Rationalities of ignorance: on financial crisis and the ambivalence of neo-liberal epistemology

Abstract

The financial crisis of 2007Á 8 was experienced and reflected upon as a crisis of knowledge, the perennial question being why nobody accurately understood the risks that were being taken within the financial sector. In the wake of the crisis, there have been demands that rational economic knowledge be extended further and more vigorously, to prevent such ignorance being possible in future. At the same time, there have been demands for a new, softer rationalism, which factors in the possibility of errors and systemic complexities. What neither approach recognizes is that ignorance is not simply the absence of rational economic knowledge, but is a productive force in itself, something that is actively nurtured and exploited, both by neo-liberal theorists such as Hayek and by expert actors who have been implicated in the financial crisis. We explore how ignorance has been alternately an albatross, a commodity and an institutional alibi to financial actors and the scholars who study them.

Good trader, good trading: The presence and the regulation of emotions in financial markets

“…Dicho de otra forma, entiendo que donde Elias yerra el tiro, Breuer acierta de lleno. b) La interdependencia financiera dibuja un campo de juego en el que los participantes se vinculan recíprocamente ignorando, pudiendo ignorar (Davies y McGoey, 2012) o desconociendo la magnitud de tales vínculos. Esa interdependencia es la materia de la que se alimenta la competencia entre los participantes.…”

Gambling debt: Iceland's rise and fall in the global economy

“…Another international banker told me that finance professionals all over the world lost sight of their role in an industry that rewarded short-term personal greed and punished long-term value. Worldwide, central figures in the finance industry, such as bankers, were able to claim just enough knowledge to keep their power by getting deals done (as opposed to putting thought into them) but not enough knowledge to take responsibility (Davies and McGoey 2012), something that became apparent after the crash. worked in 2008, the combined banking experience of the twelve to fourteen employees there was barely fifteen years, with no one having worked in banking for more than two years.…”

“…Icelanders embraced the free market mantra that they believed entailed harmony and stability, something Cassidy (2009) argues was built on an illusion. Neoliberalism was initially built upon the concept of freedom, the argument that governments could not decide what was best for their citizens, and slowly the argument evolved until the efficiency of the market was in the front seat (Davies and McGoey 2012). Icelanders justified the privatization of banks not only because it increased efficiency but also because of the implied declaration of nationalistic freedom.…”

Terminal value: Building the alternative Bloomberg

“…The idea of the market as a machine is not a new one. Davies and McGoey (2012) argue that Milton Friedman and his colleagues in the Chicago School used it as a way of understanding how people should act within a given set of conditions. Building on this idea of homo economicus, more abstracted models emerged for calculating risk and negotiating complex socio-economic situations (Davies and McGoey, 2012: 71).…”