An Engine, Not a Camera

How Financial Models Shape Markets

Donald Mackenzie (University of Edinburgh)

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English

MIT Academic
29 August 2008

Economics & Business; Economic theory & philosophy; Finance

Series: Inside Technology

In An Engine, Not a Camera, Donald MacKenzie argues that the emergence of modern economic theories of finance affected financial markets in fundamental ways. These new, Nobel Prize-winning theories, based on elegant mathematical models of markets, were not simply external analyses but intrinsic parts of economic processes.

Paraphrasing Milton Friedman, MacKenzie says that economic models are an engine of inquiry rather than a camera to reproduce empirical facts. More than that, the emergence of an authoritative theory of financial markets altered those markets fundamentally. For example, in 1970, there was almost no trading in financial derivatives such as ""futures."" By June of 2004, derivatives contracts totaling $273 trillion were outstanding worldwide. MacKenzie suggests that this growth could never have happened without the development of theories that gave derivatives legitimacy and explained their complexities.

MacKenzie examines the role played by finance theory in the two most serious crises to hit the world's financial markets in recent years- the stock market crash of 1987 and the market turmoil that engulfed the hedge fund Long-Term Capital Management in 1998. He also looks at finance theory that is somewhat beyond the mainstream-chaos theorist Benoit Mandelbrot's model of ""wild"" randomness. MacKenzie's pioneering work in the social studies of finance will interest anyone who wants to understand how America's financial markets have grown into their current form.

By: Donald Mackenzie (University of Edinburgh)
Imprint: MIT Academic
Country of Publication: United States
Dimensions: Height: 229mm, Width: 152mm, Spine: 21mm
Weight: 544g
ISBN: 9780262633673
ISBN 10: 0262633671
Series: Inside Technology
Pages: 392
Publication Date: 29 August 2008
Recommended Age: From 18
Audience: Professional and scholarly , College/higher education , Undergraduate , Further / Higher Education
Format: Paperback
Publisher's Status: Active

Donald MacKenzie is Professor of Sociology (Personal Chair) at the University of Edinburgh. His books include Inventing Accuracy (1990), Knowing Machines (1996), and Mechanizing Proof (2001), all published by the MIT Press. Portions of An Engine, not a Camera won the Viviana A. Zelizer Prize in economic sociology from the American Sociological Association.

Reviews for An Engine, Not a Camera: How Financial Models Shape Markets

An Engine, Not a Camera provides an insightful appreciation of the ways in which financial models influence and shape the world they seek to understand. Anthony Hopwood Times Higher Education Supplement A brilliant, extremely lucid account of the connections between financial economics and the development of futures, options, and derivatives markets between the 1950s and 2001. Neil Fligstein American Journal of Sociology

Shortlisted for BISA International Political Economy Group Book Prize 2007.
Winner of <PrizeName>Shortlisted for the 2007 British International Studies Association's (BISA) International Political Economy Group (IPEG) Book Prize</PrizeName> 2007
Winner of <PrizeName>Winner, 2007 British International Studies Association's (BISA) International Political Economy Group (IPEG) Book Prize</PrizeName> 2007
Winner of BISA International Political Economy Group Book Prize 2007.
Winner of Shortlisted for the 2007 British International Studies Association's (BISA) International Political Economy Group (IPEG) Book Prize 2007
Winner of Shortlisted for the 2007 British International Studies Association's (BISA) International Political Economy Group (IPEG) Book Prize</PrizeName> 2007
Winner of Winner, 2007 British International Studies Association's (BISA) International Political Economy Group (IPEG) Book Prize</PrizeName> 2007