Turning Financial Markets inside Out: Polanyi, Performativity and Disembeddedness

Abstract

In light of the spread of markets across the globe and deeper into daily life, this paper argues for a more robust analysis and application of Karl Polanyi's conception of (dis)embedded markets coupled with the performativity thesis authored mainly by Michel Callon. It suggests that while disembeddedness as a concept is necessary for an analysis of contemporary financial markets that are increasingly self-referential, it is not sufficient. Despite the suggestion of a gulf between Polanyian and Callonian economics, there are important similarities in the two frameworks. The similarities are considered along with the considerable difference, all in an attempt to develop a more robust methodological framework for analyzing financial markets. Performativity, it is argued, can help fill the gaps in Polanyi's embeddedness framework, albeit only when that concept's tendency to produce aspatial and apolitical arguments are taken seriously. The paper uses an abbreviated case study of the development of US financial derivative markets in the 1970s and 1980s to argue that markets must be considered in light of both their institutional and geographic entanglements as well as their (dis)embeddedness in systems of calculativeness and mathematical modeling. Specifically the paper analyzes the tension between the derivative origin story authored by Donald MacKenzie, which focuses on neoclassical pricing models like the Black—Scholes—Merton option pricing formula, and my own empirical research, which suggests the urban-economic geography of Chicago played a key role in the development of these instruments.

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