Banking on words the failure of language in the age of derivative finance

www.ebook3000.com BANKING ON WORDS www.ebook3000.com BANKING ON WORDS T H E FA I LU R E O F L A N G UA G E I N T H E A G E O F D E R I VAT I V E F I N A N C E Arjun Appadurai The University of Chicago Press Chicago & London Arjun Appadurai is the Goddard Professor of Media, Culture, and Communication at New York University and a senior fellow of the Institute for Public Knowledge A fellow of the American Academy of Arts and Sciences, he is the author or editor of numerous books, including The Social Life of Things, Modernity at Large, Fear of Small Numbers, and The Future as Cultural Fact The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London © 2016 by The University of Chicago All rights reserved Published 2016 Printed in the United States of America 25 24 23 22 21 20 19 18 17 16 ISBN-13: 978-0-226-31863-9 (cloth) ISBN-13: 978-0-226-31877-6 (paper) ISBN-13: 978-0-226-31880-6 (e-book) DOI: 10.7208/chicago/9780226318806.001.0001 Library of Congress Cataloging-in-Publication Data Appadurai, Arjun, 1949– author Banking on words : the failure of language in the age of derivative finance / Arjun Appadurai pages cm Includes bibliographical references and index ISBN 978-0-226-31863-9 (cloth : alk paper) — ISBN 978-0-226-31877-6 (pbk : alk aper) — ISBN 978-0-226-31880-6 (e-book) Derivative securities—Social aspects Global Financial Crisis, 2008–2009 I Title HG6024.A3A67 2015 332.64'57014—dc23 2015009033 ♾ This paper meets the requirements of ANSI/NISO Z39.48–1992 (Permanence of Paper) www.ebook3000.com CON T EN T S Preface vii CHAPTER ONE T H E L O G I C O F P R O M I S S O RY F I N A N CE CHAPTER T WO T H E E N T R E P R E N E U R I A L ET H I C A N D T H E S P I R I T O F F I N A N CI A L I S M 15 CHAPTER THREE T H E G H O ST I N T H E F I N A N CI A L M ACH I N E 37 CHAPTER FOUR T H E S ACR E D M A R K ET 55 CHAPTER FIVE S O CI A L I T Y, U N CE RTA I N T Y, A N D R I T UA L 71 CHAPTER SIX T H E CH A R I S M AT I C D E R I VAT I V E 83 CHAPTER SEVEN T H E W E A LT H O F D I V I D UA L S 101 CHAPTER EIGHT T H E G L O B A L A M B I T I O N S O F F I N A N CE 125 CHAPTER NINE T H E E N D O F T H E CO N T R ACT UA L P R O M I S E Notes References Index 157 163 171 149 www.ebook3000.com P R EFA CE This book has its roots in the early 1970s, when I was a graduate student at the Committee on Social Thought at the University of Chicago I was exposed then to the writings of Max Weber (though I first read The Protestant Ethic and the Spirit of Capitalism in 1967, as an undergraduate at Brandeis University) During the five decades that have elapsed since then, Max Weber has been both my inspiration and my foil This book is an effort to offer Weber, on whose shoulders I (and many others) still rest, a small gift in return It is also a tribute to my graduate education at the University of Chicago at a time when anthropology and the other social sciences hosted a uniquely fruitful conversation about the future of what were then called “the new nations.” Anthropology and economics have had less to say to each other since then I hope this book will add to the arguments in favor of deepening their dialogue I have had the pleasure of developing many of the ideas in this book in close and intense conversations with the members of the Cultures of Finance group at New York University: Randy Martin, Robert Meister, Ben Lee, Edward LiPuma, Robert Wosnitzer, and, more recently, Emanuel Derman and Elie Ayache I have also benefited from opportunities to present some of this work at WISER (The Wits Institute for Social and Economic Research) in Johannesburg; the Human Economy project at the University of Pretoria; the Anthropology Departments at New York University and the University of Cambridge; the University of Copenhagen; and the Institute for Public Knowledge at New York University The numerous conferences, workshops, and seminars of the Cultures of Finance group were made possible by the financial generosity of the provost of NYU, and the successive directors of the Institute for Public Knowledge, Craig Calhoun and Eric Klinenberg During these viii • P R E FACE occasions I was the beneficiary of the work of some of the best scholars (including many younger ones) working on social science approaches to finance in the New York area, elsewhere in the United States, and in other countries Randy Martin’s book, Knowledge LTD: Toward a Social Logic of the Derivative (2015), a collected volume of papers by members of the Cultures of Finance group (currently being prepared for publication), and the recent doctoral dissertation of Robert Wosnitzer, all reflect lines of thought from this collective dialogue, which is a major context for this book I have also benefited greatly from the encouragement and intellectual conviviality of my colleagues and students in the Department of Media, Culture, and Communication at the Steinhardt School, New York University I owe special thanks to Keith Hart, Ben Lee, and Natasha Schull, who read the entire manuscript and made several valuable suggestions which I have done my best to address in this book I owe sincere thanks as well to Madhurim Gupta, who helped with every detail of the preparation of this manuscript for publication In addition to my colleagues in the Cultures of Finance group at NYU, I have received scholarly support, encouragement, and fruitful criticism about the ideas in this book from the following friends and colleagues: Ritu Birla, Craig Calhoun, Jean Comaroff, John Comaroff, Jane Guyer, Eric Klinenberg, Achille Mbembe, Uday Mehta, Stine Puri, Vyjayanthi Rao, Hylton White, and Caitlin Zaloom My wife, Gabika Bockaj, has made our years together an ongoing reminder of the pleasures and passions of a true partnership Its living gift is our son, Kabir, who has done his joyous best to make my waking hours more disciplined than ever This book is for them Arjun Appadurai New York City January 2015 www.ebook3000.com CH A P T E R O N E THE LOGIC OF PROMISSORY FINANCE The Argument in Brief The principal argument of this book is that the failure of the financial system in 2007–8 in the United States was primarily a failure of language This argument does not deny that greed, ignorance, weak regulation, and irresponsible risk-taking were important factors in the collapse But the new role of language in the marketplace is the condition of possibility for all these more easily identifiable flaws To make this case requires understanding how language takes on a new life in contemporary finance, and this argument takes us into a realm not usually explored when financial markets are discussed.1 To understand how language takes on the role it does in finance today, four steps are involved The first is to show how derivatives are the core technical innovation that characterizes contemporary finance Edward LiPuma and Benjamin Lee took an initial step in this direction in their important book on Financial Derivatives and the Globalization of Risk (LiPuma and Lee 2004) Since then, there have been several efforts to define and explain derivatives, both within and outside the community of finance experts The second step is to show how derivatives are, essentially, written contracts about the future prices of various types of financial assets, the essence of which are promises by the losing party to pay the winning party an agreed-upon sum of money in the event of a specific future price outcome Thus the contract is a promise, and to understand it fully requires a new look at contracts, seen as 166 • R E F E R E N CE S Guyer, Jane I 2007 “Prophecy and the Near Future: Thoughts on Macroeconomic, Evangelical, and Punctuated Time.” American Ethnologist 34 (3): 409–21 doi:10.1525/ae.2007.34.3.409 Habib, Allen 2009 “Promises to the Self.” Canadian Journal of Philosophy 39 (4): 537–57 Hacking, Ian 1992 “The Self-Vindication of the Laboratory Sciences.” In Science as Practice and Culture, edited by Andrew Pickering, 29–64 Chicago: University of Chicago Press Hart, Keith 2000 The Memory Bank: Money in an Unequal World London: Profile Books Heelas, Paul 2008 Spiritualities of Life: New Age Romanticism and Consumptive Capitalism Malden, MA: Wiley-Blackwell Hilferding, Rudolf 1981 Finance Capital A Study of the Latest Phase of Capitalist Development Translated by Morris Watnick and Sam Gordon Edited by Tom Bottomore London: Routledge and Kegan Paul Originally published in 1910 Hirschman, Albert O 1977 The Passions and the Interests: Political Arguments for Capitalism before its Triumph Princeton, NJ: Princeton University Press Holmes, Douglas R 2013 Economy of Words: Communicative Imperatives in Central Banks Chicago: University of Chicago Press Janeway, William H 2006 “Risk versus Uncertainty: Frank Knight’s ‘Brute’ Facts of Economic Life.” Last modified June 7, 2006 http://privatizationofrisk ssrc.org/ Janeway/ Kahneman, Daniel, and Amos Tversky 1979 “Prospect Theory: An Analysis of Decision under Risk.” Econometrica 47 (2): 263–91 doi:10.2307/1914185 Knight, Frank H 2009 Risk, Uncertainty, and Profit Kissimmee, FL: Signalman Originally published in 1921 Latour, Bruno 2005 Reassembling the Social: An Introduction to Actor-Network Theory Oxford: Oxford University Press Leach, Edmund 1976 Culture and Communication: The Logic by which Symbols Are Connected: An Introduction to the Use of Structuralist Analysis in Social Anthropology Cambridge: Cambridge University Press Lears, Jackson 2003 Something for Nothing: Luck in America New York: Viking Levi- Strauss, Claude 1976 Structural Anthropology, vol Translated by Monique Layton Chicago: University of Chicago Press Levitt, Steven D., and Stephen J Dubner 2005 Freakonomics: A Rogue Economist Explores the Hidden Side of Everything New York: Harper Perennial Lewis, Michael 2010 The Big Short: Inside the Doomsday Machine New York: Norton LiPuma, Edward, and Benjamin Lee 2004 Financial Derivatives and the Globalization of Risk Durham, NC: Duke University Press www.ebook3000.com R E F E R E N CE S • 167 MacKenzie, Donald 2006 An Engine, Not a Camera: How Financial Models Shape Markets Cambridge, MA: MIT Press ——— 2009 Material Markets: How Economic Agents Are Constructed Oxford: Oxford University Press MacKenzie, Donald, Fabian Muniesa, and Lucia Siu, eds 2007 Do Economists Make Markets?: On the Performativity of Economics Princeton, NJ: Princeton University Press Malinowski, Bronislaw 1922 Argonauts of the Western Pacific New York: E P Dutton and Co Marriott, McKim 1976 “Hindu Transactions: Diversity without Dualism.” In Transaction and Meanning: Directions in the Anthropology of Exchange and Symbolic Behavior, edited by Bruce Kapferer, 109–42 Philadelphia, PA: Institute for the Study of Human Issues Marriott, McKim, and Ronald Inden 1974 “Caste Systems.” In Encyclopaedia Britannica 15th ed., 3:982–91 Martin, Randy 2002 Financialization of Daily Life Philadelphia, PA: Temple University Press ——— 2007 An Empire of Indifference: American War and the Financial Logic of Risk Management Durham, NC: Duke University Press ——— 2011 Under New Management: Universities, Administrative Labor, and the Professional Turn Philadelphia, PA: Temple University Press ——— 2015 Knowledge LTD: Toward a Social Logic of the Derivative Philadelphia, PA: Temple University Press Marwick, Alice E 2014 “How Your Data Are Being Deeply Mined.” New York Review of Books, January http://www.nybooks.com/articles/archives/2014/jan/ 09/how-your-data-are-being-deeply-mined/ Marx, Karl 1992 Capital Vol 1, A Critique of Political Economy Translated by Ben Fowkes New York: Penguin Classics Originally published in 1867 Maurer, William 2005 Mutual Life, Limited: Islamic Banking, Alternative Currencies, Lateral Reason Princeton, NJ: Princeton University Press Mauss, Marcel 1985 “A Category of the Human Mind: The Notion of Person; the Notion of Self.” Translated by W D Halls In The Category of the Person: Anthropology, Philosophy, History, edited by Michael Carrithers, Steven Collins, and Steven Lukes, 1–25 Cambridge: Cambridge University Press Originally published in 1938 ———.1990 The Gift: The Form and Reason for Exchange in Archaic Societies Translated by W D Halls London: Routledge Classics Originally published in L’Année Sociologique in 1925 McCloskey, Deirdre N 1985 The Rhetoric of Economics Madison: University of Wisconsin Press 168 • R E F E R E N CE S Meyer, Birgit 1999 Translating the Devil: Religion and Modernity among the Ewe in Ghana Trenton, NJ: Africa World Press Miller, Peter 2008 “Calculating Economic Life.” Journal of Cultural Economy (1): 51–64 doi:10.1080/17530350801913643 Miller, Peter, Liisa Kurunmäki, and Ted O’Leary 2008 “Accounting, Hybrids and the Management of Risk.” Accounting, Organizations and Society 33 (7–8): 942–67 doi:10.1016/j.aos.2007.02.005 Mitchell, Timothy 1998 “Fixing the Economy.” Cultural Studies 12 (1): 82–101 doi:10.1080/095023898335627 Miyazaki, Hirokazu 2007 “Between Arbitrage and Speculation: An Economy of Belief and Doubt.” Economy and Society 36 (3): 396– 415 doi:10.1080/ 03085140701428365 ——— 2013 Arbitraging Japan: Dreams of Capitalism at the End of Finance Berkeley: University of California Press Morris, Charles R 2008 The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash New York: Public Affairs Myers, Fred R 2002 Painting Culture: The Making of an Aboriginal High Art Durham NC: Duke University Press Pálsson, Gísli, and Paul Rabinow 1999 “Iceland: The Case of a National Human Genome Project.” Anthropology Today 15 (5): 14 doi:10.2307/2678370 Parfit, Derek 1984 Reasons and Persons Oxford: Oxford University Press Pollack, Sydney, dir 1970 They Shoot Horses, Don’t They? Film Poon, Martha A 2008 “From New Deal Institutions to Capital Markets: Commercial Consumer Risk Scores and the Making of Subprime Mortgage Finance.” Accounting, Organizations and Society 35 (5): 654–74 Poovey, Mary 2008 Genres of the Credit Economy: Mediating Value in Eighteenth- and Nineteenth-Century Britain Chicago: University of Chicago Press Power, Michael 1997 The Audit Society: Rituals of Verification Oxford: Oxford University Press Rabinow, Paul, and Limor Samimian-Darash, eds 2015 Modes of Uncertainty: Anthropological Cases Chicago: University of Chicago Press Rao, Vijayendra, and Michael Walton 2004 Culture and Public Action Stanford, CA: Stanford Social Sciences Riles, Annelise 2001 “Real Time: Governing the Market after the Failure of Knowledge.” Law and Economics Papers, June http://law.bepress.com/nwwps -lep/ art41 ——— 2004 “Real Time: Unwinding Technocratic and Anthropological Knowledge.” American Ethnologist 31 (3): 392–405 doi:10.1525/ae.2004.31.3.392 ——— 2011 Collateral Knowledge: Legal Reasoning in the Global Financial Markets Chicago: University of Chicago Press www.ebook3000.com R E F E R E N CE S • 169 Roitman, Janet 2004 Fiscal Disobedience: An Anthropology of Economic Regulation in Central Africa Princeton, NJ: Princeton University Press Rose, Nikolas 1992 “Engineering the Human Soul: Analyzing Psychological Expertise.” Science in Context (2): 351–69 doi:10.1017/S0269889700001228 Rose, Nikolas, and Peter Miller 2010 “Political Power beyond the State: Problematics of Government.” British Journal of Sociology 61:271–303 doi:10.1111/ j.1468-4446.2009.01247 Sahlins, Marshall D 1972 Stone Age Economics Chicago: Aldine-Atherton ——— 2013 What Kinship Is—And Is Not Chicago: University of Chicago Press Sandel, Michael J 2012 What Money Can’t Buy: The Moral Limits of Markets Thorndike, ME: Center Point Sassen, Saskia 2006 Territory, Authority, Rights: From Medieval to Global Assemblages Princeton, NJ: Princeton University Press Schelling, Thomas C 1978 Micromotives and Macrobehavior New York: W W Norton Schrift, Alan D 1997 The Logic of the Gift: Toward an Ethic of Generosity New York: Routledge Schumpeter, Joseph A 2008 Capitalism, Socialism, and Democracy New York: Harper Perennial Originally published in 1942 Shell, Marc 1982 Money, Language, and Thought: Literary and Philosophic Economies from the Medieval to the Modern Era Berkeley: University of California Press Simmel, Georg 1978 The Philosophy of Money Translated by Tom Bottomore and David Frisby London: Routledge and Kegan Paul Originally published in 1900 Simon, Jeremy M 2011 “Consumer Credit Card Debt Jumps Sharply.” Last modified July 8, 2011 http:// www.creditcards com /credit - card -news /federal -reserve-g19-consumer-credit-may-2011-1276.php Sirri, Erik 2008 “Testimony Concerning Credit Default Swaps.” Last modified October 15, 2008 http://www.sec.gov/news/testimony/2008/ts101508ers.htm Sombart, Werner 2001 The Jews and Modern Capitalism Translated by M Epstein New York: E P Dutton Originally published in 1911 Strathern, Marilyn 1988 The Gender of the Gift: Problems with Women and Problems with Society in Melanesia Berkeley: University of California Press Tambiah, Stanley J 1968 “The Magical Power of Words.” Man (2): 175 doi: 10.2307/2798500 ——— 1985 “A Performative Approach to Ritual.” In Tambiah, Culture, Thought, and Social Action: An Anthropological Perspective, 123–66 Cambridge, MA: Harvard University Press Tett, Gillian 2009 Fool’s Gold: How the Bold Dream of a Small Tribe at J.P Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe New York: Free Press 170 • R E F E R E N CE S Troeltsch, Ernst 1992 The Social Teaching of the Christian Churches Translated by Olive Wyon Louisville, KY: Westminster/John Knox Press Originally published in 1912 Turner, Victor W 1967 The Forest of Symbols: Aspects of Ndembu Ritual Ithaca, NY: Cornell University Press van Gennep, Arnold 1960 The Rites of Passage Translated by Monika B Vizedom and Gabrielle L Caffee Chicago: University of Chicago Press Originally published in 1909 Viveiros de Castro, Eduardo 2012 “Cosmological Perspectivism in Amazonia and Elsewhere.” In Hau Masterclass Series, vol http://www.haujournal.org/index.php/ masterclass/issue/view/Masterclass Volume Weber, Max 2008 Roman Agrarian History: In Its Relation to Roman Public Law and Civil Law Translated by Richard I Frank Claremont, CA: Regina Books Originally published in 1891 ——— 2009 The Protestant Ethic and the Spirit of Capitalism Translated by Stephen Kalberg Oxford: Oxford University Press Originally published in 1905 ——— 1978 Economy and Society: An Outline of Interpretive Sociology Edited by Guenther Roth and Claus Wittich Translated by Ephraim Fischoff et al Berkeley: University of California Press Originally published in 1922 ——— 2003 General Economic History Translated by Frank H Knight Mineola, NY: Dover Originally published in 1923 Weiner, Annette B 1991 Cloth and Human Experience Edited by Jane Schneider Washington, DC: Smithsonian Books Wessel, David 2010 In FED We Trust: Ben Bernanke’s War on the Great Panic New York: Crown Business Wosnitzer, Robert 2014 “Desk, Firm, God, Country: Proprietary Trading and the Speculative Ethos of Financialism.” PhD diss., New York University Yuran, Noam 2014 What Money Wants: An Economy of Desire Stanford, CA: Stanford University Press Zaloom, Caitlin 2006 Out of the Pits: Traders and Technology from Chicago to London Chicago: University of Chicago Press Zandi, Mark 2008 Financial Shock: A 360° Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis Harlow: FT Press www.ebook3000.com I N DE X aboriginal peoples, 56–58, 78–81, 88–93, 115 ABS (asset-backed securities), 107–8 absurd, the, 41–42 accounting: double-entry bookkeeping and, 27–34, 43–46; finance industry and, 33–34; sociology of, 27; uncertainty and, 30–34 actor network theory (ANT), 53, 146 agency, 102–4, 113–14, 145–46, 150–51, 154–56 agreements, 84–100, 115, 150 See also contracts; language; promises AIG (company), 9–10, 62 Alaimo, Stacy, 146 amortization, 61 ANT (actor network theory), 53, 146 anthropology, 17, 35, 71, 102–3, 146–48 See also Durkheim, Emile; and specific anthropologists antidebt movement, 110–11, 118, 126, 145, 161n1 anxiety, 41–42, 116–17 arbitrage, 16, 46, 125, 158n1 archaeology, 55 Aristotle, 132 asceticism, 39–43, 72–73 assemblages, 53, 104, 114, 116–17, 121–23, 146 asset-backed securities (ABS), 107–8 assets, 3, 10, 13, 107–8, 134, 144 See also derivatives; markets; securitization atomization (of the person), 68, 109–11 See also dividuals; individuals Austin, J L., 2, 6, 75–76, 86, 113, 130, 149, 151, 157n1 Australia, 56–58, 78–81, 88–93, 115 avarice, 9–10, 40, 46, 52–53, 138 See also wealth Ayache, Elie, 6, 83, 85–88, 90–99, 115–17, 134–35, 161n8 Badiou, Alain, 96, 135 Baldwin, James, 126 banking and banks: charisma and, 46; Islamic banking and, 16, 55–56, 158n1; mortgage market and, 60–62, 106–11, 126; practices of, 24 See also finance; liquidity; markets; mortgages Bank of India, 140, 142–43 Barad, Karen, 146 Baudrillard, Jean, 96 Baxter, John, 47 Bayly, Chris, 15 BBC, 65 Beck, Ulrich, 130–31 behavioral economics, 35, 47, 159n3 belonging, 88, 115 Bennett, Jane, 146 Benveniste, Emile, 112 Bergson, Henri, 104, 146 beruf See calling Bharatiya Janata Party (BJP), 139 Big Data, 109 biopolitics, 104 BJP (Bharatiya Janata Party), 139 Black-Scholes model, 80, 91, 98–99, 128–32, 160n1 Blank Swan, The (Ayache), 83–84, 161n8 Boas, Franz, 51, 55 172 • INDEX Bourdieu, Pierre, 39, 55, 57, 112–13, 116–17, 135 Brazil, 143 Brentano, Lujo, 19–20, 35 Brouwar, Maria, 32–33 Buffet, Warren, 60, 66 bundling See dividuals; securitization Bush, George W., 24 business news, 65–67 Butler, Judith, 76, 86, 111 calculation, 11; definitions of, 27; ethics of, 17–19, 21, 27–30, 34–35; finance discipline and, 133–37; insurance industry and, 62; magic thinking and, 23–25; speculation and, 28–29; spirit of, 16–17, 38–40; uncertainty and, 24–26, 30–34; Weber and, 30–34 See also probability calling, 19–21, 40–42 Callon, Michel, 16, 24, 31, 52–53, 56, 159n1 Calvinism, 71–72; methodicality and, 27–30; profit-making and, 32–33, 40–41; uncertainty of salvation in, 4–5, 23–27, 45–50, 71–74 Capital (Marx), 5, 127 capital accounting, 30–34 capitalism: accounting practices and, 27–34; ascetical, 39–42; calculation and, 11, 20–21; crises of, 44, 126, 136, 138, 140–41, 145, 149, 151–53; ethics of, 19–27, 39–42, 52–53; financialization of, 2–6, 43–50, 52–53, 101–6, 125–28; industrial period of, 11–12, 28, 125, 127; Marx on, 5, 10, 57–58; millennial capitalism and, 16; risk and, 22–27; Weber’s research on, 4–6, 17–19, 27–30, 43–46, 71–72 castes, 103–4, 121–23 Catholicism, 22–24, 41 CDOs (collateralized default obligations), 107 CDSs (credit default swaps), 136–45, 152–54 certitudo salutis, 23, 43 chance See risk chance (culture of), 49 charisma, 20–21, 25, 33–34, 46, 52–53, 81, 96–100 chartism (financial), 24–25 China, 20, 72 Cixous, Helene, 112 class action suits, 67, 145 www.ebook3000.com CNN, 65 collapses (of financial system), 90–91; derivatives and, 1–2 collateral, 16 collateralized default obligations (CDOs), 107 collective effervescence, 78–79, 81, 87–90, 97–98, 115 commodities, 107–8, 144; definitions of, 3–4; derivatives and, 11–12, 144; fetishism and, 5, 10; futures markets and, 3, 12–13 conditions of felicity, 2, 13, 42, 76–81, 87–88, 92, 98, 113, 138 conflicts of interest, 26 Connolly, William, 146 contingency See events contracts: dividuals and, 154–56; as events, 84–87, 94–95; force of, 7, 37–38, 50–52, 74–81, 153–54; (in)dividuals and, 147–48; language and, 2, 6, 13–14; promises and, 3–4, 138, 147–48, 151–54, 158n4; temporal period of, 3–4, 6; uncertainty and, 97–98, 134–35 contrarians, 48–52, 159n4 INDEX control (culture of), 49, 104–5, 109 Coole, Diana, 146 corporations: ethics of, 26; financial subjectivity and, 67 corroboree, 80, 88, 90–91, 93, 150 cosmology: dividuals and, 111–14, 121–23, 145–48; financial subjectivity and, 63–67; gift-giving and, 37–38; of the market, 14, 56–62, 67–69, 81, 85, 92, 129; retroperformativity and, 112–14; rhizome figure and, 104 creative destruction, 153–55 credit: CDSs and, 136–45, 152–54; credit cards and, 58–59; credit scores and, 63–65, 68; giftgiving and, 51–52; microcredit and, 25; money’s role in, 2; rating agencies and, 10, 48, 107, 138 credit default swaps (CDSs), 136–45, 152–54 culture: agreement and, 96, 99–100, 150; of chance, 49; of control, 49; moral force and, 7, 37–38, 50–52, 74–81, 88–90; risk- taking behaviors and, 18–19; ritual’s role and, 72–81, 88–91; the sacred and, 56–58, 63–65; spirit concept and, 39–40 Davidson, Paul, 32 Davy, George, Debord, Guy, 118 debt: antidebt movement, 110–11, 118, 126–27, 145, 161n1; credit cards and, 58–59; financial subjectivity and, 68, 106–11, 125–28, 136–37, 145–48; microlending and, 25, 142; subprime lending and, 136–37 Debt (Graeber), 161n1 Deleuze, Gilles, 104–5, 109, 146 derivatives: charisma and, 81, 96–100; credit default swaps and, 136–37; definitions of, 1–6, 83, 107–8; dividuals and, 114–19, 144–48; in India, 137–45; language and, 2, 6–10, 13, 134–35, 138, 141–49, 151–53; monetization and, 10–14; mortgage market and, 8, 60–61, 106–11; religious valences of, 41–42, 105–6; risk’s • 173 monetization and, 1–2, 12, 98–100, 125–28; short sellers and, 48–52; trading events and, 84–87, 92, 115–17, 134, 149–50 See also markets; prices derive, the, 118 Derman, Emanuel, 160n1 Derrida, Jacques, 37, 104, 112–13 Descartes, Réne, 102, 104 desire, 11–12 device skeptics, 47–48 discipline(s), 11, 18, 22–24, 56, 73, 75, 102, 105 See also anthropology; economics; finance; sociology dividuals: agency and, 102–4, 117–23, 130–32, 145–48, 154–56; community and, 119–23, 145, 161n7; debt and, 127–28; definition of, 101–3; derivatives and, 114–19, 144–48; gift-giving and, 113–14; logic of, 109–10, 112–14; sociological concepts and, 118–19, 121–22; subprime mortgages and, 106–11 double-entry bookkeeping, 24–34, 43–46 downside risks, 3–4, 174 • INDEX Dumont, Louis, 104, 116 Durkheim, Emile: collective effervescence and, 78–81, 87–93, 97, 115; Elementary Forms of Religious Life, 56–58, 78, 85, 89–90, 115; financial capitalism and, 67–69, 74–75; Mauss and, 103; scholarship on, 2, 14, 71; Weber and, 71–81, 83, 97, 129, 135 economics: behavioral, 35, 47, 159n3; definitions of, 11; as discipline, 11, 13, 132–37, 144; ethics of, 19–21; market logics and, 17–19; modernization theory and, 15–16, 20–21; neoclassical, 11, 17–19, 27, 35, 134–36, 140–41, 144; performativity and, 31, 159n1; risk and, 29–30; sociology and, 16–17, 34–35; uncertainty and, 30–34; Weber and, 21–22 education (sector), 62, 74, 108, 110, 125–26 Einstein, Albert, 17–18 Elementary Forms of Religious Life (Durkheim), 56–58, 85, 89–90, 115 Engine Not a Camera, An (MacKenzie), 133 Enlightenment, 102 entrepreneurship, 20–21, 27, 32–33, 42–46, 66, 73–74, 96, 154; risk and, epistemology See cosmology; magic; markets; quantification; rituals ethics: calculation and, 17–21, 27–30, 34–35, 52–53, 72–73; charisma and, 29–30; definitions of, 38–40; financial subjectivity and, 68–69; giftgiving and, 51–52; of grace, 41, 47–50, 52; moral force and, 7, 37–38, 50–52, 74–81, 153–54; ritual and, 78–81; short selling and, 47–52; systematicity and, 40–42, 45–47; uncertainty and, 45–50 Evans-Pritchard, E E., 55, 75, 130 events, 84–88, 92–93, 97 faith-based economy, 67 Fama, Eugene, 133 felicity (conditions of), 2, 13, 42, 76–81, 87–88, 92, 98, 113, 138 FICO scores, 63–65 finance: accounting practices and, 33–34, 43–44; Black-Scholes www.ebook3000.com model and, 80–81, 91, 98–99, 128–32; charisma and, 33–34, 46, 52–53, 81, 105–6; collapses of, 44, 126, 136–41, 145, 149–53; definitions of, 57–58; as discipline, 132–37, 144; dividuals and, 104–6, 114–19; ethics of, 24–26, 52–53, 84; in India, 138–45; Indian housing market and, 119–23; magic thinking and, 23–25; materiality of, 58–62, 101–2; mortgage market and, 60–62, 106–11; risk exploitation and, 46–50, 63–65; scholarship on, 22–24, 30, 32, 45–46, 55–56; spirit of, 27–30; uncertainty and, 32–34 financial chartism, 24–25, 34 Financial Derivatives and the Globalization of Risk (LiPuma and Lee), 1–2 financial systems: collapses of, 1–2, 8–13; insurance and, 2–3; language and, 6–10; liquidity and, 9; regulation of, 1–2, 10 flow charts, 30 formatting (term), 24 Fortune (magazine), 65 INDEX Foucault, Michel, 104, 157n1 framing (term), 24, 159n3 Franklin, Benjamin, 40–42, 47 Freud, Sigmund, 56 Fried, Charles, 150–51 Friedman, Milton, 133 Frost, Samantha, 146 functionalism, 75, 79, 94 futures markets, 3, 12–13, 152 gambling, 25–27, 41–42 game theory, 18–19 Geertz, Clifford, 55, 89, 114, 131, 135 geist, 21–27, 38–39 General Economic History (Weber), 27–28, 42–43 Gift, The (Mauss), 7, 37–38, 150 gifts, 7, 14, 37–38, 50–52, 113–14, 116–17, 150 Gillen, Francis, 56–58, 78 Goffman, Erving, 135, 159n3 Goldman Sachs, 51 good life, 18, 35 Gordon, Colin, 30 grace, 41, 47–52 See also Calvinism; salvation; uncertainty Graeber, David, 161n1 Greece, 143 greed See avarice Grossein, Jean Pierre, 39 Guattari, Felix, 104 Habermas, Jürgen, 129 habitus, 30, 39–40, 84 Hacking, Ian, 30 Hart, Keith, 132 hau, 7, 37–38, 113 health care, 62, 110, 125–27 hedge funds, 46, 52, 60–62, 75, 126, 133, 159n3 hedging, 3–4, 61, 86, 111, 131–33, 152 Hegel, G W F., 21–22 hegemony, Hilferding, Rudolf, 157n2 Hindus, 138–39 Hirschman, Albert, 17, 46, 132 Hobbes, Thomas, 150 holism, 104, 116 Holmes, Douglas, 157n1, 158n1 Homo Hierarchicus (Dumont), 104, 116 Household Debt Service Ratio, 59 illocutionary force, 76, 149 imaginaries See ethics; spirit IMF (International Monetary Fund), 139 Inden, Ronald, 103 India, 20, 26, 72, 103–4, 112, 116, 119–23, 137–45 individuals: contracts and, 153–54; defini- • 175 tions of, 102; financial subjectivity and, 63–69, 101–6; moral force and, 74–81; political agency of, 102, 118–19, 145–47, 150–51; quantification of, 63–65, 109–11 inequality, 17–19 instruments See technologies insurance, 2–4, 62, 125–26, 136–37, 141–42 interest, 26, 46; mortgages and, 61; passions and, 17–19 investments See markets Irigary, Luce, 112 Islamic banking, 16, 158n1 Janeway, William, 32 Japan, 26, 158n1 Jobs, Steve, 66 Kant, Immanuel, 56, 116 Kierkegaard, Søren, 41–42 Knight, Frank, 28, 32–33, 44–46, 52, 72–81, 91, 94, 134, 159n2 Knightian uncertainty, 24–25, 30–34 Kula ring, labor, 5, 10–12, 19, 123, 125, 127, 144, 153, 157n2 176 • INDEX language: conditions of felicity and, 2, 13, 42, 76–81, 87–88, 98, 113, 138; derivative contracts and, 2–4, 6–10, 13, 97–100, 138, 143–49, 151–52; performatives and, 2, 75–76, 86, 141–42, 145–49, 151 See also contracts; promises; speech act theory Latour, Bruno, 53, 56, 146 Leach, Edmund, 112 Lears, Jackson, 49 Lee, Benjamin, 1–2, 83, 130, 157n1 leverage, 137, 149, 151–52 Lévi-Strauss, Claude, 57, 89, 112, 116–17 LiPuma, Edward, 1–2, 83, 130, 157n1 liquidity, 9, 85, 98–100, 140–41 loneliness, 41–43 Luther, Martin, 40–41 MacKenzie, Donald, 31, 83, 85, 92, 133–34, 160n1 Madoff, Bernie, 25 magic, 23–24, 27, 75, 111–12, 130 See also markets; religion; rituals; uncertainty Malinowski, Bronislaw, 55, 75, 130 Maori, 113–14 maritime commerce, 2–3 markets: cosmology and, 14, 60–62, 67–69, 81, 92, 129; dividuals and, 117–23; event notion and, 84–86, 90, 92, 94–95; human motivations and, 18–19; liquidity and, 85, 98–100, 140–41; ontological assumptions about, 24, 115, 149–50; religious elements of, 56–58, 61–62, 88–91, 97–98, 128–32; value and, 59–60 See also derivatives; mortgages; quantification; risk; uncertainty Marriott, McKim, 103–4, 112, 116, 121 Martin, Randy, 83, 133 Marx, Karl, 5, 10, 17, 19–22, 56–58, 67–68, 79–80, 125, 127, 157n2 materialism: derivatives and, 107–8; dividuals and, 101–4, 146–48; the market and, 58–62; Marx and, 5; mediation and, 5, 14, 58–63, 67, 106–9; social sciences and, 55–56 Maurer, William, 157n1, 158n1 Mauss, Marcel, 2, 7, 14, 37–40, 49–56, 68, 71, 74, 89, 103, 112–17, 150 www.ebook3000.com MBS (mortgage-backed securities), 107 McCloskey, Deirdre, 157n1 media, 65–66, 109–11 mediation, 5, 14, 58–63, 67, 106–9 Meillasoux, Quentin, 96, 135 metaphor, 112, 114, 130–32 methodicality, 17–21, 23, 27–30, 32–33, 41, 43–46, 74–81 metonym, 112, 114, 130–32 microcredit, 25, 142 Midas myth, 12, 144 millennial capitalism, 16 Miller, Merton, 133 Miller, Peter, 30 Mitchell, Timothy, 132 Miyazaki, Hiro, 158n1 modernization theory, 15, 20–21 Modi, Narendra, 139 money: control/discipline dichotomy and, 105; definitions of, 2, 10; derivatives and, 1–14; desire and, 11–12, 97; Indian policy and, 140; Marx on, 5, 10, 157n2; mediation and, 5, 14, 58–63, 67, 106–9; quantification and, 104–5 Money (magazine), 65 morality: dividual agency and, 103, 121–23, INDEX 145–48; force of, 7, 37–38, 50–52, 74–81, 153–54; promises and, 1–10, 13, 138, 150 mortgage-backed securities (MBS), 107 mortgages: financial subjectivity and, 68, 106–11, 125–28, 136; in India, 140–43; materiality of, 60–62; subprime designation and, 8, 106–11, 137 MSNBC, 66 Mumbai, 119–23 mystification: the market and, 56–58; materiality and, 59–62 narratives, 65–67, 130 new materialism, 104, 146, 161n7 New York Times, 66 Nietzsche, Friedrich, 56 NSA (National Security Agency), 109 Obama, Barack, 108 objects See things Occupy movement, 99, 110–11, 126, 161n1 options, 3, 80, 83, 91, 117, 128, 132–35, 144, 152 outsourcing, 21 Parfit, Derek, 68 Pascal, Blaise, 17–18 Passeron, Jean-Claude, 39 passions, 17–19, 46 Paulson, John, 47, 50–51 pensions, 60–62, 67 performance and performatives: accounting and, 31–34; Austin on, 2, 75–76, 113, 149; conditions of felicity of, 2, 13, 42, 76–81, 87–88, 92, 98, 113, 138, 152; definitions of, 6; derivatives and, 6–10, 116–17, 157n1; gift-giving and, 37–38, 50–52, 113–17, 150; retroperformativity and, 76–81, 85–87, 89–91, 97–98, 111–14, 116–17, 130–32, 149–50; rituals and, 72–74, 76–81, 85–86, 89–90 See also language; promises; speech act theory perlocutionary force, 76 Philosophy of Money (Simmel), 11 politics: biopolitics and, 104; dividuals and, 101–6, 110–11, 113–14, 117–23, 145, 147–48; individual concept and, 118–19 See also agency Poon, Martha, 63–64 Poovey, Mary, 157n1 posthumanism, 146 potlatch ceremonies, 51–52, 55–56 Power, Michael, 30 • 177 predatory dividuation, 106–12, 114–19 See also dividuals prices: Black-Scholes and, 80–81, 91, 128–32, 134–35, 160n1; calculative ethos and, 30–34, 144; as events, 84–88, 90, 92–95, 97–98, 115, 149–50; market cosmology and, 59–60 probability: contingent events and, 84–88; financial capitalism and, 44–46, 67–69, 80–81, 91; insurance industry and, 62–65, 67–69; religion and, 3, 73–74; risk society concept and, 130–32; uncertainty and, 22–26, 33–34, 44–46, 62–69, 73–74, 81, 93, 95, 134–35; Weber and, 17–18, 22–23 profit: banking and, 61; calculative rationality and, 17–19, 33–34, 46, 72–73; Calvinist theology and, 5–6, 27; derivatives and, 13–14, 153; doubleentry bookkeeping and, 24–34, 43–46; predatory dividuation and, 106–12; risk and, 46–50, 62, 73–74; ritual elements of, 79–81; uncertainty 178 • INDEX profit (continued) and, 32–33, 47–50; Weber on, 31–32, 40–42 See also derivatives; markets; money; risk progressivism, 145–48 promises, 1–4, 6–10, 13, 138, 141–43, 145–48, 153–54 See also contracts; derivatives; language; performance and performatives proof, 29, 41, 46 Protestant Ethic and the Spirit of Capitalism (Weber), 5, 17–19, 22–27, 38–40, 43, 72 psychology, 35, 47 Puritanism See Calvinism quantification: BlackScholes and, 80, 128–32, 160n1; cosmological import of, 63–65, 67–69, 84–85; of debt, 58–59; dividuals and, 101–2, 109; measurement and, 15; politics and, 104–5; uncertainty and, 24–25, 30–34, 44–46, 52, 91, 94, 134 See also probability; risk rating agencies, 10, 63–64, 107, 138 rationalization, 20–21, 26, 40–43, 72–73 Rawls, John, 151 RBI (Bank of India), 140, 142–43 regulation, 1–2, 10, 21, 67, 99, 102, 138–39, 152–53 relationality, 146–48 See also dividuals religion: calling concept and, 19–21, 40–42; charisma and, 33–34; dividual notion and, 111–14; Durkheim on, 56–58, 74, 78–81, 88–90, 92–93, 97; financial capitalism’s relation to, 45–50, 63–67; magic and, 16, 23–24, 27, 75, 111–12, 130; retroperformativity and, 76–81, 85, 88–91, 150; risk conceptions and, 3, 71–72; ritual and, 74–81, 85–91, 93–94, 111–14; salvational ideologies and, 16–21, 23–27, 32, 71–74, 78; sociology and, 34–35; uncertainty and, 5–6, 72, 78 See also Calvinism retro-performativity, 76–81, 84, 86–87, 97–98, 111–14, 116–17, 130–32, 149–50 return, the, 7, 37–38, 50–52, 55–56, 116–18 See also gifts; hau; promises; risk www.ebook3000.com Riles, Annelise, 158n1 risk: collective risk-taking and, 118–23, 145–48; derivatives and, 1–2, 8–10, 12, 118–19, 147–48; financial capitalism and, 5, 43–46; liquidity and, 98–99; probabilistic understandings of, 3, 22–26, 44–46, 62–65, 68–69, 73–74, 81, 95, 129–32, 135–37; scholarly studies of, 17–19; uncertainty and, 18–19, 24–26, 42–50, 71–72, 81, 91–92, 94–95, 98–100, 128–32, 151–52, 159n2; Weber and, 17–19, 22–23, 32, 42–46 See also derivatives; dividuals; markets; profit Rites of Passage, The (van Gennep), 77–78, 111 rituals: dividual notion and, 111–14, 116–17, 130–32; Durkheim on, 56–58, 74–75, 92–93; market activity as, 81, 105–6; uncertainty’s amelioration and, 76–81, 85–86, 88–91, 93–94, 111–14 Roman Agrarian History (Weber), 72 Rose, Nikolas, 30 Rumsfeld, Donald, 45 INDEX Rural Electrification Corporation of India, 142 Russia, 143 Sabanes-Oxley, 26 sacred, the, 56–58, 63–65, 67–69, 76–81, 85, 88, 115 Sahlins, Marshall, 55, 57 salvation, 5–6, 16–19, 32–34, 40–46, 72 Sandel, Michael, 11–12 Schneider, David, 103 Schopenhauer, Arthur, 67 Schumpeter, Joseph, 30, 32–33, 35, 135, 153–54 scores (credit), 63–65, 68, 109–10 Searle, John, 151 secularization, 56–58 securitization, 10, 107, 137, 142, 151, 157n2 Sen, Amartya, 139 Shell, Marc, 157n1 Shils, Edward, 15 short selling, 33–34, 47–48, 51–52, 81, 159n4 Simmel, Georg, 11, 19–20, 87 social, the See culture Social Life of Things (Appadurai), 15, 53 Social Science Research Council, 15 sociology: actor network theory and, 53, 146; dividuals and, 118–19; economics and, 45–46; social facts and artifacts and, 10, 56–58, 103; vocabulary of, 118–19, 121–22, 146; Weber and, 15–17, 19–21, 34–35, 71–81 Sombart, Werner, 20, 29–30, 35 sorcery, 111–12 Soros, George, 47, 50 speculation, 2, 152; calculation and, 28–29, 136–37; Weber’s analysis and, 72–73 See also derivatives speech act theory, 75–76, 89–90, 149, 157n1 Spencer, Herbert, 56–58, 78 Spinoza, Baruch, 104, 111, 146 spirit, 21–27, 37–40, 52–53 See also ethics; Weber, Max spreadsheets, 30 Stanford, Allen, 25 statistics See probability Strathern, Marilyn, 104, 112, 116 subjects See agency; dividuals; finance; individuals; politics subprime lending, 8, 63–64, 106–11, 136–37 surplus value, 5, 10 Taleb, Nassim, 85, 135 Tambiah, Stanley, 112, 130 • 179 technologies: accounting as, 30, 52–53; financial instruments and, 60–61, 68, 83–84, 98–102; magic as, 16, 23–24, 75, 111–12, 130; risk profiles and, 44–50, 63–65 things: anthropology of, 55–56; financialization and, 58–62; gifts and, 37–38; religious practices and, 57; sociology of, 15 See also materialism; new materialism time, 48, 113, 129; derivatives contracts and, 3–4, toilet festivals, 122–23 totemism, 56–58, 60, 88–89, 92–93 trading See markets Troeltsch, Ernst, 20 Trump, Donald, 66 Turner, Victor, 89 uncertainty: accounting and, 30–34; Black-Scholes and, 128–32; calculation and, 24–26, 30–34; Calvinism and, 23–27, 71–74; definitions of, 22–27; ethos of, 45–50; Knightian, 24–25, 30–34, 44–46, 52, 91, 94, 134, 159nn2–3; risk’s relation to, 180 • INDEX uncertainty (continued) 18–19, 41–50, 71–72, 81, 91–92, 94–95, 98–100, 128–32, 151–52, 159n2; ritual and, 74–81, 93–95, 111, 128–32; spirit of, 44; Weber on, 16–17, 22–27, 72, 78 United States: consumer debt in, 58–59; financial capitalism in, 46, 63–65, 125–28, 135–36, 141–42, 152–53; gambling ethos of, 49–50; mortgage market in, 106–11; quantification drive in, 63–65 See also debt Untouchables, 122 upside risks, 3–4, 48 utilitarianism, 150–51 value: labor and, 5, 10–12, 19, 123, 125, 127, 157n2; market pricing and, 59–60, 87 van Gennep, Arnold, 75, 77–78, 111, 114 vitalism, 146 wealth, 9, 17, 31–35, 42, 58–59, 72–73, 83, 98–101, 107–8, 118–19, 144–48, 155 See also money; profit Weber, Max: accounting and, 30–34; Durkheim and, 71–81, 83, 97, 129; General Economic History, 27–28; Marx and, 17, 19–22; Protestant Ethic and the Spirit of Capitalism, 4–5, 14, 22, 38–40, www.ebook3000.com 71–72; Roman Agrarian History, 72; scholarship on, 2, 15–17, 19–21, 49, 71–72; on speculation, 28–29; spirit concept and, 21–27, 38–42, 47–50, 52–53; uncertainty and, 16–17, 22–23, 42–50, 71–72, 78, 96, 129, 135 Weiner, Annette, 55 Wittgenstein, Ludwig, 151 World Bank, 139 writing, 6–7, 13–14, 84–88, 92, 96 Yuran, Noam, 11–12 Zaloom, Caitlin, 24 ... Library of Congress Cataloging -in- Publication Data Appadurai, Arjun, 1949– author Banking on words : the failure of language in the age of derivative finance / Arjun Appadurai pages cm Includes... seeing the coming autonomy of money as a means of making money through the derivative form, offers us a road into the ethos of derivative trading This is the journey of some of the forthcoming... profit as a sign of election Since such a state of certainty about one’s own election requires both speculation and certainty, it leads to a continuous wagering of oneself in the routines of