relation about the relative volatility (price swings) of
another relation, such that one agents profts are nothing more than other
agents losses, be they deferred or transferred? Such a job does not easily
ft into what historically has been considered work. As the fnancial econo-
mist John Kay concludes, the work that is derivatives creation and trading
turns on an ensemble of special behaviours very diferent from the norms
of either everyday business or traditional fnance.29 In essence, a Euro-
American culture of capitalism in which circulation, especially the trafc
in derivatives, has emerged as cutting edge seems to be producing a new
regime of work and a new species of worker enframed within a re- formed
fnancial feld. A social analysis begins to apprehend what goes into the cre-
ation of a novel, complex, and signifcant work regime founded instrumen-
tally on risk- driven derivatives and socially on a speculative habitus.
Conclusion
The social approach outlined here seeks to access the forms of sociality
that interlink the social imaginary of the market and the instantiation of
fnancial markets with the habitus of work and the production of subjects,
and to do so in a manner that captures the imbrication of work, play, and
ritual that imbues fnance with a character that is simultaneously familiar
yet historically its own. It inserts a disruptive voice that reformulates the
scale of analysis and restores to the conversation those things social that
economistic perspectives must exclude as the condition of their own pro-
duction. What our preliminary investigation suggests is that an approach
that renders the social visible would see a fnancial (i.e., derivatives) market
as a performatively constructed frame for circulation(s) that creates, even
as it is created by, a sociospecifc habitus of work. This fnancial habitus is
founded subjectively on an embodied speculative ethos and a monetized
subjectivity and objectively on speculative capital and risk- driven instru-
ments and their collective institutionalization in the politics of the repro-
duction of a circulation- centered capitalism.
Notes
1 Ben Bernanke, Troubled Asset Relief Program and the Federal Reserves Liquidity
Facilities, US House of Representatives, Committee on Financial Services, November
18, 2008, available at www.federalreserve.gov/newsevents/testimony/bernanke2008
1118a.htm.
2 The present analysis is based on what is now three years of ethnographic research
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Spring 2012
among derivatives traders, the documentation and analysis of the public culture of
fnance, a deconstruction of the mathematical statistics used by fnance economics
(e.g., Black-Scholes equations), a review of secondary sources on the fnancial mar-
kets and the credit crisis, and the fact that we trade fnancial derivatives for our own
accounts.
3 Gillian Tett, Fools Gold: How the Bold Dream of a Small Tribe at J. P. Morgan Was Cor-
rupted by Wall Street Greed and Unleashed a Catastrophe (New York: Free Press, 2009).
4 Charles Gasparino, The Sellout: How Three Decades of Wall Street Greed and Government
Mismanagement Destroyed the Global Financial System (New York: Harper Business,
2009).
5 William Fleckenstein and Frederick Sheehan, Greenspans Bubbles: The Age of Ignorance
at the Federal Reserve (New York: McGraw- Hill, 2008); and David Wessel, In Fed We
Trust: Ben Bernankes War on the Great Panic (New York: Crown Business, 2009).
6 Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington
Fought to Save the Financial Systemand Themselves (New York: Viking, 2009).
7 Kate Kelly, Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall
Street (New York: Portfolio, 2009); and Lawrence McDonald, A Colossal Failure of
Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Random
House, 2009).
8 John Cassidy, How Markets Fail: The Logic of Economic Calamities (New York: Farrar,
Strauss and Giroux, 2009); David Leinweber, Nerds on Wall Street: Math, Machines,
and Wired Markets (New York: John Wiley, 2009); Pablo Triana, Lecturing Birds on Fly-
ing: Can Mathematical Theories Destroy the Financial Markets? (New York: John Wiley,
2009); Justin Fox, The Myth of the Rational Market: A History of Risk, Reward, and Delu-
sion on Wall Street (New York: Harper Business, 2009); and Nassim Taleb, Fooled by
Randomness: The Hidden Role of Chance in Life and in the Markets (New York: Random
House, 2004).
9 Tett, Fools Gold, 25254.
10 Philip Mirowski, Machine Dreams: Economics Becomes a Cyborg Science (Cambridge:
Cambridge University Press, 2002).
11 John von Neumann and Oskar Morgenstern, Theory of Games and Economic Behavior
(Princeton, NJ: Princeton University Press, 1966).
12 This originates with Harry Markowitz, Portfolio Selection: Efcient Diversifcation of
Investments (New Haven, CT: Yale University Press, 1959); and William Sharpe, Capi-
tal Asset Prices: A Theory of Market Equilibrium under Conditions of Risk, Journal of
Finance 19, no. 3 (1964): 42542.
13 See, for example, Frank K. Reilly and Keith C. Brown, Investment Analysis and Portfolio
Management, 9th ed. (Austin, TX: South- Western Cencage Learning, 2009), 77.
14 Eugene Fama provides the classic statement and Arthur OSullivan and Steven Shefrin
a similar treatment. See Eugene F. Fama, Foundations of Finance: Portfolio Decisions and
Securities Prices (New York: Basic Books, 1976); and Arthur OSullivan and Steven Shef-
frin, Economics: Principles and Tools, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2003).
15 Douglas North, Economic Growth: What Have We Learned from the Past?, Carnegie-
Rochester Conference Series on Public Policy 6, no. 1 (1977): 4.
16 The Callon group is a group of sociologists of fnance working out of the Paris- based
LiPuma and Lee

A Social Approach to the Financial Derivatives Markets315

school founded by Michel Callon. Michel Callon, ed. The Laws of the Markets (Lon-
don: Blackwell, 1998); Bruno Latour, Reassembling the Social: An Introduction to Actor-
Network- Theory (Oxford: Oxford University Press, 2007); and Donald A. MacKenzie,
An Engine, Not a Camera: How Financial Models Shape Markets (Cambridge, MA: MIT
Press, 2006).
17 See The Financial Crisis Inquiry Report 2011 (New York: Public Afairs, 2011).
18 US House of Representatives Committee on Oversight and Government Reform,
The Financial Crisis and the Role of Federal Regulators, 110th Cong. (2008) (state-
ment of Alan Greenspan, chair of the Federal Reserve), available at http://democrats
.oversight.house.gov/index.php?option=com_content&task=view&id=3470&Itemid=2
(accessed December 1, 2011).
19 Marshall David Sahlins, Stone Age Economics (Chicago: Aldine- Atherton, 1972); and
Sahlins, How Natives Think: About Captain Cook, for Example (Chicago: University of
Chicago Press, 1995).
20 Henry Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial
System (New York: Business Plus, 2010).
21 Since risk is a relation that objectifes itself in other relations, notably the wager inter-
nal to fnancial derivatives, its function in defning and stimulating liquidity is insepa-
rable from the moment of objectifcation. Thus the production of derivatives, by amal-
gamating context- specifc risks in order to model and price them, objectifes risk in an
abstract form. Even the notion of counterparty risk is inherently plural and frequently
social, inasmuch as it may encompass an open- ended ensemble of otherwise incom-
mensurable risks, from a run- of- the- mill bankruptcy to a governments seizure of a
counterpartys assets to a terrorist attack.
22 See, for example, Stanley Tambiah, The Magical Power of Words, Man 3, no. 2 (1968):
175208; Stanley Tambiah, Form and Meaning of Magical Acts, in Modes of Thought:
Essays on Thinking in Western and Non- western Societies, ed. Robin Horton and Ruth H.
Finnegan (London: Faber, 1973), 199229; Stanley Jeyaraja Tambiah, A Performa-
tive Approach to Ritual, in Culture, Thought, and Action: An Anthropological Perspective
(Cambridge, MA: Harvard University Press, 1985); Victor Turner, The Forest of Symbols:
Aspects of Ndembu Ritual (Ithaca, NY: Cornell University Press, 1967); Victor Turner,
The Ritual Process: Structure and Anti- structure (Chicago: Aldine, 1969); Roy Rappaport,
Ritual and Religion in the Making of Humanity (Cambridge, UK: Cambridge Univer-
sity Press, 1999); Michael Silverstein, Metapragmatic Discourse and Metapragmatic
Function, in Refexive Language: Reported Speech and Metapragmatics, ed. John Lucy
(Cambridge: Cambridge University Press, 1993), 3358; Joel Robbins, Ritual Commu-
nication and Linguistic Ideology: A Reading and Partial Reformulation of Rappaports
Theory of Ritual, Current Anthropology, 42, no. 5 (2001): 591614; and Michael Silver-
stein, Private Ritual Encounters, Public Ritual Indexes, in Ritual Communication, ed.
Gunter Senft and Ellen B. Basso (Oxford, England: Berg, 2009), 27191.
23 Benjamin Lee and Edward LiPuma, Cultures of Circulation: The Imaginations of
Modernity, Public Culture 14, no. 1 (2002): 191213.
24 Mohamed El- Erian, When Markets Collide (New York: McGraw- Hill, 2008), 2021.
25 Edward LiPuma and Benjamin Lee, Financial Derivatives and the Globalization of Risk
(Durham, NC: Duke University Press, 2004).
316The South Atlantic Quarterly

Spring 2012
26 Lee and LiPuma, Cultures of Circulation.
27 Cassidy, How Markets Fail, 33.
28 Benedict Anderson, Imagined Communities: Refections on the Origin and Spread of
Nationalism (Durham, NC: Duke University Press, 2000).
29 John Kay, What a Carve Up (book review), Financial Times, July 31, 2009.
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