Processes of Commensuration in Financial Markets
Final Report Abstract
What drives the dynamism of the modern financial system? Next to technological innovation, political deregulation and ubiquitous competition, an important factor that can be sociologically described is the tendency at commensuration, i.e., the integration and comparabilitization of elements that used to be disparate and incommensurable. The formation of the modern financial system can be described as a process in which very heterogenous assets, instruments, markets were categorically assimilated, made comparable through ever more complex calculative tools, and woven into ever denser networks of interrelations, correlations, equivalences, parities, etc. Against this backdrop, this research project pursued three research questions, concerning (i) techniques of comparison in financial markets, (ii) the relation between the financial system and the monetary system, (iii) alternative approaches to financial regulation. (i) A powerful technique for the comparison of financial assets and values is the technique of reflexive comparison, or second-order comparison (third-order, …). Here, what is compared are not immediate elements, but comparison series and their principles of construction. This meta-level procedure allows an expansion of the horizon and abstraction of comparisons and has contributed to the hermeticism and ‘esotericism’ of the contemporary financial system. (ii) The monetary system or banking system has operated as a protected niche within the larger finance field. It has been subject to tighter regulation and a higher degree of sovereign oversight than ‘free’ and purportedly self-regulating financial markets, since ‘money’ and ‘monetary stability’ are seen as basic preconditions of a well-functioning economy. However, this duality has been shaken by the rise of shadow banking. Shadow banks do pretty much the same things and supply pretty much the same services as banks, viz., supply instruments for the short-term parking and short-term borrowing of money, except without the label ‘money’ and without being hampered by banking regulation. The financial system’s tendencies at commensuration have not stopped at the boundaries of the monetary system. This poses new challenges for regulators and has led some (heterodox, Post- Keynesian) economists to argue for the elimination of the distinction between banking and shadow banking and for their categorical ‘lumping’ in a reformed regulatory system. (iii) Given the general commensuratory drift of the financial system, regulators have a choice between two regulatory strategies. They can either rely on strategies of de-commensuration, i.e., seek to separate certain sectors, markets, actors within the financial system, in search for stability and protected niches, as in the traditional US-American separation of commercial banking and investment banking, or as in a proposed ‘narrow banking’ system. Or they can counter commensuration with more commensuration, as in the above-mentioned Post-Keynesian proposal of a categorical and regulatory ‘lumping’ of banking and shadow banking. This incongruent perspective on financial regulation through the lens of a sociological concepts yields instructive insights and an innovative axis of comparison.
Publications
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Where does money come from? The dual circuit of money creation. Social Science Information, 61(2-3), 217-244.
Kuchler, Barbara
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The boundary contest that never was: Shadow banking and the relation between monetary system and financial system. Social Science Information, 62(3), 264-294.
Kuchler, Barbara
