Circularidades económicas y observación de segundo orden: La realidad de las calificaciones crediticias

Can observers observe the economy from the outside? Recent developments in economic sociology tend to blur the classic distinction and combination of economy and society and to move to a model in which the observer is necessarily inside the society he describes. The behavior of financial actors can then be analyzed by combining two concepts: beauty contest and moral hazard - a combination that allows for a translation of their behavior into the terms and the tradition of observation theory. Keynes' beauty contest can be interpreted as a systematic recognition of second-order observation: financial op­erators primarily observe other observers and what they observe. This observation produces particular circularities - including the insoluble problem of moral hazard, which reproduces Merton's famous model of self-defeating/self-fulfilling prophecies in the field of finance. If finance consists in second-order observation, however, then its movements can no longer be explained in reference to the world, but in reference to observation and its structures: the reality reference of finance is increasingly provided by ratings, which can only offer information concerning what others observe. The spread of ratings in recent decades and the doubts about their reliability are related to the generalized move of modern so­ciety to second-order observation, which produces specific problems and specific puzzles, as well as structures and constraints.¿Pueden los observadores observar la economía desde el exterior? Desarrollos recientes en la sociología económica tienden a desdibujar la clásica distinción y combinación entre economía y sociedad, y a avanzar hacia un modelo en el que el observador se encuentra necesariamente dentro de la sociedad que él describe. El comportamiento de los agentes financieros se puede analizar mediante la combinación de dos conceptos: el concurso de belleza y el riesgo moral –una combinación que permite una traducción de su comportamiento en los términos y tradición de la teoría de la observación. El concurso de belleza de Keynes puede ser interpretado como un reconocimiento sistemático de la observación de segundo orden: los operadores financieros observan principalmente a otros observadores y lo que estos observan. Esta observación produce circularidades peculiares –incluyendo el insoluble problema del riesgo moral, el cual reproduce el famoso modelo de Merton de las profecías autocumplidas y autofrustradas en el campo de las finanzas. Sin embargo, si las finanzas consisten en observaciones de segundo orden, entonces sus movimientos no pueden ser explicados más con referencia al mundo, sino con referencia a la observación y sus estructuras: la referencia a la realidad de las finanzas es proporcionada crecientemente por calificaciones crediticias que solo pueden ofrecer información respecto de lo que los demás observan. La expansión de las calificaciones crediticias en las últimas décadas y las dudas sobre su fiabilidad están relacionadas con el movimiento generalizado de la sociedad moderna hacia la observación de segundo orden, lo cual produce problemas y enigmas específicos, así como estructuras y restricciones

Was binden Bonds? Das Eigentum an der Zukunft und die Verantwortung für die Gegenwart.

Die große Wendung durch strukturierte Finanz seit den siebziger Jahren kann gerade als eine Änderung im Sinne und in der Bewertung der Risikobereitschaft gelesen werden. In jenen Jahren haben sich Finanzinstrumente (CAPM, Value-at-Risk und andere) verbreitet, die versprechen, Risiken zu verwalten und zu kontrollieren, ihren Schäden für kluge Händler zu neutralisieren. Auf den angeblichen risikoneutral-Märkten der strukturierten Finanz ändert sich dann auch die moralische Perspektive radikal: wenn für einen gut ausgestatteten Händler die Unsicherheit der Zukunft keine Bedrohung mehr ist und er immer auf die Füße fallen wird, ist es viel umsichtiger und lobenswerter, zu riskieren statt den erworbenen Reichtum zu behalten. In der Tat: Wer nicht riskiert, ist zu sich selbst und zu den anderen kleinlich, weil die Aktivität auf den Markt die Verfügbarkeit von Reichtum für ihn und für alle erhöht. Die Schuld geht dann eher an denjenigen, der sich nicht verschuldet. Vorsicht wird hoch riskant, weil er bedeutet, zukünftige Gewinne aufzugeben

Temporal Markets Money, the Future and Political Action

Following Keynes and Shackle, money can be defined by its temporal nature, as a tool for managing and using the uncertainty of the future – as a problem and as an opportunity. Finance, which relies on money, can be described as a large apparatus that relates to the future while operating in the present, or the present intervention in the construction and structuring of the future. The financial crisis, in this context, can be brought into connection with an inadequate management of the future in terms of risks and its actual conceptualisation. The reference to time also allows one to interpret the approach and the effectiveness of public policies on finance This paper examines the measures of Quantitative Easing, describing it as “injection” of time into markets, in the hope of encouraging the use and construction of the future

Artificial Communication

A proposal that we think about digital technologies such as machine learning not in terms of artificial intelligence but as artificial communication. Algorithms that work with deep learning and big data are getting so much better at doing so many things that it makes us uncomfortable. How can a device know what our favorite songs are, or what we should write in an email? Have machines become too smart? In Artificial Communication, Elena Esposito argues that drawing this sort of analogy between algorithms and human intelligence is misleading. If machines contribute to social intelligence, it will not be because they have learned how to think like us but because we have learned how to communicate with them. Esposito proposes that we think of “smart” machines not in terms of artificial intelligence but in terms of artificial communication. To do this, we need a concept of communication that can take into account the possibility that a communication partner may be not a human being but an algorithm—which is not random and is completely controlled, although not by the processes of the human mind. Esposito investigates this by examining the use of algorithms in different areas of social life. She explores the proliferation of lists (and lists of lists) online, explaining that the web works on the basis of lists to produce further lists; the use of visualization; digital profiling and algorithmic individualization, which personalize a mass medium with playlists and recommendations; and the implications of the “right to be forgotten.” Finally, she considers how photographs today seem to be used to escape the present rather than to preserve a memory

From Actuarial to Behavioural Valuation: The Impact of Telematics on Motor Insurance

Algorithmic predictions are used in insurance to assess the risk exposure of potential customers, for the purpose of improving how the problem of adverse selection is tackled. This paper examines the impact of digital tools in the field of motor insurance, where telematics devices produce data about the behaviour of the insured party. The individual’s resulting behavioural score is combined with their actuarial score to determine the price of the policy or additional incentives. Current experimentation is moving in the direction of proactivity: instead of waiting for a claim to occur, insurance companies engage in coaching and other interventions to mitigate the risk. Such practices may have consequences for the social function of insurance, whose traditional aim has been not to reduce risks, but to make them bearable by socialising them over a pool of insured individuals. The introduction of behavioural variables and the corresponding idea of fairness could instead isolate individuals in their exposure to risk and affect their attitude towards the future

What's Observed in a Rating?: Rankings as Orientation in the Face of Uncertainty

Ratings and rankings are criticized for being simplistic, obscurantist, inaccurate, and subjective, yet they are becoming an increasingly influential social form. We elaborate the criticisms of ratings and rankings in various fields but go on to argue that analysis should shift its target. The problem that ratings deal with is not observation of an independent world. Instead, the challenge they face is the circularity of second-order observation in which observations must take into account the observations of others. To this purpose they function well enough not because they mirror how things are but because they offer a highly visible reference point to which others are attentive and thereby provide an orientation to navigate uncertainty. The concluding section places the problem of ratings and rankings in a broader historical perspective, contrasting the ranked society to the society of rankings. Responding to uncertainty, ratings and rankings perpetuates rather than eliminates anxiety