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Critical finance studies
G Model YCPAC 2012 No. of Pages 3
Critical Perspectives on Accounting xxx (2017) xxx–xxx
Contents lists available at ScienceDirect
Critical Perspectives on Accounting journal homepage: www.elsevier.com/locate/cpa
Editorial
Critical finance studies
Responding to Protagoras’ sensate claim that man (anthropos) is the measure of all things, Plato argues in the Laws that this transcendent position could only pertain to God. That is to say, God, not man, is the measure of all things, asserting thereby that human thought, knowledge and existence are conditioned by a judgemental authority located somewhere else, beyond the boundaries of this deceptive, experiential world. Plato is thus referring to the true and essential reality of absolute Ideas or Forms, an otherworldly dimension inhabited by noumena, objects devoid of all phenomenal attributes and as such impossible to access through bodily senses, conceivable only through what Plato in the Phaedo terms ‘intellectual vision’ or ‘pure thought’.1,2 The one thing required to possess such absolute vision is that you live your life ‘almost as though [you] were dead’ – death here defined by Plato as ‘the separation of soul and body [ . . . the moment when the] soul runs away from the body and desires to be alone and by herself.’3,4 ‘Thought is best when the mind is gathered into herself and none of these things trouble her – neither sounds nor sights nor pain nor any pleasure – when she has as little as possible to do with the body, and has no bodily sense or feeling, but is aspiring after being,’5 ; the supreme Form or Idea of existence. We suggest that Finance, in its broadest sense, is not only modelled after this Platonic prototype, but is in fact practiced as such. Without Plato (and indeed religion) there would be no finance. In the financial world, however, the Ideal against which everything is measured is of course not God but the Future, functioning ‘as a transcendental ideal which incites us to take thought beyond the limits of possible experience.’6 And, we would add, making sure thought stays there. To in any way act upon or partake in the financial markets, to speculate economic matters through intellectual vision, is thus to move beyond economy – to transcend the economic as such. The financial world is ideational and must thus be approached as something which is not and can never be present to our senses. As opposed to this world, which the Christian church fathers named oikonomia, and in which Christ was called “the man of economy”, and which was created ex nihilo, out of nothing; the financial world was created ex futuro, out of the future, in and through the idea of the advent, the incoming of the Future, a future we must presume will arrive, but which under no conditions may be allowed to actually do so. Finance, in other words, is an idée fixe, an idea fixing in advance of the present as a futurum exactum, a promissory event that by definition will take place in the not yet but all-ready of the future. Financial practice is about one thing and one thing only: turning means into ends, means that have in themselves their own transcendent ends, ends without means – pure financial endedness. This suggests that financial means, when projected onto the market screens of the Future, must be completely pervious, absolutely permeable, thus making the means transcendible, possible to surpass, to the extent of turning the financial means or media entirely unnoticeable, imperceptible – who has ever seen a financial derivative? We must, in other words, envisage the financial world Platonically, if not through
1 2 3 4 5 6
Plato, Phaedo, http://classics.mit.edu/Plato/phaedo.html (2017-09-20) Plato (1997), Phaedo in Plato Complete Works, John M. Cooper (Ed). Cambridge: Hacket Publishing Company, p. 57 (66a). Plato, Phaedo, http://classics.mit.edu/Plato/phaedo.html (2017-09-20). Ibidem. Ibidem. Philip Goodchild (2001), Why is Philosophy so Compromised With God? in Mary Bryden (ed) Deleuze and Religion, p. 156. London: Routledge.
https://doi.org/10.1016/j.cpa.2017.09.005 1045-2354/© 2017 Elsevier Ltd. All rights reserved.
Please cite this article in press as: T. Bay, S. McGoun, Critical finance studies, Crit Perspect Account (2017), http://dx.doi.org/ 10.1016/j.cpa.2017.09.005
G Model YCPAC 2012 No. of Pages 3
2
T. Bay, S. McGoun / Critical Perspectives on Accounting xxx (2017) xxx–xxx
the oculus animae, the soul’s eye, then through the mind’s eye, our intellectual vision – as an im-mediate or un-mediated event, a mediation without intermediary, intervening agency or medium: pure thought. When the financial system is in full operation, working perfectly, to the very limit of its capacities, all financial means are effaced, disappearing into immediacy. The remainder? Pure, uncontaminated, shadowless financial Future; the assurance of something better occurring beyond this world, something which the economy will never be able to procure. What we intend to problematize in this special issue is not so much the invisibility of the financial sphere per se, but the indiscernibility of its financial means. This indiscernibility engenders important consequences as it deprives us all of the means with which to grasp how the financial system works – in this world, as it is. Expressed differently, we will endeavour to exhibit the absolute senselessness of Platonic finance by repeating it differently, in excess over what it claims to be representing. This, we hold, will add enough visibility to at least some parts of the financial world to deliver a thorough critique enabling us to see what we have been taught to discard – financial mediacy at work – and, ultimately, to allow us the possibility of thinking and living our economic lives otherwise. As befits a journal taking a critical perspective, the six papers in this issue examine finance in ways that a discipline that is virtually devoid of self-reflection—let alone self-criticism—rarely does. Two of the papers deploy philosophy to cast finance in new light and situate it within a broader context of human endeavor. In “Heidegger and Modern Finance”, Charalampos Fytros draws upon Martin Heidegger to illuminate relationships among the current streams of finance research. Within the discipline itself, behavioral finance is often presented as a bold challenge to traditional theory, of which the efficient markets hypothesis (EMH) is an exemplar. From an epistemological standpoint, however, the two are methodologically identical. Economic sociology and its somewhat broader variant social studies of finance (SSF) approach finance quite differently. While these latter take a more Heideggerian position regarding finance, their prescriptions regarding markets reflect more immediate instrumentality than the philosopher would support. Rather, Heidegger would emphasize how finance is a part of a longer-term historical process. For Charles Barthold, David Harvie, and Stephen Dunne in their paper “Resisting Finance with Deleuze and Guattari”, the philosophers offer a useful lens through which to study finance’s intrusions into everyday life and the resistance to those intrusions such as the once prominent but now defunct Occupy Wall Street (OWS) movement. Essentially, finance— and especially its attendant proliferation of derivatives—has created a “society of control”. In response, OWS can be considered as an itinerant political event in opposition to it. As such, it had the potential to present a serious challenge to financial hegemony, a potential which despite spawning successor activities to carry on its work, it essentially failed to realize. A second pair of papers look more deeply into finance to explore the uncertainties that lie beneath a surface that is commonly taken for granted. In “Value Without Valuation”, author Ekaterina Svetlova observes that loath as finance is to admit it, there are financial securities that determinedly resist practitioners’ best efforts to subject them to mathematical valuation methods. The paper’s illustrative example of such a security is the “coco”, a contingent convertible bond whose future (continued payment of interest or conversion to equity) cannot be assessed using traditional statistical methods because there is no relevant/reliable history with which to do so. As a result, the market for cocos might best be understood in terms usually associated with the marketing of consumer goods and services. Quite possibly, then, other more familiar financial markets that appear to be more mathematically tractable might not reflect the rational, estimable risk-return tradeoffs they are promoted to be driven by. Peter Pelzer’s “Risk Bearing Capacity and the Bearers of Responsibility” makes a more subtle but no less important point. Risk is clearly a core concern of finance, but at the same time our ignorance of just what risk is, is profound. Pelzer takes on the metaphor that risk is something that must be borne and that financial entities have risk-bearing capacities. An alternative perspective embedded in the Bank for International Settlement (BIS) guidelines is that risk is not something to be borne but something to be understood. According to this interpretation, financial entities do not bear risk; rather, jointly with regulators, they bear the responsibility for addressing the risks. The effect of this formulation is to shift a burden from the financial entities themselves to the public. These four papers all implicitly aver that finance will profit by questioning statements and approaches that finance treats as axiomatic and by paying greater attention to the insights of other disciplines—notably philosophy—in doing so. The final two papers are more explicit in their demands for change. In “Gekko and Black Swans”, Geeta Lakshmi shows the in spite of the failures of the financial system over past decades, the serious pain individuals have suffered in the crises that those failures have caused, and the widespread criticisms and protests that have followed, universities continue to educate increasing numbers of accounting and finance students with the same curricula that have been blamed for engendering the values and thought patterns that led to the problems. Educators need to revise that curriculum to reorient their courses toward the knowledge and attitudes with which accounting and finance can make meaningful contributions to the creation of sustainable societies. Christoph Schinckus’ “Pataphysics of Finance” concludes this issue with something extremely rare in finance—humor with a serious message. Using the absurdist “science” of pataphysics, he has produced a satire that skewers the sacred theories and models of modern finance theory. With the meteoric rise of algorithmic trading taking off from these theories and model, humanity and its real economic concerns have been left behind as machines have reached escape velocity and
Please cite this article in press as: T. Bay, S. McGoun, Critical finance studies, Crit Perspect Account (2017), http://dx.doi.org/ 10.1016/j.cpa.2017.09.005
G Model YCPAC 2012 No. of Pages 3
T. Bay, S. McGoun / Critical Perspectives on Accounting xxx (2017) xxx–xxx
3
taken over the financial system. When clearly confronted with the preposterousness of this situation as presented in this paper, thoughtful persons cannot help but reflect on the actions they might take to address it. Thomas Bay* Stockholm University, Sweden Skip McGoun Bucknell University, United States * Corresponding author. E-mail addresses: [email protected] (T. Bay), [email protected] (S. McGoun). Received 20 September 2017 Accepted 20 September 2017 Available online xxx
Please cite this article in press as: T. Bay, S. McGoun, Critical finance studies, Crit Perspect Account (2017), http://dx.doi.org/ 10.1016/j.cpa.2017.09.005
Critical Perspectives on Accounting xxx (2017) xxx–xxx
Contents lists available at ScienceDirect
Critical Perspectives on Accounting journal homepage: www.elsevier.com/locate/cpa
Editorial
Critical finance studies
Responding to Protagoras’ sensate claim that man (anthropos) is the measure of all things, Plato argues in the Laws that this transcendent position could only pertain to God. That is to say, God, not man, is the measure of all things, asserting thereby that human thought, knowledge and existence are conditioned by a judgemental authority located somewhere else, beyond the boundaries of this deceptive, experiential world. Plato is thus referring to the true and essential reality of absolute Ideas or Forms, an otherworldly dimension inhabited by noumena, objects devoid of all phenomenal attributes and as such impossible to access through bodily senses, conceivable only through what Plato in the Phaedo terms ‘intellectual vision’ or ‘pure thought’.1,2 The one thing required to possess such absolute vision is that you live your life ‘almost as though [you] were dead’ – death here defined by Plato as ‘the separation of soul and body [ . . . the moment when the] soul runs away from the body and desires to be alone and by herself.’3,4 ‘Thought is best when the mind is gathered into herself and none of these things trouble her – neither sounds nor sights nor pain nor any pleasure – when she has as little as possible to do with the body, and has no bodily sense or feeling, but is aspiring after being,’5 ; the supreme Form or Idea of existence. We suggest that Finance, in its broadest sense, is not only modelled after this Platonic prototype, but is in fact practiced as such. Without Plato (and indeed religion) there would be no finance. In the financial world, however, the Ideal against which everything is measured is of course not God but the Future, functioning ‘as a transcendental ideal which incites us to take thought beyond the limits of possible experience.’6 And, we would add, making sure thought stays there. To in any way act upon or partake in the financial markets, to speculate economic matters through intellectual vision, is thus to move beyond economy – to transcend the economic as such. The financial world is ideational and must thus be approached as something which is not and can never be present to our senses. As opposed to this world, which the Christian church fathers named oikonomia, and in which Christ was called “the man of economy”, and which was created ex nihilo, out of nothing; the financial world was created ex futuro, out of the future, in and through the idea of the advent, the incoming of the Future, a future we must presume will arrive, but which under no conditions may be allowed to actually do so. Finance, in other words, is an idée fixe, an idea fixing in advance of the present as a futurum exactum, a promissory event that by definition will take place in the not yet but all-ready of the future. Financial practice is about one thing and one thing only: turning means into ends, means that have in themselves their own transcendent ends, ends without means – pure financial endedness. This suggests that financial means, when projected onto the market screens of the Future, must be completely pervious, absolutely permeable, thus making the means transcendible, possible to surpass, to the extent of turning the financial means or media entirely unnoticeable, imperceptible – who has ever seen a financial derivative? We must, in other words, envisage the financial world Platonically, if not through
1 2 3 4 5 6
Plato, Phaedo, http://classics.mit.edu/Plato/phaedo.html (2017-09-20) Plato (1997), Phaedo in Plato Complete Works, John M. Cooper (Ed). Cambridge: Hacket Publishing Company, p. 57 (66a). Plato, Phaedo, http://classics.mit.edu/Plato/phaedo.html (2017-09-20). Ibidem. Ibidem. Philip Goodchild (2001), Why is Philosophy so Compromised With God? in Mary Bryden (ed) Deleuze and Religion, p. 156. London: Routledge.
https://doi.org/10.1016/j.cpa.2017.09.005 1045-2354/© 2017 Elsevier Ltd. All rights reserved.
Please cite this article in press as: T. Bay, S. McGoun, Critical finance studies, Crit Perspect Account (2017), http://dx.doi.org/ 10.1016/j.cpa.2017.09.005
G Model YCPAC 2012 No. of Pages 3
2
T. Bay, S. McGoun / Critical Perspectives on Accounting xxx (2017) xxx–xxx
the oculus animae, the soul’s eye, then through the mind’s eye, our intellectual vision – as an im-mediate or un-mediated event, a mediation without intermediary, intervening agency or medium: pure thought. When the financial system is in full operation, working perfectly, to the very limit of its capacities, all financial means are effaced, disappearing into immediacy. The remainder? Pure, uncontaminated, shadowless financial Future; the assurance of something better occurring beyond this world, something which the economy will never be able to procure. What we intend to problematize in this special issue is not so much the invisibility of the financial sphere per se, but the indiscernibility of its financial means. This indiscernibility engenders important consequences as it deprives us all of the means with which to grasp how the financial system works – in this world, as it is. Expressed differently, we will endeavour to exhibit the absolute senselessness of Platonic finance by repeating it differently, in excess over what it claims to be representing. This, we hold, will add enough visibility to at least some parts of the financial world to deliver a thorough critique enabling us to see what we have been taught to discard – financial mediacy at work – and, ultimately, to allow us the possibility of thinking and living our economic lives otherwise. As befits a journal taking a critical perspective, the six papers in this issue examine finance in ways that a discipline that is virtually devoid of self-reflection—let alone self-criticism—rarely does. Two of the papers deploy philosophy to cast finance in new light and situate it within a broader context of human endeavor. In “Heidegger and Modern Finance”, Charalampos Fytros draws upon Martin Heidegger to illuminate relationships among the current streams of finance research. Within the discipline itself, behavioral finance is often presented as a bold challenge to traditional theory, of which the efficient markets hypothesis (EMH) is an exemplar. From an epistemological standpoint, however, the two are methodologically identical. Economic sociology and its somewhat broader variant social studies of finance (SSF) approach finance quite differently. While these latter take a more Heideggerian position regarding finance, their prescriptions regarding markets reflect more immediate instrumentality than the philosopher would support. Rather, Heidegger would emphasize how finance is a part of a longer-term historical process. For Charles Barthold, David Harvie, and Stephen Dunne in their paper “Resisting Finance with Deleuze and Guattari”, the philosophers offer a useful lens through which to study finance’s intrusions into everyday life and the resistance to those intrusions such as the once prominent but now defunct Occupy Wall Street (OWS) movement. Essentially, finance— and especially its attendant proliferation of derivatives—has created a “society of control”. In response, OWS can be considered as an itinerant political event in opposition to it. As such, it had the potential to present a serious challenge to financial hegemony, a potential which despite spawning successor activities to carry on its work, it essentially failed to realize. A second pair of papers look more deeply into finance to explore the uncertainties that lie beneath a surface that is commonly taken for granted. In “Value Without Valuation”, author Ekaterina Svetlova observes that loath as finance is to admit it, there are financial securities that determinedly resist practitioners’ best efforts to subject them to mathematical valuation methods. The paper’s illustrative example of such a security is the “coco”, a contingent convertible bond whose future (continued payment of interest or conversion to equity) cannot be assessed using traditional statistical methods because there is no relevant/reliable history with which to do so. As a result, the market for cocos might best be understood in terms usually associated with the marketing of consumer goods and services. Quite possibly, then, other more familiar financial markets that appear to be more mathematically tractable might not reflect the rational, estimable risk-return tradeoffs they are promoted to be driven by. Peter Pelzer’s “Risk Bearing Capacity and the Bearers of Responsibility” makes a more subtle but no less important point. Risk is clearly a core concern of finance, but at the same time our ignorance of just what risk is, is profound. Pelzer takes on the metaphor that risk is something that must be borne and that financial entities have risk-bearing capacities. An alternative perspective embedded in the Bank for International Settlement (BIS) guidelines is that risk is not something to be borne but something to be understood. According to this interpretation, financial entities do not bear risk; rather, jointly with regulators, they bear the responsibility for addressing the risks. The effect of this formulation is to shift a burden from the financial entities themselves to the public. These four papers all implicitly aver that finance will profit by questioning statements and approaches that finance treats as axiomatic and by paying greater attention to the insights of other disciplines—notably philosophy—in doing so. The final two papers are more explicit in their demands for change. In “Gekko and Black Swans”, Geeta Lakshmi shows the in spite of the failures of the financial system over past decades, the serious pain individuals have suffered in the crises that those failures have caused, and the widespread criticisms and protests that have followed, universities continue to educate increasing numbers of accounting and finance students with the same curricula that have been blamed for engendering the values and thought patterns that led to the problems. Educators need to revise that curriculum to reorient their courses toward the knowledge and attitudes with which accounting and finance can make meaningful contributions to the creation of sustainable societies. Christoph Schinckus’ “Pataphysics of Finance” concludes this issue with something extremely rare in finance—humor with a serious message. Using the absurdist “science” of pataphysics, he has produced a satire that skewers the sacred theories and models of modern finance theory. With the meteoric rise of algorithmic trading taking off from these theories and model, humanity and its real economic concerns have been left behind as machines have reached escape velocity and
Please cite this article in press as: T. Bay, S. McGoun, Critical finance studies, Crit Perspect Account (2017), http://dx.doi.org/ 10.1016/j.cpa.2017.09.005
G Model YCPAC 2012 No. of Pages 3
T. Bay, S. McGoun / Critical Perspectives on Accounting xxx (2017) xxx–xxx
3
taken over the financial system. When clearly confronted with the preposterousness of this situation as presented in this paper, thoughtful persons cannot help but reflect on the actions they might take to address it. Thomas Bay* Stockholm University, Sweden Skip McGoun Bucknell University, United States * Corresponding author. E-mail addresses: [email protected] (T. Bay), [email protected] (S. McGoun). Received 20 September 2017 Accepted 20 September 2017 Available online xxx
Please cite this article in press as: T. Bay, S. McGoun, Critical finance studies, Crit Perspect Account (2017), http://dx.doi.org/ 10.1016/j.cpa.2017.09.005