The Credit Crisis as a Problem in the Sociology of Knowledge
A number of scholars have recently been applying perspectives from the social studies of science and technology to financial markets, an activity sometimes called “social studies of finance.” Amongst the questions this work throws up is how market participants evaluate financial instruments, an issue which is (amongst other things) a problem in the sociology of knowledge.
This talk will present a historical sociology of the clusters of evaluation practices surrounding three classes of financial instrument (CDOs, i.e. collateralised debt obligations; ABSs, asset-backed securities; and a fateful concatenation of the two, ABS CDOs) that together account for more than half the losses that triggered the near-collapse of the global banking system in autumn 2008. (These clusters of evaluation practices are loosely analogous to Knorr Cetina’s “epistemic cultures” and to other uses of the term “culture” in social studies of science, but one of the issues to be debated is whether the term “culture” is appropriate here.) I will suggests ways in which those clusters of practices, the interactions between them, and the ways in which they became organisational routines (especially in the rating agencies that awarded credit ratings to CDOs and ABSs) help explain the crisis.
The talk (which will be based loosely on the article with the same title that appeared in the American Journal of Sociology in May) will not assume any prior knowledge of finance, and will explain what CDOs, etc. are. It will be based on a set of 90 predominantly oral-history interviews (29 conducted before the crisis and 61 after it), mainly with the constructors, traders and modellers of instruments of this kind and with employees of the rating agencies.
Donald MacKenzie works in the sociology of science and technology and in the sociology of markets, especially of financial markets. He holds a personal chair in sociology at the University of Edinburgh, where he has taught since 1975. His most recent books are An Engine, Not a Camera: How Financial Models Shape Markets (MIT Press, 2006); Do Economists Make Markets? On the Performativity of Economics (Princeton University Press, 2007), co- edited with Fabian Muniesa and Lucia Siu; and Material Markets: How Economic Agents are Constructed (Oxford University Press, 2009).