Research and Working Papers
Research and Working Papers
Information, Prices, and Sensemaking in Financial Futures Trading
The interaction of organizational setting with cognitive schemas provides the content for analyzing futures prices as outcome of organizational sensemaking instead of a priori inputs of markets. It defines the process by which information is transformed into an ontologically stable category of price. Reconstructing this sensemaking is a crucial task, since the settlement of prices for futures markets has significant organizational and economic consequences. And the recent emergence of electronic trading as an alternative to traditional ways of trading makes this issue more vivid. Futures exchanges have historically relied on a trading technology known as “open outcry,” where traders gather in a central physical location to buy and sell futures contracts on a range of physical and financial commodities. The organizational practices of open outcry produces prices deeply embedded in the interactions among these traders. Since the early 1990s, the technology of futures trading has been challenged by the introduction of electronic trading platforms. Automated trading systems shift the point of exchange from a centralized physical location to a decentralized network of terminals, located in investment banks and smaller boutique trading firms. With the elimination of the exchange trading floor and transformation of trading technology, the schemas and organizational settings that supported the creation of prices in open outcry have required renegotiation. This paper uses participant observation and interview data gathered on the trading floors of open outcry and electronic exchanges to investigate how sensemaking leads to the production of futures market prices.
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Jumping off the Embeddedness Bandwagon
(with Carol Heimer)
Rather than showing that the economic and the social are not fully separate, we suggest that economic sociologists instead should be making the far more radical assumption that they are not separate at all. If the dominant image has been of a sturdy barrier with an occasional passage linking economic and social, we suggest that a more appropriate image would be the intermingling of salt and fresh water in a coastal region where the water’s brackishness varies with the tides and very local features such as tidepools or sandbars or temporary disturbances such as storms or floods. We can distinguish economic from “social,” saltwater from sweet, but we’d be hard pressed to say where one starts and the other ends. This suggests that the distinction between spheres or processes is quite artificial, not nearly as apparent in “nature” as in our depictions of nature. It is a division that people, including social scientists, have worked hard to create and sustain; mixing is the state of nature, separation socially constructed, we suggest, not vice versa.
This paper is very much still in process, and I will post a working paper when it is closer to useful to do so.
The Institutional Settlement of Exchanges
(with Marc Ventresca)
Institutions take shape within specific cultural and political contexts, but they often make and re-make patterns of activities, actors, and organizations. Much of contemporary institutional analysis – often in the idiom of instrumental social theory – under-specifies the often disorderly conflicts and struggles that occur prior to the construction of ontologically-stable actors and activity that is the particular focus of such instrumental accounts (Hirsch, Michaels and Friedman 1990; Hollingsworth 2000). Sociological institutionalisms have typically highlighted such struggles over meanings and boundaries, with concern for the societal logics and cultural models that shape the efficacy of actors (Friedland and Alford, 1991; Hamilton and Biggart, 1989; Jepperson and Meyer, 1991) and for the crescive processes which birth and naturalize categories of action and actors (Coleman, 1978; Douglas, 1986; Dowd and Dobbin, forthcoming). We develop this more sociological and cultural variant of institutional analysis. We consider the origins of the modern commodities markets from the mid-19th century in the U.S. as a case of market-making that occurs in the midst of conflicts and struggles and successive settlements among institutional logics and governance arrangements. We treat the emergence of modern commodities markets as a contested organizational process: they are marked by initial variation and subsequent mechanisms that select out some dominant forms and make closure through institutional settlements. These settlements involved provisional primacy of a cultural model of “organized speculation” which supplanted legal and popular conceptions of gambling. In turn, this settlement contributed to a modern conception of tractable, manageable risk. Then, a series of governance settlements established a specific organizational form as appropriate, pushed to the edges of the field alternative existing organizational forms, and established a standard model of governance and accountability underscoring the power of key challenger actors in the exchanges field. Finally, the work of expert theorizers in both academic and over time government agencies naturalized this form of the market.
I will post a copy of the paper when it's closer to a finished product.
Pollution Futures: Commensuration, Commodification, and the Market for Air
(with Wendy Espeland)
We build on sociological approaches to markets by examining the role of commensuration in the social construction of a commodity, here sulfur dioxide permits created under Title IV of the Clean Air Act Amendments of 1990. We focus on how prices become attached to air pollution. Prices, as an expression of value, depend on transforming emissions into comparable, standardized commodities; doing so, in turn, depends on our being able to conceive of the environment as comprised of discrete, measurable objects. Commensuration, the transformation of qualitative relations into quantities on a common metric, is central to both of these processes. Commensurative practices are fundamental for making markets.
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