Wednesday, January 27, 2010

Do economic theories describe or create economies? A history of modern finance.

Donald MacKenzie's An Engine Not a Camera: how financial models shape markets is a fascinating read on a couple of levels.

1. If you have any interest in understanding the history behind the financial instruments that were largely responsible for America's (and the world's) current financial mess, this book spends a few chapters outlining their development.

2. From an SSK (Sociology of Scientific Knowledge) or STS (Science and Technology Studies) perspective Mackenzie's application of performative theory to economics is convincing and instructive to those, like myself, who are interested in extending the explanatory power of that theory to other fields, in my case coastal management.

3. Finally Mackenzie manages to successfully engage with, and shed insightful light on, financial and economic theories without being pulled into, and taking sides in, the tired, interminable, and contentious, debate between "Friedman-inspired capitalists" and "Keynesian-inspired socialists" (pick your own labels for those two groups if mine don't suit you.)

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