An Engine, Not a Camera: How Financial Models Shape Markets (review)

Donald MacKenzie, more than any other scholar I know, has built a career out of making arcana—missile guidance systems, floating point arithmetic—both accessible to the historian through his lucid prose and interesting through its embedding of these arcana into our fundamental understanding of the world around us as it is being shaped by the military-industrial complex. This book exhibits some of these virtues, while also pointing to limitations to MacKenzie's approach.

What concerned me most in reading An Engine, Not a Camera was the case of the disappearing society. In MacKenzie's work on missile guidance, there was a whole chapter on "uninventing the bomb"—a call which at first blush I thought somewhat pious but at least was worked through with some rigor. Despite my initial doubts I have found myself frequently referring students to it as a possible pathway in the maze of political responses to technoscience. In this book, the same work is reserved for the last sentence: "And, finally, the notion of performativity prompts the most important question of all: What sort of a world do we want to see performed?" (p. 275). Nowhere in the preceding text is there a consideration of that question. Further, there is no indication of the human suffering and sybaritic delights offered the losers and winners in the Black-Scholes-Merton modeling game. Flesh and blood only appear as the sweating, jockeying guys (the standard aside tells us they were generally not women) on the floor of the exchange enact theorems.

The story MacKenzie tells recounts how, by fits and starts, a model of the stock trader as a rational actor and the market as fully rational gained sway. The content of the trader's rational action was mathematically derived risk management, which had nothing to do with the fundamentals of the actual stock being bought or sold, and a lot to do with the volatility of the stock as compared to the relative volatility of the market. MacKenzie demonstrates beautifully that the rational-actor model became more and more true as certain instruments were put into play (futures markets, arbitrage) which made it so. He refers this construction of a world in which one's theories are true to the general Barnesian position (which seems to be a derivative of Mary Douglas's functionalist position) that what society does is make knowledge which it then seeks to make true. He does permit caveats, which he titles "counter-performativity," much like the functionalists' "dysfunction."

As ever with MacKenzie's work, the scholarship is astonishing—he has carried out a great number of interviews, and melds these with beautiful readings of some very difficult texts. The writing is generally excellent—more than any other technology-studies author, MacKenzie both explicates subtle theory beautifully and creates a theoretical frame wherein that subtle reading is necessary. I did sometimes wonder, however, about the identity of the ideal reader. Take this passage: "an expression for the change in the value of a cash flow in a short, finite time interval ∆t; expanding the expression using the standard calculus technique of Taylor expansion; taking expected values . . . and letting ∆t tend to zero so that the finite-difference equation became a differential equation" (p. 129). MacKenzie provides no information for those like myself who don't know Taylor expansions and I suspect little for those who do. Similarly, the reference to "distributed cognition" (p. 162) is obscure for someone who doesn't know the field already—and even as someone who knows that literature, I was confused by the later claim that "In the 1980's, human beings had been still at the center of the market, and technical systems were their aids" (p. 201). While this is true in the sense that the technical systems accreted more agency in the latter period, it gives the impression of a world before and after computers which I feel misses the centrality of...