Sleeping with the enemy? On Hayek, constructivist thought, and the current economic crisis

Review of International Studies

Volumn 38, Issue 2, 2012, Pages 275-299

  Kessler, Oliver ^a  

^a Kyung Hee University   (South Korea)

Author keywords

[No Author keywords available]

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EID: 84860498755     PISSN: 02602105     EISSN: 14699044     Source Type: Journal    
DOI: 10.1017/S0260210512000010     Document Type: Review

References (131)

1. See Grahame Thompson, 'What's in a frame', Economy and Society, 38:1 (2009), pp. 520-4.
2. For the report see {www.fsa.gov.uk/pubs/other/turner-review.pdf} last accessed 15 January 2012.
3. Grahame Thompson, 'Sources of Financial Sociability', Journal of Cultural Economy, 4:4 (2011), pp. 405-21.
4. Oliver Kessler, 'Die Subprime-Krise und die Frage nach der Finanzmarktstabilitä t', Zeitschrift für Internationale Beziehungen, 16:1 (2009), pp. 161-75.
5. See Daniel Beunza, Iain Hardie, and Donald MacKenzie, 'A Price is a Social Thing: Towards a Material Sociology of Arbitrage', Organization Studies, 27:5 (2006), pp. 721-45.
6. Also Donald MacKenzie, 'The Credit Crisis as a Problem in the Sociology of Knowledge', American Journal of Sociology, 116 (2011), pp. 1778-1841.
7. See in particular Jens Beckert and Patrick Aspers (eds), The Worth of Goods: Valuation and Pricing In the Economy (Oxford: Oxford University Press, 2011), especially part III.
8. See Marieke de Goede, 'Repoliticising Financial Risk', Economy and Society, 33:2 (2004), pp. 197-217;
9. Oliver Kessler, 'Uncertainty, Rationality, and the Study of Social Institutions', Review of Social Economy, 66:4 (2008), pp. 501-23;
10. Christopher Daase and Oliver Kessler, 'Known and Unknowns and the Political Construction of Danger', Security Dialogue, 38:4 (2007), pp. 411-34.
11. For similar conclusions, see Bob Jessop, 'Critical Semiotic Analysis and Cultural Political Economy', Critical Discourse Studies, 1:2 (2004), pp. 159-74.
12. See Jacqueline Best, 'How to Make a Bubble: Toward a Cultural Political Economy of the Financial Crisis', International Political Sociology, 3:4 (2009), pp. 461-65;
13. Bruce Rodney Hall, 'Intersubjective Expectations and Performativity in Global Financial Governance', International Political Sociology, 3:4 (2009), pp. 453-57;
14. Anna Leander, 'Close Range: Targeting Regulatory Reform', International Political Sociology, 3:4 (2009), pp. 465-68;
15. Timothy Sinclair, 'Let's get it right this time: Why Regulation will not solve or prevent global financial crises', International Political Sociology, 3:4 (2009), pp. 450-3;
16. Eleni Tsingou and Leonard Seabrooke, 'Power Elites and Everyday Politics in International Financial Reform', International Political Sociology, 3:4 (2009), pp. 457-61.
17. See in particular B. Rodney Hall, 'Intersubjective Expectations', p. 455.
18. See in particular T. Sinclair, 'Let's get it right', p. 452
19. Seabrooke and Tsingou, 'Power Elites', p. 459.
20. For the Keynes-based approach see in particular Jacqueline Best, Limits of Transparency (Ithaca: Cornell University Press, 2005);
21. Wesley Widmaier, 'Keynesianism as a Constructivist Theory of the International Political Economy', Millennium: Journal of International Studies, 32:1 (2003), pp. 87-107.
22. That this however is simply not good enough for constituting a constructivist approach to IPE, see Oliver Kessler, 'From Agents and Structures to Minds and Bodies: on supervenience, quantum and the linguistic turn', Journal of International Relations and Development, 10:3 (2007), pp. 243-71.
23. For a very preliminary discussion see Oliver Kessler, 'After Sectors, Before the World: Finance, Security and Risk', Security Dialogue, 42:2 (2011), pp. 197-215.
24. For a terrific discussion see Herman Schwartz, Subprime Nation: American Power, Global Capital and the Housing Bubble (Ithaca: Cornell University Press, 2009).
25. See John Kiffs and Paul Mills, 'Money For Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets', International Monetary Fund Working Paper, 07/188 (2007), p. 7.
26. See also Markus Brunnermeier, 'Deciphering the Liquity and Credit Crunch 2007-2008', Journal of Economic Perspectives, 23:1 (2009), pp. 77-100.
27. See T. Sinclair, 'Let's get it right';
28. Marcin Kacperczyk and Philipp Schnabl, 'When Safe Proved Risky: Commercial Paper during the Financial Crisis 2007-2009', Journal of Economic Perspectives, 24:1 (2010), pp. 29-50.
29. See also Ismail Ertü rk, Adam Leaver, and Karel Williams, 'Hedge Funds as "War Maschine": Making the Positions Work', New Political Economy, 15:1 (2010), pp. 9-28.
30. See Hans-Jürgen Bieling, 'Wenn der Schneeball ins Rollen kommt: Überlegungen zur Dynamik und zum Charakter der Subprime-Krise', Zeitschrift für Internationale Beziehungen, 16:1 (2009), pp. 107-21.
31. Markus Brunnermeier, 'Deciphering the Liquity and Credit Crunch 2007-2008', Journal of Economic Perspectives, 23:1 (2009), pp. 77-100;
32. Paul Mizen, 'The Credit Crunch of 2007-2008: A Discussion of the Background, Market Reactions and Policy Responses', Federal Reserve Bank of St Louis Review. 90:5 (2008), pp. 531-67;
33. Duncan Wigan, 'Credit Risk Transfer and Crunches: Global Finance Victorious or Vanquished?', New Political Economy, 15:1 (2010), pp. 109-25.
34. For a discussion see Jonathan Eaton, Samuel Kortum, Brent Neiman, and John Romalis, 'Trade and the Global Recession', Working Paper w16666 (Cambridge, MA: National Bureau of Economic Research, 2011).
35. See Stephen G. Cecchetti, 'Crisis and Response: The Federal Reserve in the Early Stages of the Financial Crisis', Journal of Economic Perspectives, 23:1 (2009), pp. 51-75.
36. See in particular Financial Stability Board, 'Improving Financial Regulation', Report of the Financial Stability Board to G20 Leaders, 25 September 2009
37. Financial Stability Board, 'Progress Since the Pittsburgh Summit in Implementing the G20 Recommendations for Strengthening Financial Stability', 9 November 2009b;
38. Financial Stability Board, 'Press Release: Financial Stability Board meets on the Financial Reform Agenda', 9 January 2010a;
39. Financial Stability Board, 'Promoting Global Adherence to International Cooperation and Information Exchange Standards;
40. Basel: Financial Stability Board', 10 March 2010b;
41. Financial Stability Board and the International Monetary Fund, 'The Financial Crisis and Information Gaps' (Basel: FSB, May 2010);
42. Financial Stability Board, 'International Monetary Fund, Bank for International Settlement', Report to G20 Finance Minsters and Governance, Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations, (Basel: Bank for International Settlement, 2010);
43. International Monetary Fund, Global Financial Stability Report April 2009 (Washington, DC: International Monetary Fund) as the equivalent reports from October 2009 and April 2010.
44. See FSB and IMF, 'The Financial Crisis', p. 16.
45. IMF (2009a), p. 114
46. FSF (2008a), p. 8.
47. FSF (2008a), p. 22
48. See also in this respect Aeron Davis, 'The Limits of Metrological Performativity: Valuing Equities in the London Stock Exchange', Competition and Change, 10:1 (2006), pp. 3-21;
49. Karen Ho, Liqidated: An Ethnography of Wall Street (Duke: Duke University Press, 2009);
50. David Stark, The Sense of Dissonance (Princeton: Princeton University Press, 2009).
51. That in fact Basle II is reductionist and actually not well suited for current problems see Oliver Kessler, 'Beyond the Economic Bias: the social construction of Economic Risks', in Colin Hay and Andreas Gofas (eds), The Role of Ideas in Political Analysis (London: Routledge, 2009).
52. See also Timothy Sinclair and Michael King, 'Private Actors and Public Policy: a Requiem For The New Basel Capital Accord', International Political Science Review, 24:3 (2003) pp. 345-62.
53. See Milton Friedman, 'The methodology of positive economics', Essays in Positive Economics (Chicago: University of Chicago Press), pp. 3-43;
54. See Geoffrey Hodgson, Economics and Institutions (London: Routledge, 1999).
55. For a discussion of Menger's influence on Hayek, the best piece is still Friedrich Hayek, 'Carl Menger', Economica, 1:4 (1934), pp. 393-420.
56. See in particular Book III of his Untersuchungen is headed as 'The Organic Character of Social Phenomena', see his Untersuchungen über die Methode der Sozialwissenschaften und der Politischen Ökonomie insbesondere (Dunker, 1883).
57. Friedrich August von Hayek, Individualismus und Soziale Ordnung (Salzburg: Wolfgang Neugebauer, 1976), p. 27.
58. Friedrich August von Hayek, 'Economics and Knowledge', Economica, 4:13 (1937), pp. 33-54.
59. Friedrich August von Hayek, 'The Use of Knowledge in Society', The American Economic Review, 35:4 (September 1945), p. 519.
60. Frank Heynemann Knight, Risk, Uncertainty and Profit, (New York: Harper and Row, 1921);
61. John Maynard Keynes, 'The General Theory of Employment', Quarterly Journal of Economics, 51:2 (1937), pp. 209-23.
62. Gilbert Ryle, The Concept of Mind (New York. Barnes and Noble, 1949);
63. Michael Polanyi, Personal Knowledge: Towards a Post-Critical Philosohpy (London: Routledge, 1958).
64. Friedrich Hayek, 'The Use of Knowledge in Society', p. 522.
65. Friedrich Hayek, The Sensory Order (Chicago: Chicago University Press, 1952), p. 167.
66. See also Friedrich Hayek, The Fatal Conceit (Chicago: Chicago University Press, 1988), p. 89.
67. Friedrich Hayek, 'The Use of Knowledge in Society', p. 522.
68. Friedrich Hayek, Die Irrtümer des Konstruktivismus, reprinted in Anmaßung von Wissen (Tübingen: Mohr, 1996), p. 21.
69. For newer contributions see David Christensen, 'Dutch Book Arguments Depragmatized: Epistemic Consistency for Partial Believers', The Journal of Philosophy, 93:9 (1996), pp. 450-79;
70. Colin Howson, 'Dutch Book Arguments and Consistency', PSA: Proceedings of the Biennial Meeting of the Philosophy of Science Association (1992 Volume Two: Symposia and Invited Papers, 1992), pp. 161- 68;
71. C Waidacher, 'Hidden Assumptions in the Dutch Book Argument', Theory and Decision, 43:3 (1997), p. 3.
72. Of particular relevance are the 'money pump' argument, for example, Frederic Schick, 'Dutch Bookies and Money Pumps', The Journal of Philosophy, 83:2 (1986), pp. 112-19.
73. See Hans Blumenberg, Die Legitimität Der Neuzeit (Frankfurt am Main: Suhrkamp, 1966);
74. for cultural cognition literature see George Lakoff, Women, Fire, and Dangerous Things: What Categories Reveal About the Mind (Chicago: University of Chicago Press, 1987);
75. George Lakoff and Rafael E. Nâuänez, Where Mathematics Comes From: How the Embodied Mind Brings Mathematics into Being, first edn (New York, NY: Basic Books, 2000);
76. for biology of cognition see Humberto Maturana and Francesco Varela, Complexity and Cognition (Dordrecht: Reidel, 1980);
77. or second order cybernetics see Heinz von Förster, Understanding Understanding: Essays on Complexity and Cybernetics (New York: Springer, 2003).
78. Friedrich Hayek, 'Degrees of Explanation', in Hayek, Studies in Philosophy, Politics and Economics (Chicago: Chicago University Press, 1967), pp. 60-1.
79. See Friedrich Hayek, 'Primacy of the Abstract', in Friedrich Hayek, New Studies in Philosophy Politics, Economics and History of Ideas (Chicago: Chicago University Press, 1978), pp. 35-49
80. F. Hayek, 'The Use of Knowledge in Society', p. 528.
81. Friedrich von Hayek, 'Drei Quellen', p. 34.
82. Friedrich von Hayek, Recht, Gesetzgebung und Freiheit, 2 (Tübingen: Mohr), p. 43.
83. Friedrich von Hayek, 'Drei Quellen', pp. 38-72, on p. 41.
84. Wesley Widmaier, 'Keynesianism as a Constructivist Theory of the International Political Economy', Millennium: Journal of International Studies, 32:1 (2003), pp. 87-107.
85. Ludwig Wittgenstein, Philosophical Investigation (Oxford: Blackwell), 85
86. Ludwig Wittgenstein, Vorlesungen 1930-1935 (Frankfurt/Main: Suhrkamp, 1984), p. 350.
87. Friedrich von Hayek, Law Legislation and Liberty, 1 (Chicago: Chicago University Press, 1973), pp. 50-1.
88. Ludwig von Bertalanffy, General System Theory: Foundations, Development, Application (New York: Braziller, 1969).
89. Explicit reference to eigen-values and autoppoiesis can for example be found in Friedrich von Hayek, 'Die Überschätze Vernunft', p. 84.
90. For an analysis of constructivism and complexity see in particular the edited volume by Mathias Albert, Lars-Erik Cederman, and Alexander Wendt, New Systems Theories of World Politics (London: Macmillan, 2010).
91. See, for example, Alexander Gofas and Colin Hay (eds), The Role of Ideas in Political Analysis (London: Routledge, 2010).
92. Prigogine and Stenger Ilya Prigogine, From Being to Becoming: Time and Complexity in the Physical Science (New York: Freeman, 1980);
93. Ilya Prigogine and Isabelle Stengers, Order out of Chaos, (New York: Bantam, 1984);
94. Manfred Eigen, The Hypercylce: A Principle of Natural Self-Organization (New York: Springer Verlag, 1979);
95. Stanley Fox, The Emergence of Life (New York: Basic, 1988).
96. Similarly, the Grundlagenkrise inaugurated by Bertrand Russell's paradox led through Gö del's proof and Wittgenstein's linguistic turn to an abandonment of logic as a priori and objectively given Ernest Nagel and James R. Newman, Gödel's Proof, rev. edn (New York: University of New York Press, 2002).
97. See Conwy Lloyd Morgan, Habit and Instict (London and New York: Edward Arnold, 1896). In particular p. 120ff.
98. See also Conwy Lloyd Morgan, Emergent Evolution: The Gifford Lectures (London: Williams and Norgate, 1923).
99. A good discussion can be found in Philip Mirowski, Natural Images in Economic Thought (Cambridge: Cambridge University Press, 1994);
100. Geoffrey Hodgson, Economics and Institutions (London: Routledge, 1999).
101. Hayek, 'The Use of Knowledge in Society', p. 528.
102. Still a classic statement in the context of finance is Maurice Obstfeld, 'Models of currency crises with self-fulfilling balance of payments crises', European Economic Review, 40:3-5 (1996), pp. 1037-47.
103. On different models of currency crises see Oliver Kessler, Die Internationale Politische Ökonomie des Risikos (Wiesbaden, 2008), chap. 2.
104. For possible avenues see Luhmann, Die Wirtschaft Der Gesellschaft (Frankfurt: Suhrkamp, 1988);
105. Harrison C. White, 'Where Do Markets Come From?', American Journal of Sociolog, 87:3 (1981), pp. 517-47.
106. Friedrich Hayek, 'The Meaning of Competition', in Friedrich Hayek (ed.), Individualism and the Economic Order (London: Routledge and Keagan Paul, 1949);
107. Friedrich Hayek, 'Competition as Discovery Process', New Studies in Philosophy, Politics, Economics and the History of Ideas (London: Routledge and Keagan Paul, 1978b).
108. For newer contributions in a broader Hayekian way see Brian Loasby, Choice, Complexity and Ignorance: an Inquiry into Economic Theory and the Practice of Decision Making (Cambridge: Cambridge University Press, 1976).
109. See also his The Minds and Methods of Economists (Cambridge: Cambridge University Press, 1989);
110. Isreal Kirzner, Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973);
111. Isreal Kirzner, The Meaning of Market Process (London: Routledge, 1992);
112. Murray Rothbard, Man, Economy and the State, 2 (Los Angeles: Nash, 1970).
113. See in particular Timothy J. Sinclair, The New Masters of Capital: American Bond Rating Agencies and the Politics of Creditworthiness., ed. Peter Katzenstein (Ithaca: Cornell University Press, 2005).
114. For a similar discussion see Kessler, 'After Sectors'.
115. See also Patrick Aspers, 'Knowledge and Valuation in Markets', Theory and Society, 39:2 (2009), pp. 111-31;
116. Andreas Langenohl, 'Finanzmarktkrisen als Deutungskrisen' (mimeo, 2010).
117. P. Aspers 'Knowledge and Valuation in Markets', p. 117
118. Donald MacKenzie, An Engine Not A Camera (Cambridge: Cambridge University Press, 2006).
119. See also T. Sinclair, 'Let's get it right', for an interpretation that highlights a similar point.
120. For a longer discussion see Kessler, 'Uncertainty, Rationality, and the Study of Social Institutions'.
121. For a general overview see Ulrich Beck, Risikogesellschaft: Auf Dem Weg in Eine Andere Moderne (Frankfurt am Main: Suhrkamp, 1986);
122. Ulrich Beck, World Risk Society (Malden, Mass: Polity Press, 1999);
123. Mary Douglas, Risk and Blame: Essays in Cultural Theory (London; New York: Routledge, 1992);
124. François Ewald, 'Insurance and Risk', in Graham Burchell, Colin Gordon, and Peter Miller (eds), The Foucault Effect: Studies in Governmentality (Chicago: Chicago University Press, 1991);
125. Sheldon Krimsky and Dominic Golding (eds), Social Theories of Risk (Westport, Conn.: Praeger, 1992);
126. Niklas Luhmann, Soziologie Des Risikos (Berlin: W. de Gruyter, 1991);
127. Deborah Lupton, Risk and Everyday Life (Thousand Oaks, CA: Sage Publications, 2003).
128. See Olivier De Bandt and Philipp Hartmann, 'Systemic Risk: A Survey', European Central Bank Working Paper Series (2000);
129. Charles A. E. Goodhart, 'Some New Directions for Financial Stability', Per Jacobson Lecture (2004);
130. Aerdt Houben, Jan Kakes, and Garry J. Schinasi, 'Toward a Framework for Safeguarding Financial Stability', IMF Working Papers, no. WP/04/101 (2004);
131. Garry J. Schinasi, 'Defining Financial Stability', IMF Working Papers, no. WP/04/187 (2004).