Notes: An Engine Not A Camera

An Engine Not A Camera

In a series of posts I will be providing reading notes for Donald MacKenzie’s book An Engine Not A Camera: How Financial Models Shape Markets. MacKenzie has been author of a number of excellent analyses of the recent financial crisis for the London Review of Books and is an expert on the sociology of financial markets.

This book centres around close empirical and sociological study of a concept that in left-wing or anti-capitalist circles has always been suspected. Rather than neutrally describe the world in a positive manner, the models that economists use effect the object, the economies or markets, that they are supposed to scrutinise. Economics makes markets gradually conform to its models with the resultant political and moral questions this implies. This is claim one hears a great deal from myriad critics of capitalism. Economics (here broadly neo-classical economics) assumes individualist, self-interested individuals dedicated to narrowly pursuit of utility maximisation and this causes people to operate in this way, coldly calculating amorally. Economics is a self-fulfilling prophecy, economics makes markets. These statements seem to have some truth in them, but also seem to be philosophically problematic to some extent – for example, if this were really the case then markets would actually become more efficient as people slowly become the model in question. After almost two-hundred years of capitalism, and around hundred of neoclassical economics we would surely expect the system to now be running entirely perfectly, since people have become fully absorbant of the descriptions, which are  widespread and fully absorbed culturally. MacKenzie is fully conscious of these kind of philosophical and empirical question and his book discusses them in detail.

It is hoped that these notes might provoke discussion as well as bringing this work to a wider audience it well deserves. I noted that in his paper of the Militant Dysphoria event in London (pdf) Nick Srnicek mentions the work of Michel Callon. The first chapter of MacKenzie’s book deals with precisely the book, Callon’s The Laws of Markets, that Nick discusses, so this first chapters notes should be interesting in an immediate sense for those intrigued by what Nick said there.

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5 Responses to “Notes: An Engine Not A Camera”

  1. Jared Says:

    I look forward to your discussion. The “economics makes markets” claim strikes me as implausible, at least in the case of derivative models, where assumptions about the normal distribution of returns have (if anything) become less true over time.

  2. Alex Says:

    McKenzie talks about that at length in a chapter I think. A fair few people, including economic historians who have been very influential on my thought, for example, Phil Mirowski, really don’t like this approach at all.

  3. Jared Says:

    Book looks good – even appendices with Black Scholes and binomial models. I’ll read this.

    Anyone interested in this topic might enjoy Mike Konczal’s post today:

    http://rortybomb.wordpress.com/2009/10/02/commodities-buying-the-future/

  4. Nick Srnicek Says:

    Looking forward to the posts Alex; this looks really interesting. I’ve read some of Mackenzie’s essays in the past, and always enjoyed them. You may already know of this book, but it might be a good supplement too:

  5. Mike Says:

    This book is excellent, especially as an intellectual history of financial engineering; I’ve been meaning to revisit it, and will probably do so with your reading notes.

    There’s a lot of room to build off of it, particularly with the performance of ‘liquidity’ as well as a more general interplay between the demand of the market for theory (in the evolving financial markets sense).


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