Sociology and political economy of financial markets

École du Management et de l’Impact

Olivier Godechot, Matthias Thiemann

Fall Semester

Mid October - December

Room: J210 (13, rue de l'université)

Financial markets have become a central institution in modern market societies but often remain obscure and complex. Traditional courses on finance and financial markets typically focus on technical aspects such as option pricing, asset allocation, and asset valuation. In contrast, the ambition of the Sociology and Political Economy of Financial Markets course is to explore financial markets as human institutions. This approach encompasses their history, politics, policies, regulation, hierarchies, various forms of rationality, norms and beliefs, social networks, cognitive categories, and labor markets. Understanding the day-to-day functioning of financial markets is crucial not only for grasping this specific institution but also for comprehending the broader logics that extend beyond it. Financial markets are at the forefront of new forms of capitalism, making them an excellent observatory for studying its development.

This course will bridge concrete examples of financial markets with recent advances in the emerging field of the sociology and political economy of financial markets, as well as with classical studies in economic sociology and political economy. It will be valuable for students interested in financial markets, whether as a potential professional career, a matter of political concern, or an exciting topic of scientific study.

Course Requirements: Students are expected to read one scientific article each week and focus on three specific articles throughout the course. They will write three memos (or 2 memos and an oral presentation) based on these articles.

Experience Memo (1-2 pages): Relate the paper’s findings to your own experience of finance.
Reaction Memo (1-2 pages): Critically analyze the paper, either positively or negatively.
In class presentation: Groups of students prepare a 15-minute oral presentation of a discussion paper. Given the number of students, two groups (A and B) will each prepare a 15-minute video recording of their presentation and send it to the professors in advance. During class, the professor will randomly select one of the groups to present orally and evaluate them based on their performance in class. The other group will be evaluated based on their video.

The professor will organize discussions based on students’ memos, and all students are expected to actively participate in these discussions.

For the sake of efficiency, we will randomly assign students to given papers. However, for reaction memos and in-class presentations, we allow two students to bilaterally swap their assigned papers. For experience memos, we allow students to switch papers (i.e., they do not have to find someone to swap with). The three exercises must be done on different papers.

Assessment:

Three exercises: 20% each
General participation: 40%

1. 15 October 2024. Introduction and historical approach of financial markets

Debated article:

Fligstein, Neil. 2021. “Chapter 2. From Mortgages to Mortgage Securitization”, The Banks Did It. An Anatomy of the Financial Crisis. Harvard University Press, 31-62.

Reading material

Carruthers, Bruce G. 1999. “Trading on the London Stock Market”, City of capital: Politics and markets in the English financial revolution. Princeton University Press, 160-194.

2. 22 October 2024. Rationalities of the market. Performativity of theories and social backgrounds

Debated article:

Beunza, Daniel, 2019. “Chapter 5. Models and Reflexivity”, Taking the Floor, Princeton University Press, 73-97.

Reading Material:

Godechot, Olivier. 2016. “Back in the Bazaar. Taking Pierre Bourdieu to a Trading Room”, Journal of Cultural Economy 9(4): 410-429.

3. 5 November 2024. Gender and hierarchies on the financial labor market

Debated article:

Neely, Megan Tobias. “Chapter 4. Inside the Firm”, Hedged out. Inequality and insecurity on Wall Street, University of California Press, 101-138.

Reading Material:

Godechot, Olivier. 2008. “‘Hold-up’ in finance: the conditions of possibility for high bonuses in the financial industry”, Revue française de sociologie, 49 Supplement Annual English Edition: 95-123.

In French: Godechot, Olivier. 2006. « Hold-up en finance. Les conditions de possibilité des bonus élevés dans l'industrie financière », Revue française de sociologie, 47 (2): 341-371.

4. 12 November 2024. Cognitive and social embeddedness: Financial categories and social networks

Debated article:

Yenkey, Christopher B. 2018. “The outsider’s advantage: Distrust as a deterrent to exploitation.” American Journal of Sociology, 124(3): 613-663.

Reading Material:

Zuckerman, Ezra W. 1999. “The Categorical Imperative: Securities Analysts and the Illegitimacy Discount.” American Journal of Sociology 104 (5): 1398-1438.

5. 19 November 2024. The regulatory embeddedness of financial markets

Debated article:

Abolafia, Mitchell. 2001. Making markets: Opportunism and restraint on Wall Street. Cambridge, MA.: Harvard University Press, chapter 1 and chapter 8

Reading Material:

Thiemann, Matthias and Jan Lepoutre. 2017. “Stitched on the Edge: Rule Evasion, Embedded Regulators, and the Evolution of Markets.” American Journal of Sociology 122(6): 1775-1821.

6. 26 November 2024. The political economy of financial markets and housing

Debated article:

Blyth, Mark. 2008. “The Politics of Compounding Bubbles: The Global Housing Bubble in Comparative Perspective.” Comparative European Politics 6: 387–406.

Reading Material:

Thiemann, Matthias. 2024. Taming the cycles of Finance: Central Banks and the Macroprudential Turn. Cambridge: Cambridge University Press, pp. 250-264

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