Tuesday, May 25, 2010

Reading :: Material Markets

Material Markets: How Economic Agents are Constructed
By Donald MacKenzie

"Financial derivatives" is not a term in good odor these days. In the wake of the 2008 financial crisis, financial derivatives have been characterized by some as a "scam," a way to create money out of thin air via abstract models. In Material Markets, Donald MacKenzie applies actor-network theory (ANT) to a study of finance - including financial derivatives and arbitrage - to examine these apparently abstract, ethereal products as material. The book doesn't break much ground theoretically, but it does provide a solid application of ANT to finances.

Social studies of finance (SSF), MacKenzie tells us, are "inspired by social science research on science and technology" (p.2). And like the research that inspired it, SSF emphasizes "the materiality of markets: their physicality, corporeality, technicality" (p.2). MacKenzie comes up with several fascinating examples of this sort of materiality. For instance, he describes "broker's ear," the ability to fully pay attention to one conversation while simultaneously listening to all the other conversations in a room (p.12). He also emphasizes the role of what is normally translated as "assemblages," but which he insists on calling "agencements" (preserving the French double meaning of arranging/fitting together and of agency; see p.20). He finds "assemblage" to be too passive (p.21). Tracing an agencement, he says, is formally endless; instead, he wants to focus on aspects that are not obvious (p.57). And since he's focusing on finances in particular, he draws more heavily on Callon than on other ANT theorists.

With this grounding, he first turns to derivatives contracts. Contract design, like technological design, is an inherently political problem, requiring balance and compromise so that all participants' interests are represented enough to entice them to trade (p.70). In this chapter, MacKenzie examines the ins and outs of designing, implementing, and using such derivatives, focusing on the material conditions that let them function.

Next, MacKenzie examines how arbitrage is enacted, again taking a materialist standpoint ("a price is a thing," p.92). In the process, he brings in several examples of how this materiality is enacted. Futures traders are encouraged to play video games to increase reaction speeds (p.96). Traders wear platform heels to better their vantage point in the pit, and they jostle and even engage in fistfights in order to gain the best vantage point (p.97). At a desk trades complex, different types of arbitrage correlate to different spatial arrangements and proximities (p.97). Through these and other examples, MacKenzie produces a rich, qualitative understanding of arbitrage, in contrast with the abstract, quantitative understandings that are typically sought by economists (p.107).

MacKenzie turns to other aspects of finance in subsequent chapters: measuring profit, constructing emissions markets. Finally, he concludes by reaffirming that he has attempted to open "the black boxes of finance" (p.177).

Overall, I found this to be a valuable book for examining finance, and a nice proof of concept in terms of applying ANT more broadly. On the other hand, it didn't develop ANT theoretically or present any surprises or development beyond those in the cases themselves. I think these limitations suggest that the book was meant for those interested in finance rather than in ANT more generally. In any case, I'm still glad I read it, and I'd recommend it to those who are interested in applying ANT to other domains.

Reading :: Prince of Networks

Prince of Networks: Bruno Latour and Metaphysics
By Graham Harman

I came upon Prince of Networks through a reference from Tom Haskins' blog; he credited it as liberating him from some double binds in understanding actor-network theory (ANT). Many thanks to Tom for pointing out this book, which is quite good.

Prince of Networks is a philosopher's understanding of Latour's body of work. Specifically, Harman is trying to introduce Latour as "a key figure in metaphysics" (p.5). And he thinks it's about time:
The central problem of metaphysics is the interplay of objects and relations, and Latour sheds more light on both problems than perhaps any other contemporary thinker. It is odd that no one so far has seemed to realize this - bad luck for Latour, but once-in-a-lifetime good fortune for me, as the author of the first book on his metaphysics. (p.159)
Harman divides this once-in-a-lifetime book into two parts. Part I examines Latour's key works - particularly Irreductions, Science in Action, We Have Never Been Modern, and Pandora's Hope, after which he names these chapters - in terms of metaphysics, comparing these key works to parallel work in metaphysics. In Part II, he examines Latour's take on objects and relations more critically, drawing Latour's thought into a more critical dialogue with metaphysics.

Unlike Harman and (evidently) Latour, I don't have a grounding in metaphysics, so the second part was of quite limited value to me. But the first part was useful because I was able to see how Harman explains Latour's thought to himself and fellow metaphysicists, and thus was able to see how ANT's concepts circulated into other disciplinary dialogues.

Harman starts with Irreductions, a relatively short treatise that is typically appended to Latour's The Pasteurization of France. Here, Latour describes a 1972 epiphany on the road from Dijon to Gray, in which he realizes that "nothing can be reduced to anything else, nothing can be deduced from anything else, everything must be allied to everything else" (p.13, quoting Latour p.163). This assertion became a "new principle of philosophy" for Latour (p.13), a principle that led to four premises: "the world is made up of actors or actants"; "no object is inherently reducible or irreducible to any other"; "the means of linking one thing to another is translation"; "actants gain in strength only through their alliances" (pp.14-15). Latour also "rejects the rift between an inner substance and its trivial exterior" (p.17). And the concept of alliance, Harman says, doesn't mean that Latour is Machiavellian: he doesn't reduce truth to human power games, he accepts nonhumans as actors and measures reality in terms of how connected an actor is (p.19). Importantly, "any attempt to see actants as the reducible puppets of deeper structures is doomed to fail" in this understanding (p.21).

Harman moves next to Science in Action, which introduces the concepts of black boxes and action at a distance (p.33). Latour, Harman asserts, is not a philosopher of science so much as "a metaphysician working in a philosopher-of-science idiom" (p.36). In this idiom, Latour chooses to open certain "black boxes" - that is, to examine specific objects as performances rather than substances (p.44).

In the next book Harman examines, We Have Never Been Modern, Latour tackles modernism and critiques how it turns quotidian, fragile actants into abstract nominalizations: "capitalism, imperialism, science, technology, domination" (p.62, quoting Latour pp.125-126). Harman becomes very enthusiastic about such critiques, and even proposes that "Although in my view (but not Latour's) Heidegger is the greatest philosopher of the past century, there are certainly moments when he deserves to have his tyres slashed" (p.68).

Moving along, Harman next discusses Pandora's Hope. And here he begins to critique Latour more directly, particularly in Latour's handling of Plato's Gorgias. In Latour's reading, although Socrates and Callicles are nominally at odds, they have a common enemy: the crowds (p.86). Harman, however, thinks that although this critique has some merit, Socrates is really the open-minded and questioning fellow that he portrays himself as being, and in this sense Socrates is "the ally of Latourean metaphysics" (p.91). (Although I'm no metaphysician, I don't buy this argument.)

The second part of the book was, frankly, less interesting to me because it deals with a lengthy comparison and critique of Latour with various metaphysicians. I agree with Harman that "Latour ... cannot explain change" (p.130) - more precisely, ANT has no strong account of development (see my book Network). But I disagree with Harman's understanding of Latorean relationships, which he seems to interpret as componentization:
But Latour's philosophy does not even allow for the existence of microparticles due to the infinite regress implied by the principle that black boxes can always be opened. Hence, it is all the more important for Latour that he allow genuine non-relational reality to emerge at each level of the world. And though he never passes the buck of reality downward to an artificial stopping point in the purported final kingdom of quarks, he does pass it upward to the outward effects an actant has on its neighbors. But the buck must never be passed in either direction. The reality of an object belongs to that object - not to its tiny internal constituents, and also not to the larger collectives in which it is immersed. (p.163)
If I'm reading Harman right, he's taking the metaphor of the black box too literally here, as many tend to do. If you imagine yourself opening a literal box, you'll find only things that fit inside that box - smaller things. If you dismantle a machine, you get the components of that machine. But Latour's concept of the black box isn't that of components but the associations from which the black box is composed. If I opened my phone, I'd find components; but if I "opened" it as a Latourean black box, I'd find Google and Taiwan. When Latour does talk of tiny components, it's in the context of comparing them: for instance, in "Drawing Things Together," he emphasizes that whether we examine microparticles or galaxies, we tend to view representations that are physically the same size, about the size of a piece of typing paper. In Latour's conception, the world doesn't have "levels"; the world is flat.

In any case, despite my misgivings over a couple of points in Part II, I thought this book was a keeper. It's certainly worth reading if you're interested in Latour or in metaphysics.