This analysis of the history of the Chicago Board Options Exchange
explores the performativity of economics, a theme in economic sociology
recently developed by Callon. Economics was crucial to the
creation of financial derivatives exchanges: it helped remedy the
drastic loss of legitimacy suffered by derivatives in the first half of
the 20th century. Option pricing theory—a “crown jewel” of neoclassical
economics—succeeded empirically not because it discovered
preexisting price patterns but because markets changed in ways
that made its assumptions more accurate and because the theory
was used in arbitrage. The performativity of economics, however,
has limits, and an emphasis on it needs to be combined with classic
themes in economic sociology, such as Granovetterian embedding
and the way in which exchanges can be cultures and moral communities
in which collective action problems can be solved.
For that matter, I'm so enthusiastic I'll even include a link to the official pdf for the article even if I have no idea if that pdf actually works or is screened out by some website security feature.
I read the article straight through in my office, remaining so riveted while I read it that the motion detector in my office turned the lights off twice on me. I'm normally so restless in the office that I think I've only had the motion detector turn off here twice before ever.
Also today, I was told by a graduate student whose presentation I had gone to earlier this semester that the student had judged the comments I had offered to be the "Least Relevant" of anything that anyone said about it.