This blog is written by Floris van Berckel Smit
6 June 2019
Last month saw the workshop ‘Speculating on Financial Heritage’ at the University of Hertfordshire – an event bringing together historians, economists, philosophers, and other researchers working in various fields related to the history of finance. Four sessions of informal discussion offered various interesting viewpoints on future research plans and the societal relevance of historical perspectives on finance.
For this meeting, the organizers opted for an informal format. No papers were presented, but four thematic sessions and one concluding session were held instead. Each session began with a couple of questions to start the discussion and from there the conversation was left completely open. This resulted in a series of dynamic discussions where many different issues were raised in relation to the four overarching themes of the day, each related to trust in the financial system, practices of trading, investment communities, and affective aspects of trading. Here are some of the outcomes and reflections of what could be an interesting future research agenda.
Trust in the System – Resilience to financial crises
What is trust in the financial system? Our discussion indicates that there are different levels of trust, i.e. the difference between trust in local markets and the institutional national level. According to multiple participants, a critical public debate speaks of trust. If no one criticizes financial institutions, we can not necessarily speak of trust in those institutions. Comments and critique display an engaged society. The public debate in the media shows how things went wrong – for instance criticism on a corruption scandal – but also how things should have gone. Thus the media as a platform for criticism is vital for our understanding of the history of financial markets.
What can historical research do for the current public debate and present issues? What financial networks bring to society is in particular an urgent matter. The idea that financial networks can fail requires in-depth explanation. Networks can by turn underpin, and also undermine, trust. Discovering from historical perspectives how and why networks fail should be a topic of great significance, academically and socially.
Understanding practices of trading
Why do trading practices matter? They matter because they give us a sense of how access financial knowledge works. Practices can be exclusive or inclusive. Access to the market does not mean that the market was (or is) balanced and fair. Understanding practices also speaks to how you make a market work. During the discussion many suggested how important it is to go down from the level of abstraction to the concrete level, from macro to micro level. Understanding everyday practices has a real potential to complement and go beyond the conventional understanding of trade via numbers or as discourses. Here the historians of financial markets have a lot to gain from colleagues working on other kinds of history – political, religious, social and cultural.
What are the benefits of historically understanding the practices of trading? What should historians offer? One obvious point to make is that more robust understanding of trading practices can help us to debunk the impression that bubbles like the South Sea Bubble of 1720 were driven predominantly by irrational euphoria. Another important benefit of a historical approach would be that, historical analyses based on a large collection of primary sources can find what is missing in current economic theories, thereby informing future theoretical thinking.
Understanding investment communities
Who are the actors that are involved in financial markets? Of course the answer varies across time and place, but there are some important characteristics that can be distinguished. Traders and brokers are seen as a professional group. That said, there is no education for traders and brokers in eighteenth-century Europe. It was learning by doing over time. Another key aspect is the social reach of financial instruments, geographically and across social hierarchy. Then again, investors are all engaged in finance, but in that engagement there are differences.
Another critical point that arose during the discussion was that trading and finance are about competition. There is union between groups, but competition is at the heart. Even more, there needs to be a community for people to compete against each other. Competition involves regulation. Not only state regulation, but also so self-regulation of markets through various groups and institutions. Having said that, creating rules of the game does not mean that regulation is about the rules of the country or that these rules are in the interest of protecting the wider public. Understanding how rules were negotiated, codified, implemented, enforced, or evaded would tell us a lot about diverse communities involved in the expanding financial sphere. Much about these communities and ensuing processes remain unclear, hence great opportunities for more in-depth historical research.
Reconstructing affective aspects of trading
How do we understand affective aspects of trading? What can the concept of affective economies bring to our research? The stock market may seem like a domain dominated by men, a space in which the role of emotions is not obvious. That said, if we historicize financial markets, even a male-dominated market is not necessarily devoid of emotions. Generally, stock trade handbooks are about how to kill – or at least control – your emotions. Yet traders are constantly preoccupied with reading one’s own emotion, and the emotions of others in the trading floor, and the mood or emotion of the market (as it were) through ever changing prices.
In discussing emotions, we need to be careful not to treat actors as monolith. For example, emotional experience would have been very different across investors acting on their own account, and people who are acting for others, professionally or otherwise. We can also study the emotion of those acting for institutions. Through careful contextualization, we can start developing a better understanding of the affective aspects of trading.
The points raised above do not do full justice to the all the conversations that unfolded during the day. Yet these topics – diverse though they are – seem to suggest some of the points that repay further analysis.
|Floris van Berckel Smit is an Assistant Research Associate at the Vrije Universiteit Amsterdam. His research focuses on the history of higher education governance and management, the history of finance, and European populism.|