Processes of Commensuration in Financial Markets

• Applicant: Privatdozentin Dr. Barbara Kuchler
• Subject Area: Sociological Theory
• Term: since 2021
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 452530257

The project sets out from the assumption that the increasing dynamism and autonomization of financial markets is the product of a long process of commensuration, by which ever more heterogeneous financial assets and financial instruments have come to be compared with, substituted for, and valuated relatively to one another, and have thereby been condensed into a highly interconnected financial system. This thesis was put forward in a 2019 article by the applicant and is put to further test here. Trajectories of increasing commensuration can be found both in the long-term historical development of financial markets from ancient origins and in the more recent transformations that have occurred since the 1970s, including (a) the rise of derivatives markets, and (b) the rise of capital markets as against bank-intermediated capital flows. The rise of derivatives markets was triggered by the commensuration of basic securities (such as stock, bond) and derivatives (such as options, futures), established by the Black-Scholes-Merton theory of option pricing. The rise of capital markets was rooted in the commensuration—and hence, competition and substitution—of bank products (such as loans, deposits) and non-bank products (capital market securities). The project collects further evidence on both partial developments by conducting discursive interviews with financial theorists and financial practicioners from several fields: (a) financial economists specialized in derivatives and derivative experts in banks or other financial firms, (b) financial historians and corporate finance experts in firms, consultancies, and industry journals. Additionally, for question (b), content analysis of selected volumes of important industry journals (on investment, corporate finance) will be done to establish historically changing ranges of comparability among different tools of investment and financing. The setting is deliberately broad and geared more to scope than to depth. The interviews do not aim at reconstructing the details of any of the named fields of expertise (which obviously would be impossible) but at discursively confronting field experts with the interpretative scheme of commensuration – as an increase in comparability, in the range and technical instrumentation of comparisons among different instruments – and at recording their reactions. This will allow us to refine our theoretical understanding of the processes at work in the historical development of financial markets; the aim and ambition of the project is to test a concept that offers a comprehensive picture of this development over the past half century.

• DFG Programme: Research Grants