March 5, 2014
by ar254@cornell.edu
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From Comparison to Collaboration: New Directions in the Ethnography of Law

A week ago, I gave a keynote lecture at a conference organized by anthropology graduate student at Princeton, Temple, and the University of Pennsylvania. I spoke about Meridian 180, a transnational, nonpartisan community of exceptional Pacific Rim intellectuals dedicated to enhancing the transpacific dialogue and building expertise across professional domains which I founded in 2011.    The project is includes a number of renowned anthropologists of the contemporary in its leadership who experience the project as very much an application of their ethnographic skill and a transformation of the meaning and purpose of ethnography as a method and anthropology as a discipline.  I argued to the anthropologists at the conference that the work that is going on inside Meridian 180 is “ethnography” even though it does not take the traditional forms of ethnographic research – – journal articles, monographs, and the like. We had a lively debate about this. Some participants rejected the idea that this work could count as ethnography, mainly because it seems too planned and controlled. Others asked,  it this is ethnography, then what result does it produce? What does it teach us to the world? Or how does it change the law for example?

What defines ethnography today and what is its contribution to legal studies in particular? For many years the ethnography of law was about comparison–making insight out of the differences.  Today, in contrast, it is not comparison but collaboration that stakes the most powerful claim as a scholarly method that is also a necessary professional skill and a policy-relevant practice.  Law schools everywhere are rushing to teach young lawyers how to collaborate effectively.  Collaborative opportunities also obviate the need for comparative scholarship: Who needs to read a scholarly comparison of legal institutions in India and the United States, or for that matter, who needs ethnographic research, when one can simply incorporate an Indian legal thinker into one’s project collaboratively?

Collaboration has always been integral to what anthropologists do, and so the debate at the conference was about whether collaboration has to remain instrumentally in the service of producing data (about differences between legal systems for example) to qualify as ethnography or whether there might be other contributions of, and other criteria for ethnographic research today.

The paper explores this by drawing out a contrast between our members’ form of engagement, which builds upon anthropological ideas about the transformative potential of exchange, and the traditional “free speech” approach to dialogue in the public sphere–the approach that undergirds most blogs, list serves, and the like.  It describes a small crisis event in the project that crystallized for us how collaboration as ethnography is different from what most laws and lawyers understand dialogue and collaboration to be about.  I will speak about this again at a conference at UC Irvine law school this saturday and the paper will eventually be published in the UC Irvine Law Review.

 

May 16, 2012
by Annelise Riles
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Is this capitalism? If not, then what is it?

This post was originally published as part of a “Theorizing the Contemporary – Finance”  forum on the Cultural Anthropology website.

 

“Business Leaders of Today are Not Capitalists,” shouted the Financial Times headline several weeks ago. The article went on to describe how, inside the largest financial institutions, leaders are today chosen not for their entrepreneurial skills, their instinct for risk, their interest in making money even, but for their ability to schmooze and negotiate with government bureaucrats. Those with connections to governmental elites from their school days who have proven themselves agile at institutional and bureaucratic politics are the new titans of the economy.

Why? The article doesn’t go there, but I think the answer is obvious.  Today, money is made primarily from government give-aways of one kind or another—subsidies, bail-outs, regulatory regimes favorable to industry.  The game is now not about making markets but ensuring you get as much as possible from the state, or at least more than your competitors. Contrary to a decade ago when industry leaders decried the “nanny state,” today they line up to be coddled.

So what should we anthropologists of markets make of this new reality? And what of the fact that it doesn’t take an anthropologist to get this far: the FT, bastion of mainstream opinion in the financial industry, has already done the analytical work. What can we add to the mix?

To my mind, the core question and contribution anthropologists can make at this moment is similar to the contribution that Hayek and the Vienna School made at the close of World War II when, as today, the consensus about markets, states, and their relationships was shattered and the ideological field was wide open.  As Foucault recounts in his lectures on biopolitics, those guys fashioned a new consensus, a set of givens, and worked hard to turn them into the hegemony they became. The results spoke for themselves: until today it was largely impossible to think outside the view that markets were more legitimate than states and that state intervention in markets should be corrective, and hence reactive and limited, but not “dirigiste”.

We could have a vibrant and exciting debate about what the contours of this new consensus should look like, as a descriptive project and as a normative project.
For example, half of me finds myself rooting for the good old Hayekian days when markets were markets, losers lost, and innovation was the way to profit maximization.

So I was excited to see the petition by Public Citizen to the Federal Reserve to break up the banks that are deemed Too Big To Fail.

The occupy wall street folks made a similar proposal.  The argument in a nutshell is, “you told us that the rules were that capitalism produces winners and losers and that tough love toward the losers ultimately raises all boats.  You forced us, the workers, the small businesses, the underemployed, to live by those rules, so the least you should do is live by those rules now.  Allowing firms that are too big to fail to exist is an admission that there are two sets of capitalist rules–rules for the insiders and rules for the rest of us.”

One of the reasons I like this proposal is that, having studied the Too Big to Fail (TBTF) issue quite extensively from the vantage point of fieldwork among government technocrats, I can confidently say that most technocrats agree that this would be the best solution. But they believe that it is politically unpalatable because ultimately those TBTF institutions control the political process and will make sure that legislators do not allow technocrats to stick to market rules.  I bet the Fed was actually really really happy to get this petition in fact.  So here is a kind of political initiative on the part of the citizenry that we anthropologists could champion, in part because it dispenses with the usual divide between technocratic elites and ordinary citizens who are assumed to be well-meaning but know nothing about finance. This initiative potentially gives technocrats the power to do what they “know” to be right (from the vantage point of their Hayekian ideology) and pits technocrats and citizens together against the big banks.

That is one way to go. But my instinct is that as tempting as this may be, we should be doing something even more bold.  My guess is that we should not just hold the Hayekians to their Hayekian bargains but rather recognize that the world is changing and set out to build the new consensus.  And here there are all kinds of other interesting developments we might want to investigate and weave into a new kind of analysis. For example, what do we make of the sudden prominence of religion in debates about capitalism–not only in “alternative” forms of capitalism but right at the heart of North Atlantic economies? And what do we make of the fact that spokespersons for mainstream religion, who, in our social theory since Weber, are imagined as supporters of capitalism, are emerging as powerful critics? I am thinking here of the statements by both the Pope and the Archbishop of Canterbury in support of Occupy Wall Street. In Japan also one hears many allusions to Buddhism, Shinto and other religious traditions in political debate about market regulation. There are many possible understandings of such statements but I wonder if along with the collapse of confidence in rational modes of risk management, prediction and planning we are seeing the beginnings of a new appreciation for the metaphysical and existential issues posed by markets, the kinds of issues anthropologists and sociologists of finance since Weber have eloquently demonstrated. What happens to the ideological consensus of market/state relations when such issues come to the forefront of market participants’ own consciousness?

Another set of issues have to do with the decline of the North Atlantic economies and the rise of Asia in particular.  How does this new reality, accepted as such by all of my informants, and the ensuing debate they are having about multiple forms of capitalism, the relationship between capitalism and culture and so on, reconfigure the possibilities for a new post-Hayekian consensus about what makes markets work and why? These are just two small examples of how and why this is an exciting moment to be an anthropologist of markets.  As one of my informants put it, we are in a counter-cyclical business: when things are really bad for everyone else, our work is full of possibilities.

May 1, 2011
by Annelise Riles
1 Comment

How can we better harness the insights of different disciplines to address market reform?

Last week we convened another meeting of our working group of economists, anthropologists, lawyers, psychologists and policy makers interested in how our disciplines could work together in new ways to solve market problems.  It is a very smart, high-powered group of creative people who truly have the best interest of the national and global economy at heart.  And the policy makers are brilliant, dedicated individuals who know how things work on the inside, and who think broadly about the issues.  Once again, our meeting was supported by the Tobin Project, as well as by the Clarke Program in East Asian Law and Culture at Cornell Law School.

The theme this time was health care insurance reform and we did some hard thinking about what our disciplines could say, practically, about what kind of insurance exchanges might help different kinds of consumers make the best choices possible for them.

 

But there is another running conversation at these meetings about how the disciplines can be reconfigured to work better together in the future. The disciplinary truce worked out in the early twentieth century was a kind of cold war-like division of the territory: anthropologists study exotic others, sociologists study deviant groups at home, psychologists study individuals, economists study markets, and so on. Thank goodness that along the way we learned that all these elements are inter-related and that each of these disciplines has much to say about every aspect of life. So how else could they work together?

 

One model that is emerging from our meetings is a kind of production model, beginning with original insights and moving all the way to the incorporation of ideas into policy.  Eric Johnson, a distinguished psychologist teaching at the Columbia Business School, suggested that anthropologists could provide the insight (based on ethnographic research), economists could provide the models, and psychologists could provide the data (based on experiments)–and that we need data and numbers to convince policy makers.

 

Another model seems to be a model of internal change within fields.  Peter Spiegler, an economist at U Mass Boston and one of the most truly original scholars I have ever encountered, suggested that economics needs to start incorporating ethnography into its own method of research, rather than just taking insights (about trust, or reciprocity or whatever) from anthropology and modeling them in the traditional way.  I argued that anthropologists, conversely, need to learn to value simplicity as well as complexity, and to communicate openly and clearly and generously with people in government and in other fields, as economists and psychologists have learned to do.

 

There are a lot of things that infuriate me about anthropology and anthropologists.  But at the end of the day, some of our most basic insights are sorely lacking in the policy world and could make an enormous contribution to market reform.  Here are just a few obvious ones:

-Asking about the givens: noticing what is so important that it is just taken for granted by everyone, including perhaps even the researcher.  For example, at our meeting, we were deep into how to structure consumer choices about insurance and one anthropologist asked “why do we value choice so much in the first place?”

-thinking about the global dimensions of even the most domestic policy problems, and thinking comparatively about policy problems. For example, what could we learn about health reform from Japan, or Singapore, or South Africa?

-thinking about the range of actors and interests involved in law reform.  For exaple once a law like the health care act is passed the story is not over–it has to be implemented by armies of regulators, interpreted in practice by physicians, drug companies and insurers, used by consumers…how do all these people come together in practice?

-reflexivity–realizing that academics are part of the picture and bear some responsibility for what we advocate for, and its consequences, intended and unintended.

Insight rather than data–ultimately ethnography gives you a picture, and a story, and helps you to to become aware of the aspects of a problem you may have ignored altogether in constructing your model or your policy proposal.  Private companies have grasped the value of this kind of insight and are employing ethnographers in large numbers to do market research and study organizational culture within their companies but we have a ways to go before it is adopted as broadly in policy circles.

 

What do you think are the strengths and weaknesses of each discipline in thinking about market reform? How do you think fields like economics, anthropology and law could better work together to address market reform?

 

February 22, 2011
by Annelise Riles
1 Comment

When Companies are Households

The scandal pages coming out of Hong Kong this month are full of intrigue about disputes among family members and various other possible “significant others” over the estate of tycoon Stanley Ho.  The Financial Times’ story on all this basically suggested that mixing family and company was an Asian characteristic, and not a particularly good one at that.  The point was that Asian companies need to separate business from family matters, and to separate the economic interests of each family member from the other if they are to succeed.

You hear this conventional wisdom from European and American experts all the time. In order to succeed, Asian companies need to make their companies look and function just like Euro-American ones.

Really? Now that two out of the three largest economies in the world are in Asia, perhaps it is time to consider European conventional wisdom on what a good company looks like. First, it is not as though shareholder governance always works out so great, as the recent financial debacles in the West have taught us.

But more importantly, writing from Tokyo at the moment, I am repeatedly struck by how much energy, creativity and real economic productivity resides in family-owned companies in this country (what the government euphemistically refers to as small and medium sized enterprises, even though some are actually enormous–as if it were an embarrassment that these companies are also families).  The open secret is that more than 90% of Japanese companies have the majority of their stock held by relatives.  More than 70% of Japanese employees work for such a company, and this does not count the unpaid labor of family members–the spouse who keeps the books, the son who manages the factory floor and so on.

I personally think this is a good thing, not an embarrassment at all. When I get depressed about the lack of innovation in large Japanese institutions–universities, companies, government–I have only to turn to the local restaurant or convenience store or florist to see examples of truly awe-inspiring creativity, intelligence, and perseverence under very difficult economic conditions.  When I get furious at the lack of women and young people in leadership positions in this country, I only have to go around the corner to see how the mom and pop owners of my local stationery store work side by side with their daughter and son-in-law with dignity and mutual respect (and of course the occasional screaming match).

What worries me, rather, is the way all this talk about needing to turn your family business into a “real” company with fancy financial investments and complex ownership structures is having disastrous effects on those who listen. One of the saddest chapters in the recent financial crisis in Japan has been the bankruptcy of so many such family businesses due not at all to poor performance in their business but to their investment in complicated financial instruments that the large banks convinced them they needed.

These companies do have very different economic challenges–one of the principal ones being what to do about succession when the founder or chairperson dies or retires, leaving behind either too many possible heirs or no heirs interested in the family business at all.  But what about the problem that worries the Financial Times so much, about people’s interests being mixed up with each other? Well, this is a problem in Euro-American shareholder governance as well, of course.  And there is no denying that in life in general, and not just in economic life, Chinese and Japanese people sometimes complain about the burdens that come with being so intimately connected with other people.  But there are advantages as well as disadvantages.  The Financial Times does not seem to recognize that the same sense of mutual connection that makes dividing assets difficult at death makes funding a startup relatively easy.  And many of the problems that plague Western companies–problems about how to align managers’ interests with the interests of shareholders–are hardly problems at all when the manager is the daughter of the founder.

And we might query whether Euro-American capitalism is really all that different, or whether the difference is rather one of degree. Many very successful public and private companies in the US and Europe are also largely family owned–from major newspapers to leading automobile manufacturers.

There are real issues here for policy: these companies are largely neglected by government policies long aimed at supporting the big industrial players.  It may also be that too many bureaucrats, trained in the West, are enamored with the Western model and not all that interested in how things work in their own country.  The company laws on the books in Japan for example–borrowed largely from American and European corporate law–don’t fit these companies’ needs or challenges very well.  Thinking about the economy as basically a bunch of household enterprises, incorporated formally as corporations, should cause us to think differently about a whole range of regulatory problems, from labor rights to the promotion of innovation to access to capital and taxation policy.  It also suggests the need for lots more research–we know surprisingly little about how these families/companies work, what role gender, and marriage, and inheritance tax, and social class, and immigration play in their fortunes and strategies.  We know too little also about how they globalize–how they set up operations overseas, and what contributes to success or failure.  And this all suggests the need for a much broader range of methodologies and specialities–notably anthropology and sociology, which have long traditions of expertise in kinship and social organization.  But the first step may be simply to recognize the obvious: so much of markets is really about households and families.

February 9, 2011
by Annelise Riles
2 Comments

The Gift Economy

It’s the Chinese New Year, and the financial press has been full of stories of massive Chinese purchases of gold (for instance here and here), as gold (molded into rabbits to signify that it was given in the year of the rabbit) has emerged as this year’s gift of choice. Chinese buyers are purchasing gold in quantities the market has never seen before not as an investment in the traditional economic sense, but for purposes of satisfying their obligations in the gift economy.

The gift economy is something that economists don’t talk much about. It is for the most part treated as an evolutionary precursor to the market economy.  The simple story most economic historians tell is a tale of progression from status to contract–from old fashioned relationships built on gifts to modern markets made up of arms-length transactions among strangers.  Where the reality of the significance of gifts to modern markets just can’t be avoided, as here (because the price of gold is skyrocketing), the gift economy is usually treated as a cultural oddity, just a little aberration to the general rules of economic action.  But anthropologists have amassed generations of data on how gift economies and market economies interact in many societies around the world–how economic tokens like money can become the stuff of gifts, and how gifts (from whales’ teeth in Fiji to sexual relations in New York) can become marketable commodities.  It turns out that gift economies are extremely complex and variable phenomena that require as much data and as much theory to understand as market economies.  (It would be impossible to even begin to summarize that literature here, but it begins with Marcel Mauss’ classic, The Gift, written a century ago, and after that just about every serious anthropologist has wrestled with the subject in every part of the world.  For a great literature review, see Hiro Miyazaki’s chapter in The Oxford Handbook of Material Culture Studies, Oxford University Press, 2010).

Now that the Chinese economy is number two though, it is probably time for the world to start paying attention to what economic anthropologists know about gift-giving: any serious China expert knows that markets don’t work in China without gifts, and that it is through gifts (as well as markets) that every kind of relationship that is significant to markets, from a company’s relations with regulators, to relations among investors to obligations between employers and employees gets built and maintained. Moreover, as the legal scholar and former dean of Peking University Law School Zhu Suli is currently finding, in research to be presented as the 2011 Clarke Lecture at the Cornell Law School, much of the astounding profits of Chinese enterprises are now being funneled into fulfilling stakeholders’ gift obligations–such as the massive resources a young man’s family must hand over to the family of their son’s prospective spouse in exchange for the “gift” of a wife.  And it turns out that there is astronomical  inflation in the price of brides these days in China, as people become richer, and the supply of daughters becomes ever more limited as a result of the one child policy and families’ preference for sons.  You simply can’t understand the logic of Chinese markets, or for that matter of Chinese actors’ investment strategies and economic activities globally, without understanding the theory and practice of gift-giving.

January 7, 2011
by Annelise Riles
0 comments

Building a Culture of Compliance

(This entry was originally posted on Jan. 7, 2011 on the Credit Slips website)

I was scheduled to speak at the AALS Financial Institutions breakfast this morning, but due to flight cancellations I was unfortunately unable to attend. I’m posting below a summary of what I intended to say there, and which I had already planned to share with the readers of Credit Slips anyway. I wanted to talk about what anthropological research among market participants and regulators tells us about how to change the way people behave in the financial markets.  After all, the whole point of regulation is just this–to change behavior. Yet how do you do it?

Of course you can make rules.  There has been a lively discussion on this blog about the value of rules, and I agree that rules have many benefits including their power to signal certain collective commitments: from now on, X behavior is not OK.  Yet rules also have a major disadvantage. Call it the cat and mouse game: as soon as regulators come up with a rule, some market participants start trying to find a way around that rule. For example, as soon as the G20 starts setting new capital adequacy requirements for banks, some investment banks start selling derivatives products that change the look of a balance sheet so that it seems to come into compliance with the new rules.  So then regulators invent another rule to close the loophole. And then market participants find another loophole. And on and on. Lots of wasted regulatory energy.But wouldn’t it be great if we could change the culture of the market–change the mindset of people in the market– so that they would choose to do the right thing all on their own? I mean to suggest that in order for regulation really to work, market participants have to be brought in; they have to feel they have a stake in good outcomes; their view of their own self-interest has to be in line with the larger collective interest.

This is of course the logic behind the idea of tailoring bonuses to long term results rather than short-term results. But one thing you learn from doing qualitative research in the financial markets that will surprise people on the outside is that market participants are not motivated entirely by money.  In fact I would go so far as to say that many of them are not motivated primarily by money. They care about all kinds of things–like having interesting, challenging work, like inventing something new or somehow making a mark that will last, like having meaningful relationships with friends and colleagues and family, like other symbolic forms of rewards ranging from industry recognition awards to academic publications. If this is the case, then bonus reform is a step in the right direction, but it is a pretty limited step.

In my presentation, I intended to talk about how Japanese financial regulators have grasped this point and have sometimes exploited it artfully.  Recognizing that many market participants actually have bigger dreams than a paycheck they have thrown them a line: join us and work with us to fix the market.  Regulators have created prestigious and competitive “fellowships” at the Bank of Japan, Japan’s central bank, for example, where market participants can come to do research, in daily conversation with regulators. The value of these fellowships is that they provide the opportunity for regulators to gather information, and they give both sides a chance to work out creative public-private solutions. But many fellowship recipients come away with an emboldened vision of their larger mission–not just to do well but also to do good, in their own corner of the market.  Likewise, informal “study groups” of academics, policy makers and key market participants serve as a forum for building trust and a shared sense of mission.  When disaster hits, I have seen policy-makers call on these relationships in very effective ways.

One of the lessons economic historians give us about the successes of the early years of the SEC is that the strong culture of professionalism at the SEC gave regulators the confidence, and the skills, to regulate effectively.  But professionalism, confidence and a sense of mission and wider purpose isn’t just for bureaucrats.  It can and does contribute to market stability and fairness in the private sector as well.  The anthropology of markets suggests that it is worth investing in building such a culture.

Anyone interested in more detail can download the slides that I had intended to show during my presentation this morning here.

January 5, 2011
by Annelise Riles
0 comments

What Can We Learn from Wikileaks About Market Regulation–or, Is Transparency Always a Good Thing?

(This entry was originally posted on Jan. 5, 2011 on the Credit Slips website)

In the wake of the Wikileaks debacle, we have started to see some conversation in the editorial pages about whether transparency is always a good thing in internationa

l affairs. The point is that there are times when allowing the parties to talk in private may help to reach optimal outcomes for all sides. As we learn more about the personalities and motivations behind the leaks, also, the image of the whistleblower as the pure-hearted pursuer of truth and justice is getting a bit tarnished. It is a complicated issue, with room for reasonable people to disagree, but that in itself is news: it used to be that if you were against transparency you had to be for cronyism, corruption, and fraud, and in fact everybody everywhere felt compelled to assert that they were of course in favor of full public disclosure. Now we are not quite so sure.

I think that some of the heatlhy skepticism–or at least complexity of thought–about transparency that is coming into the public debate about foreign affairs also has a place in the conversation about the regulation of financial markets. Why?

•  Transparency is too easy.

How many times, when faced with a difficult political choice between, say, siding with investors or siding with the financial institutions, have the politicians settled for simply demanding more disclosure to consumers? There is even a certain cynicism to this solution at times–research shows us that investors are often ill-equipped to digest the information that is handed to them in the name of transparency. And yet politicians get to say they took a stand in favor of the common good.

•  Transparency isn’t all that transparent.

Goldman Sachs artfully exploited this insight when they dumped literally tons of documents at the doors of Congress in response for a request for information–“go ahead, be our guest..” and yet it might as well have been a truckload of manure, for all it was worth to Congress.  The point here is that information alone is only valuable to those with the tools–that is, the resources to get the tools–to turn information into insight.   As the sociologist of science Bruno Latour has put it, referring to the beautiful transparent glass building that houses to German Bundestag or parliament–itself a symbol of transparency in the political process–you can stare at it all day but somehow you don’t see anything at all.

•  Transparency can do damage.

My own research among regulators has produced case after case in which an informal off-the-record conversation among representatives of the market and representatives of the state was able to avert disaster and reach a win-win result for each.  Yet my research also shows very high levels of fear (even paranoia) among bureaucrats that informal contacts with market participants will expose them to charges of corruption or non-transparent behavior. So too often the less courageous of them opt to do nothing, rather than to stick their necks out and solve the problem, and potentially expose themselves to charges of inappropriate behavior.  Now again, this is a complicated issue: I don’t deny for a second that some bureaucrats and market participants have at times exploited their informal relationships for personal gain so we have reason to demand transparency. However, the pro-transparency rhetoric goes too far where it suggests that any such contact is always motivated by naked self-interest. And the institutionalization of this position into policies that make all email correspondence, meeting records and so on a matter of public record has serious social costs as well as social benefits that deserve to be more carefully weighed as we think about the way forward in financial regulation.

Now again, all of these points are not mine alone: the anthropology and sociology of bureaucracy around the world has produced many examples now of how serious political harm, and the promotion of very questionable private interests has come to pass in the name of well-meaning transparency campaigns. This research suggests that transparency is not a simple good–that it has different costs and benefits in different situations, that we need to ask questions about whose interests transparency serves, and that if we value transparency there may be additional work to do to make it real and meaningful for all sectors of society.

My research has convinced me that a more effective financial regulation will require a new set of scripts for deep cooperation between regulators and market participants. It is the only way that regulators can get the information they need, and it is the only way that we can begin to get around the cat and mouse game in which as soon as the government proposes a rule market players look for a loophole.  Yet regulators and market participants alike insist that a certain degree of privacy is necessary in order for each side to trust the other.  How we carefully balance the costs and benefits of various institutional options, given this reality, is a complex, but interesting and important question.

November 21, 2010
by Annelise Riles
0 comments

When is a silo mentality a problem in financial markets?

Yesterday at the American Anthropological Association’s annual meeting I went to hear Gillian Tett, a journalist for the Financial Times, talk about how her own training in anthropology (like me, she holds a doctorate from Cambridge) had shaped her reporting on the derivatives markets and the financial crisis.  Tett eloquently explained how anthropologists’ attention to the difference between what people say and what they do, and how the ethnographic method–of observing people intensively over the long run rather than simply relying on public statements or even one to one interviews–had helped her to see the importance of credit derivatives before other newspapers began reporting on them and to sniff out problems in the credit derivatives markets ahead of the crash.  Tett argued that anthropologists’ holistic perspective, and their interest in rituals, in social and institutional practices, in latent hierarchies and in all that gets glossed as “irrational” in economics had an invaluable contribution to make to our understanding of modern finance and to policy debates.

Tett’s own diagnosis of the financial crisis focuses on what she calls “silos”–the way different financial institutions, and different teams within each financial institution, prevented anyone from seeing the big picture.  Stuck in their own little tribe’s group thinking, each team could not see the wider effects of their activities, or the way their perspective was only one among many.  Tett says she sees herself engaged in “silo-busting”–breaking down those barrios with a more holistic approach.

Tett is surely right that a silo mentality pervades certain aspects of the financial markets.  This is one of the ways finance is really like the rest of the world–all of us fail to see the limits of our own ways of thinking.  This is certainly true in the social sciences.  Anthropologists for example are for the most part utterly convinced that their own world view is better than others, and that they are misunderstood and under-appreciated by everyone else.  Economists’ self-confidence about their own discipline’s assumptions is legendary.  Paul Krugman has created a stir by asking whether economists’ over-confidence in their models might not have caused them to miss the financial crisis.  Like Krugman, I think Tett’s diagnosis should cause academics too to ask some hard questions about why we did not do more to highlight and critique the problems in the financial markets prior to the crash.  For myself, for example, fieldwork in the derivatives markets had convinced me long before the crash that all was not well in these markets. My husband (also an ethnographer of finance) and I often joked way back around 2002 that our research had convinced us not to put a penny of our own money in these markets.  But our own disciplinary silo made us feel that it was impossible to counter the enthusiasm for financial models out there in the economics departments, the business schools, the law schools, the corridors of regulatory institutions.  There surely was some truth to our sense that no one wanted to hear that markets were not rational in the sense assumed by the firms’ and regulators’ models.  But maybe we should have tried a bit harder; it turns out many other people also had doubts and thought they too were alone. What might have happened if we had all found a way to link our skepticisms?  The silo mentality is not just about a lack of knowledge.  It is also about a lack of confidence in one’s ability to communicate with people outside the silo.  I don’t think this is anthropologists’ problem alone.  When I ask many of my research subjects why they don’t tell regulators the full story, have just shrugged, “they wouldn’t understand.”
With funding from the Tobin Project and the Clarke Program in East Asian Law and Culture, Tom Baker at Penn Law School and I have sponsored a string of workshops aimed at breaking down disciplinary barriers and getting the conversation about markets going between economists, sociologists and anthropologists.[1] It has been exciting to see how much interest there is on all sides. One of the positive outcomes of the crisis is a greater sense of curiosity about perspectives outside our own silos and a greater commitment to building new conversations.
Still, I wonder if it is always and everywhere a good idea to break down specialized ways of thinking and replace them with a holistic approach.  Take lawyers and back office staff inside the big banks.  As I have written about elsewhere, they lack the big picture: there are lots of things about finance they don’t understand and this sets them apart from traders.  But precisely because they don’t think like traders, they can also evaluate the activities of a trading room with some critical distance.  After all, if they were indoctrinated into the same assumptions as traders they probably would not catch the limitations in traders’ logic that can have disastrous risk management consequences.  So having lots of different groups that think differently from one another with a stake and a role in making decisions is also an important component of financial stability.  In practice, dealing with people who think differently can be a huge pain in the neck–traders don’t much like back office staff meddling in their affairs and vice versa.  Collaborating across differences in expertise is laborious, time consuming, and even wasteful of time and resources, and everyone complains about the other guys constantly.  Yet the requirement that different groups with different forms of expertise collaborate in making financial decisions is a kind of sociological fuse box, a way of slowing things down when they start to snowball out of control.  Sometimes waste and redundancy is a good thing.  The benefits of this fuse box would be lost if everyone had the full picture: traders with back office expertise can more easily circumvent regulatory checks; back office staff with too much training in finance begin to buy into the trader’s world view.
So maybe instead of silo busting, what we really need is more mandates that we collaborate, across our differences. This is true in the academy as much as in finance.

[1] The first Workshop on Behavioral and Institutional Research and Financial Services Regulatory Reform took place at Penn Law in the Fall of 2009. The second one took place in Washington, DC in June 2010. The third one will take place at the Cornell University Law School in April 2011.

December 8, 2009
by Annelise Riles
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Anthropological Studies of Financial Markets

WHAT IS ANTHROPOLOGY/ETHNOGRAPHY OF FINANCE

Why is it important?

Links

Cornell Conference on Cultural Approaches to Asian Financial Markets in 2002

Other scholars working in this tradition:

  • Hirokazu Miyazaki (Cornell) (bio)
  • Bill Maurer (Irvine) (bio)
  • Doug Holmes (Binghamton) (bio)
  • Vincent Lepinay (MIT) (bio)
  • Karen Ho (Minnesota) (bio)

RELATIONSHIP TO BEHAVIORAL ECONOMICS

Links

Penn Conference

UPCOMING EVENTS IN THE FIELD

Techniques of Hope (Link)

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