Ritual, Emotion, Violence by unknow

Author:unknow
Language: eng
Format: epub
Tags: Nonfiction, Social & Cultural Studies, Social Science, Sociology
ISBN: 9780429874772
Publisher: Taylor and Francis
Published: 2018-07-27T04:00:00+00:00

Financial Economics

Financial economics concerns the analysis of corporate financing, with scholars in this sub-discipline paying particular attention to capital structure (as in, for instance, Modigliani and Miller’s classic formulation of the irrelevance of financial policy to the value of a firm). It also includes the evaluation of capital assets (under the rubric of the now-famous Capital Asset Pricing Model). And finally, it considers the study of financial markets, where the efficiency of the market serves as a foundational hypothesis (Bernstein 1992). Initially approaching these questions with mostly practical concerns in mind, financial economics has undergone a significant process of expansion, abstraction, and professionalization over the past 40 years. As William Sharpe once put it, its domain now includes very general dimensions of economic life such as time, information, uncertainty, and options (Breit and Hirsch 2004; Whelan, Bowie and Hibbert 2002). As a result, financial economics is now entrenched in both economics departments and business schools (Fourcade and Khurana 2013; Fourcade, Ollion and Algan 2015; Whitley 1986b).

Such an impressive process of expansion has not been free of controversy. Financial economics’ relationship with mainstream economics was particularly contentious as the discipline was about to take off: in 1954, Milton Friedman famously dismissed Harry Markowitz’s PhD dissertation (which lay the foundations for much of financial economics) as statistics, not economics (MacKenzie 2006)—a particularly damning consideration given Friedman’s anti-statistical perspective on economic life (McCloskey 1998). Finance tended to be associated with vocational education, and economists strongly condemned it as atheoretical and ad hoc (Whitley 1986a). Further, it was not only established economists of the caliber of Milton Friedman who once derided financial economics for its alleged lack of relevance to economic questions; it was also investment fund managers, traders, and other market actors (Mehrling 2005). This is because, by formalizing knowledge about financial markets, financial economics challenged the authority of practitioners, and often sacrificed the need for practical and applied knowledge to the neatness of mathematics and theory.

Financial economists, therefore, were forced to mobilize an impressive array of rhetorical and material resources in order to legitimize themselves. In terms of rhetorical resources, mathematics, statistics, and formalization were particularly important, as they allowed financial economists, once they embraced formal models, to turn their disagreements with mainstream economics into more manageable technical debates, gaining prestige and legitimacy in the process (Fourcade 2009; Whitley 1986a). Developments within the business school, in particular the rise of agency theory, played an important role as well, for agency theory helped cast the role of a business education as that of aid to the diffusion of markets, thus creating new opportunities for connections between theorists and practitioners (Khurana 2010). More generally, financial economics benefited from the massive expansion of the financial sector in the post-1970 global order, often even playing a leading role in the institutionalization of new financial instruments and financial arenas (MacKenzie and Millo 2003; Preda 2002).

For the purposes of our argument, what is important to note is that financial economics evolves and grows as a discipline, to some

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