An Engine, Not a Camera

How Financial Models Shape Markets

by Donald Mackenzie, Wiebe E. Bijker, W. Bernard Carlson,

Subject categories
ISBNs
  • 0262250047
  • 9780262134606
  • 9780262250047

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.

  • The MIT Press; August 2008
  • ISBN 9780262250047
  • Read online, or download in secure EPUB format
  • Title: An Engine, Not a Camera
  • Author: Donald Mackenzie; Wiebe E. Bijker (ed.); W. Bernard Carlson (ed.); Trevor Pinch (ed.)
  • Imprint: The MIT Press
Subject categories
ISBNs
  • 0262250047
  • 9780262134606
  • 9780262250047

In The Press

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

Subject categories
ISBNs
  • 0262250047
  • 9780262134606
  • 9780262250047