Spectacular Speculation: Thrills, the Economy, and Popular Discourse
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Spectacular Speculation: Thrills, the Economy, and Popular Discourse
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| ISBN-13: | 9780804771313 |
|---|---|
| Publisher: | Stanford University Press |
| Publication date: | 02/20/2013 |
| Pages: | 312 |
| Product dimensions: | 6.20(w) x 9.10(h) x 0.90(d) |
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SPECTACULAR SPECULATION
THRILLS, THE ECONOMY, AND POPULAR DISCOURSEBy URS STÄHELI
STANFORD UNIVERSITY PRESS
Copyright © 2013 Board of Trustees of the Leland Stanford Junior UniversityAll right reserved.
ISBN: 978-0-8047-7131-3
Chapter One
GAMBLING AND SPECULATIONENTERTAINING CONTINGENCY?
What's your game? ... Speculation I believe. —Jane Austen, "The Watsons"
"The Watsons" is the surviving fragment of an unfinished novel by Jane Austen, who refers here to a card game called "speculation," which was popular in the nineteenth century. The term also alludes, of course, to stock speculation. Reflecting on the pleasures remaining for a modernity that had become monotonous, the behavioral psychologist John B. Watson immediately thought of speculation: "Sex is so free and abundant that it hardly comes any more in the realm of excitement.... We all get bored. Stock gambling is about the only thing that offers the same kind of thrill that big game hunting does, and you can play the market right at your desk" (Watson in Fred C. Kelly 1962 [1930], xiv; emphasis added).
Watson was thinking of stock speculation, not as an economic activity, but as a first-class form of entertainment—the last thrill left to moderns for whom routine and boredom stifled any form of excitement. The French economic historian Robert Lacour-Gayet also noted the fact that thrill seeking was a distinguishing feature of American speculation. A few months before the stock market crash in 1929, Lacour-Gayet referred to Americans' having indulged over the past five years in the "luxury of a permanent thrill" (1929, 159). For the French, the English word "thrill" became the term that best fitted American culture.
The euphoric affirmation of the thrill of the stock market is logically (and not historically) the suspension of the distinction between speculation and gambling. Terms like "stock gambling" and, later, "the money game" may have appeared to create a self-evident link between gambling and speculation. However, these terms owed less to polemics against the stock market than to an enthusiastic plea for speculation by figures like Watson and Lacour-Gayet. This articulation of gambling and speculation proved to be based on complex presuppositions and conflicts. In order to be combined with gambling as a thrill, speculation had first to be separated from gambling as a "serious" economic operation and only later to be reunited. This re-articulation of gambling and speculation did not simply form a cyclical pattern based on their division and recombination. Rather, the figure of the speculator arose from their dialectic. The speculator was born as a privileged figure of economic subjectivity in the conflict between gambling and speculation—a figure that had to assert itself in the tension between diverting thrill and economic communication. The intense conflicts surrounding this distinction can be better understood in light of the provocation behind the gambling metaphor. Gambling contrasted with the stock exchange, often represented as the perfect market. No other form of economic communication seemed as appropriate to embody the neoclassical ideal of an efficient market. The stock trader was always supplied with current information on transactions, something that had to be painstakingly determined in other markets. Moreover, the stock trader was also spared the elaborate procedure of acquiring products and could devote all his attention to observing and producing prices. The French economist Léon Walras (1834-1910) saw the stock market as a quintessential market model, since it combined perfect competition and ideal pricing—which, moreover, took place with minimal delay (Walras 2005 [1880]; Goux 1997, 162; Walker 2000). A similar belief in the stock exchange as the perfect market can be found in contemporary American discourses on speculation. William C. Van Antwerp (1867-1938) of E. F. Hutton & Co. wrote, for example: "Buyers seek the largest market they can get in order to obtain the lowest prices; sellers in order to obtain the highest prices ... and so it was learned long ago that economy of time and labor, as well as a theoretically perfect market, could be best secured by an organization under one roof of as many dealers in a commodity as could be found." The stock exchange produced a fair price under "ideal conditions" by temporally and spatially condensing the communication of prices. Hence, the stock exchange became the domain of homo oeconomicus—the central fiction of economic rationality—embodied in speculators who found scope to pursue their calculated self-interest in its institutionalized economic freedom.
The stock exchange constituted the economic imaginary through a process of rigorous self-referential abstraction. Precisely because the stock market bracketed customary economic external references, it figured as a self-referential system par excellence. To a large extent, this notion of the stock exchange replaced external references with instances of payment continuously linked to each other: "The financial market exists, so to speak, as the proper market of the economic system.... The operations of this market are, to the highest degree, determined self-referentially, that is, are oriented toward the self-reference of the economic system, and towards the reflexivity of its medium: money" (Luhmann 1988, 116).
Speculation did not have to relate either to the labor process or to a business's fundamental data. Products also played a reduced role as interchangeable signs that, in the best case, served as points of reference for the speculative imagination of traders. Speculation acquired its communicative criteria only from itself. The productivity or the earning potential of a business could be monitored, but primarily to see how other observers monitored these economic references. Stock market speculation was a classic instance of second-order observation, being simultaneously an operation and an observation. Payments—the basic operation of the economic system—were observed as observations in a process that grounded further payments.
Because of this dissociation from economic references, stock market speculation has been read as a self-sufficient "stock exchange paradigm" (Goux 1997, 2000). By abandoning external references, speculation set free an arbitrary play of signifiers grounded in the desire of economic subjects (Bigelow 1998). Even if one does not want to follow Goux's euphoric poststructuralist reading, it nonetheless emphatically foregrounds the self-referentiality of stock market communication. This heightened self-reference made the stock market the "market of markets" for many observers. As the American economist Henry Crosby Emery (1872–1924) pointed out, socialists like Pierre-Joseph Proudhon (1809–65) had first discovered this new meaning of the stock market, whereas many "capital friendly" authors had overlooked it. According to Emery, Proudhon understood the stock exchange as "the symbol of modern commerce ... the center of the vast industrial system which he denounces" (Emery 1969 [1896], 158). Evidently, some critics of capitalism better understood the symbolic power of the stock exchange than many economists and moralists.
Given the privileged position of the stock exchange in the economic imaginary, it might seem surprising that speculation also functioned as entertainment. One would not expect a cool-headed character like homo oeconomicus to pursue the thrill of speculation. Yet speculation was both celebrated and criticized as popular communication before the first stock exchanges were founded. The intense conflicts over the distinction between gambling and speculation were centered on this aspect of entertainment. It is striking that speculation and gambling intersected, and that stock speculation, an economic practice confined primarily to second-order observations, became so popular. How did the exclusive circuit of communication in stock speculation stay connected to the "people" who served as the fictive popular actor? The stock market would seem to be a particularly good example of "elite" communication, because it was organized like a club. The peculiar logic of the stock market would also seem to be indifferent to the normative criteria of the "moral economy," based on ideals of equivalence and fairness. With these tensions, stock speculation presented itself as an ambivalent form of communication. On the one hand, it was a highly exclusive and self-referential field. On the other hand, it was a popular amusement almost as disreputable as gambling. My concept of the popular analyzes the tension between these two aspects of speculation. The thrill of speculation uncovers the popular in stock market communication, indicating that, along with its economic "seriousness," speculation is also a form of entertainment.
A brief comparison with other functional systems shows how unusual it is for entertainment to be joined to a second-order economic observation. In the academic system, epistemological papers are hardly comprehensible to laypeople interested in popular science. Procedural conflicts in the legal system are often seen as a complicated and often unnecessary postponement of the legal drama that is actually of interest. "Art for art's sake" is likewise often a reliable means of excluding a wide audience. However, finance operates differently. The self-observation of the economy in finance appears to create a thrill that is to a large extent missing in second-order observation in other functional systems.
This thrill seeking goes well beyond professional traders. It includes laypeople who often do not possess basic financial knowledge. Second-order observations demand the high degree of competence specific to a functional system, and speculation is no different in this regard. However, despite this required competence, speculation exerts a peculiar attraction on the uninitiated—even if (or precisely because) it has to remain incomprehensible to them. The contingency generated by the self-referential play of speculation is highly entertaining. This thrill could thus also threaten the economic legitimacy of speculation, whether by threatening to make speculation incalculable or by invoking its exterior as a source of contamination. The challenge facing a communications-theoretical analysis of finance arises in understanding market populism not merely as a psychological phenomenon but as something intrinsic to the stock market. The speculator may certainly be driven to get rich, but this does not explain how speculation simultaneously processes economic and entertainment contingencies.
Semantic conflicts distinguishing gambling and speculation address the problem of the noneconomic in the economic. In gambling and speculation, the boundaries of economic communication are specified, displaced, and once again fixed. The distinction between gambling and speculation is an essentially contested distinction. Moreover, it is not simply one element among others, but constitutes what Philippe Desan (1993) calls an imaginaire économique, or "economic imaginary," within which not only the legitimacy of particular morally dubious practices but also the boundaries of the economic can be contested.
Following William Connolly (1983), concepts are contested in three ways. First, their internal complexity leads to disputes over their definition. Second, how these distinctions are to be applied remains unclear. Third, the normative evaluation of these concepts is also contested. These conflicts are not settled by an "improved" definition or other theoretical efforts, but emerge precisely because there is no overriding logic to resolve them. The distinction between gambling and speculation has been contested in all of these ways. Controversy arose as to whether speculation could be distinguished from gambling as an economic operation. Likewise, how to apply this distinction was often intensely debated, particularly in the discussion about futures trading. Normatively, a wide spectrum of irreconcilable positions on speculation arose—ranging from those that condemned its moral abjectness to those that celebrated it as the "most economic" of economic operations.
In what follows, I track thematic "spots" in which templates for these efforts to distinguish gambling and speculation were articulated. Following a brief communications-theoretical discussion of gambling and speculation (1), my analysis begins with a prehistory of this distinction in the seventeenth and eighteenth centuries. At this time, gambling and speculation were equated with each other. From this point of view, the novel form of "wild contingency" proved to be fascinating and dismaying (2). Discussions of the argumentative strategies deployed by opponents of speculation and gambling also took an interest in how the two forms were equated (3). Precisely because these criticisms strengthened each other, they posed a challenge to positions friendly to speculation. I trace efforts to separate speculation from gambling, and to observe speculation as a legitimate form of economic communication (4). This expulsion of gambling from speculation took shape as an extremely demanding process that led to a "paradox of purification" with far-reaching consequences (5). The last section of this chapter discusses how a popularized version of neoclassical economics was the first to connect gambling and speculation from a perspective friendly to the latter. With this connection, such arguments also destabilized the presuppositions underlying their own calculations (6).
I. Gambling and Speculation as a Theoretical Problem: The Provocation of Contingency
Before we can analyze conflicts over the distinction between gambling and speculation, we need to situate them within the coordinates of social theory. To do so, it is necessary to outline the mode of communication at stake in gambling and speculation. Only then can we see how this mode of communication is fraught with assumptions and accompanying zones of indeterminacy. In these zones of indeterminacy, conflicts over the distinction between gambling and speculation are put into play.
Gambling includes all the forms of communication in which payment depends exclusively on a contingent future event—an event often specifically produced for this very purpose. Gambling is a form of communication that—like economic communication—uses money as its medium of payment. However, this similarity by no means ensures its economic nature. For example, as will be discussed later, moralistic monetary discourses see gambling as a noneconomic and illegitimate use of money. Critics argue that profits and losses in gambling are detached from effort and knowledge. However, these criteria are not persuasive from a systems-theoretical standpoint, which determines whether an operation belongs to a given system based on its capacity for communicative connection, rather than on individual motives, intentions, and competences.
Yet systems theory also has difficulties mapping gambling socially. Gambling may appear to be economic because it operates with a payoff: "The economy consists of endless new payments" (Luhmann 1988, 52). In this sense, a successful payoff in roulette or in a card game likewise contributes to the autopoiesis of the economic system. An analysis restricted to money as an economic medium would have to identify gambling as economic communication. However, it becomes more difficult to determine the economic character of gambling when one follows Luhmann's functional conception of the economy. Luhmann emphasizes that the economy is not formed by the arbitrary use of money, but by scarcity. Money is a means by which the scarcity of goods is reproduced, translating it into prices. The economy is oriented by the scarcities it generates, and produces corresponding programs to handle them: "In the modern economy, all economic operations must comply with both languages of scarcity together, so the overall code of the economy applies, and this code alone—namely, to pay for services," Luhmann asserts.
Only this double economy of scarcity (of goods and money) makes the explosive theoretical consequences of gambling clear. Gambling utilizes money as a medium (and payment as a unit of communication) like any economic operation. However, the problematics of gambling differ from those found in economic communication oriented toward the sale of goods. Gambling presupposes a scarcity of money (by promising a future and contingent payoff) but discards the "language of scarcity" of goods. In contrast to speculation with futures, gambling does not negotiate fictive goods or services. Rather, gambling entirely dispenses with staging sales transactions.
For Luhmann, the modern economy orientates itself toward two problems of scarcity: the scarcity of goods and of money. Gambling caricatures—and thereby inverts—the premodern economy that was confronted only with a scarcity of goods. In gambling, the double scarcity of money and goods is abandoned for an exclusive orientation toward the scarcity of money. Gambling is provocative because although it uses money as a medium, it is exclusively interested in the scarcity of money. The gambler buys neither a real nor fictive good. As a result, the gambler begins to deal with the medium of money itself and becomes fascinated with its possibilities. The use of money itself becomes a thrill. Detaching money from the twin discourses of economic scarcity opens up the possibility of border conflicts and is even regarded as something shocking.
(Continues...)
Excerpted from SPECTACULAR SPECULATION by URS STÄHELI Copyright © 2013 by Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of STANFORD UNIVERSITY PRESS. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Contents
LIST OF ILLUSTRATIONS....................VII ACKNOWLEDGMENTS....................IX Introduction....................11 Gambling and Speculation: Entertaining Contingency?....................19
2 The Normalization of "Wild Contingency": Stabilizing the Distinction Between Gambling and Speculation....................43
Introduction....................95
3 Charles Mackay: The Spectacle of Equality....................98
4 Speculative Vistas: Crowds and Speculation in the United States during the Nineteenth Century....................110
5 Alone Against the Crowd: The Communicative Techniques of the Contrarians....................146
6 The Eroticism of the Market and the Gender of Speculation....................171
7 The Rhythm of the Market....................197
Epilogue....................237
NOTES....................243
REFERENCES....................271
INDEX....................291