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Economic markets as calculative and calculated
collective devices
Michel Callon and Fabian Muniesa*
April 2002
(Very provisional draft, uncorrected English, references to be added)
Paper to be presented at the New York Conference on Social Studies of Finance, Columbia University
and the Social Science Research Council
Pricing is a key element of the functioning of concrete markets and its
description and explanation is one of the most central concerns of economic theory.
Our paper is an attempt to give a new description of these mechanisms. We consider
markets as collective organized devices which make it possible to reach
compromises, not only on the nature of the goods to produce and distribute, but also
on the value to be given to them1. In other words, we see markets as social
mechanisms which, based on a multiplicity of antagonistic conceptions of welfare
and goods or, in other words, contradictory and competing values and worth,
produce acceptable compromises. In particular, one of the most significant
achievements of economic markets is that they pragmatically are able to calculate, on
scale one, shared values for tradable goods, when situations are fuzzy and uncertain
(C. Smith).
Many authors have underscored this conception of the market. We know that
Babbage was inspired by it when he devised his calculating machine (ref. CampbellKelly and Aspray on Babbage’s observation of the Banker’s Clearinghouse in
London). More recently Leontieff said: "The economic system can be viewed as a
gigantic computing machine which tirelessly grinds out the solution of an unending
stream of quantitative problems" (in: Essay in Economics). David Stark, drawing on
Boltanski and Thévenot's work, adopted the same point of view in proposing the
notion of heterarchy to define the organization of markets and to highlight their role
in the definition of values given to goods2. What is important, in this conception, is
the fact that collective machinery affords practical solutions to theoretically insoluble
problems, by making commensurable that which was not. The aim of this paper is to
advance the understanding of the functioning or, rather, of the different modalities of
functioning, of this computandi instrumentum.
At this point, we might feel compelled to provide a minimal definition of
calculation. By putting calculation at the heart of our approach, we should indeed be
Centre de Sociologie de l’Innovation. Ecole des mines de Paris. callon@csi.ensmp.fr ;
muniesa@csi.ensmp.fr
*
“Entrepreneurship is the ability to keep multiple orders of worth in play and to exploit the resulting
ambiguity … As an ability to exploit ambiguity, entrepreneurship is not the property of an individual
… instead it has an organizational basis. That is organizational forms will differ in their capacity to
sustain an ongoing rivalry among coexisting principles of evaluation. We use the term "heterarchy" to
refer to the organizational form with this reflexive capacity … Restated, heterarchy is characterized by
distributed intelligence and the organization of diversity” (ref: Stark).
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careful to avoid to dangers. The first is to simply get back to an abstract and formal
view of economic markets governed by impersonal laws (as the law of the demand)
and constituted of disembodies economic agents reduced to their preferences and
their (more or less extended) cognitive competencies. The second danger, more
subtle and commonplace in sociology, would be to simply get rid of this
cumbersome notion and to dissolve the problem of calculation into the
anthropological, fine-grained account of a concrete market composition. For many
anthropologists what was meant to be a calculative behavior turns to be a matter of
mere judgment, mere choice, mere guess, or, when it can be observed, as something
imported from elsewhere (institutions, culture, like in DiMaggio economic
sociology). We learn from the ethnographic fieldwork that, either in the supermarket
or in the trading room, people hardly ever calculate, they rarely perform any proper
arithmetic combination: they interpret information, they decide what to do on the
bases of heterogeneous and not always well-defined criteria (ref. Miller, Stark, KnorrCetina). In the end (and we are afraid that this is the normal consequence of taking
calculation in its hard, arithmetic sense) nobody calculates.
A quick glance at some etymology could allow us to temper this notion of
calculation in order to reintroduce it in a realistic account of concrete market
practices (and to usefully blur the boundary between mere judgment and mere
calculation). In his analysis of the vocabulary for counting and estimating in Latin
sources (ref. Vocabulaire indo-européen), Benveniste points out that there is an
intimate link between computing and judging or estimating, in one hand, and that, in
the other hand, computing refers to literal detachment (cutting) and re-attachment
(leading to a result)3. Borrowing from him, we propose to give a very general (and
provisional!) definition describing calculation as a three step process:
• The entities taken into consideration are sorted out: they are detached and
display in a single space (and here we have to make the effort of imagining all the
possible forms of this single space: from a sheet of paper to a caddy at the
supermarket, from a simple slate to the input band of a Turing machine).
• Relations are drawn between them: more precisely, they are subjected to
manipulation and transformation (movements to the left or to the right, from one
place to another, scroll up and down, for real or just virtually, simulation at large).
• A result is extracted: a new entity is produced (a ranking, a sum) that
corresponds precisely to the relations (the manipulations) performed; this new entity
creates a series of links, of attachments, between the entities originally taken into
consideration.
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First, in the two main words involved in this vocabulary, the roots duco and puto (and the verbs
ducere and putare), there is a strong amalgamation of both the technical meaning related to
calculation and a more abstract use as authoritative judgment, consideration or estimation. Rationem
ducere means "to lead (to conduct) a count to its total (summa)." This meaning is transposed to a more
general sense that we can translate as to judge or to believe: "to reach a conclusion after verifying all
the elements of the problem, like when verifying a count, after successive elimination of all articles."
Second, putare (and this is the etymological root for computing) was an original rural term for cutting
or pruning plants (like vine), specially getting rid of the useless branches. The metaphorical use for
counting (rationem putare) can be interpreted on the basis of the same literal sense: "to detach
successively from the list (the count) the articles that have been verified" or "to verify all the articles,
one by one, in order to reach an acceptable result".
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Our argument will then proceed as follows. First we examine the question of
the calculability of goods: in order to be calculated, goods must be calculable. In the
second section we introduce the notion of calculative agencies to understand how
these calculable goods are actually calculated. Thirdly we consider the rules and
material devices that organize the encounter between individual supplies and
demands, i. e. the specific organizations that allow for a calculated exchange and a
market output. Those three elements define concrete markets as collective organized
devices that calculate compromises on the values of goods. We shall meet different
versions of our minimal definition of calculation in each of these three elements. In
the fourth section we turn to the question of the design of this collective machine,
insisting upon the role of modelling, simulation and R&D: the conception of
economic markets is becoming an activity in its own right; consequently markets
become explicitly perceived as the result of social engineering and could be at the
heart of public debates that are no longer limited to the community of experts.
The calculability of goods
Conceiving of the (concrete) market as a device for calculating the value of
goods means focusing the analysis on those goods and taking the singular market
transaction itself as the starting point.4
In a market transaction a good changes hands. This good is given a price that
constitutes its monetary value. The buyer, in exchange for the price she pays the
seller, acquires a recognized and guaranteed right to use the good in a certain way
for a specified period of time. Once the transaction has been concluded, the buyer
and seller leave each other. That is why we normally refer to a process of alienation:
the two agents engaged in the transaction become strangers again once it has been
concluded (ref: Slater +Miller).
At this stage several comments are called for. First, the good involved in the
market transaction is not necessarily a physically delimited, tangible good such as a
car or a fish. A good is a thing in the sense in which Durkheim says we must consider
social facts as things, or in the sense in which Desrosières talks of statistics as things,
or in which Thévenot speaks of the “investment in forms”. That is why a service
(which has no physical reality) can be the object of a market transaction if it has first
been transformed into a thing. This is what the most recent work on the service
economy (Gadrey) shows us. The fact, for example, of having a car for certain use,
under certain conditions and for a certain time (which in this case defines property
rights, in the Anglo-American sense of the term), constitutes a good in the same way
as the acquisition of a car whose buyer is the sole owner for an indefinite period5.
These two things – the purchased car and the rented car – are equally stabilized,
delimited and definable. They hold together (stand for themselves?), have
boundaries delimiting them. In short, and this point is well established now, they
have objective properties which allow the application of property rights and thus make them
This is the consequence of choosing to consider the market as a set of interconnected transactions
and not as an abstract market.
5 The conditions of use of a car that I own are framed (by traffic rules, the availability of infrastructure,
the existence of after-sales service, guarantees, etc.) as much as are those attached to a rented car.
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fit for a transfer of property6. Likewise, there is no difference of materiality between a
fish sold on the Marseille fish market (see below) and a one-week holiday in the
mountains bought by a Briton dreaming of sun and snow. Both cases concern things
that "hold together" and can be appropriated because they have objectified
properties. Materiality and physicality are not confused. This point was made by the
anthropology of science a few years ago already when it analysed the conditions of
individualization and circulation of scientific statements. A thing is a black box
composed of a large number of heterogeneous elements which have been folded,
arranged and connected lastingly to one another and which consequently objectify
the thing that they constitute7.
This thing that holds together, because it is held by the (human and nonhuman) elements comprising it, is a good if and only if its properties represent a
value for the buyer that she can evaluate in relation to her own criteria. This
valuation is expressed in a price or range of prices that the buyer is prepared to pay
to appropriate the thing, that is, to become attached to it, to incorporate it into her
world. Once she has acquired this good, whose properties she has evaluated before
entering into the market transaction, the buyer becomes the owner of the good. The
transformation is in fact twofold: not only is the good possessed by the owner, it also
becomes her own good. As M. Strathern so rightly points out: by saying that when A
is the owner of vehicle V, we are referring to a market transaction, while by saying
that V is the good belonging to A, we emphasize the fact that it has been
incorporated into the world of A, of which it has become an integral part.
How can we describe the transformation of a thing which turns into a good
that an economic agent values? How can we explain the integration into the buyer's
world of a thing designed and produced outside of it? One way of addressing this
difficult question, without being tempted by traditional analyses that resort to
notions such as utilities and preferences (Cochoy, 2002), is to start with the
illuminating notion of individualization (or singularization) of products proposed by
Chamberlin. For Chamberlin, the product is an economic variable in itself, one that is
strategic because, owing to its variability, it allows a singular adjustment between
what the consumer (or a specific category of consumers) want(s), and what the
This profound similarity between the object thing and the service thing is more difficult to perceive
in Roman law than in Anglo-Saxon law. In property law, based on Roman law, things are considered
as (or supposed to be) divisible between persons ("each entity is split among the persons who have a
claim to it, and has as many parts as there are persons who have rights, like a sum of money divided
between several claimants" (Ref: Marilyn Strathern). For property rights based on the common law
notion of "bundles of rights", things are intrinsically compound. The common law notion of a bundle
of rights naturally leads to the conception of abstract rights (a good example of which is copyright). To
clearly illustrate the difference between the two types of right, Marilyn Strathern takes the example of
money. In Roman law the distribution of property rights over a given sum of money is translated into
a physical division of that sum of money. In the common law notion of property rights, it is as if that
sum of money could abstractly be divided into a part used for purchases of food, another for
purchases of accommodation, another for leisure, etc. From an anthropological point of view these
two perspectives are complementary: in one case persons are defined by ownership of things (which
proliferate by division), while in the second case the proliferation of ownership which defines the
objectivity of things allows the proliferation of persons. The notion of property is at the heart of this
reversal.
7 A thing is a network in a black box, which is ponctualized.
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supplier offers. This individualization process consists in the shaping of a product
whose properties are progressively defined in such a way that it can enter the
consumer's world, mix with it and become attached to it. We previously suggested
calling this progressive adjustment a product qualification process. The market
transaction concludes this successful adjustment. Throughout the process, the thing,
which is a product undergoing qualification, is transformed into a good with
adjusted properties and successful individualization. The transfer can then take
place. The good leaves the world of supply, breaks away from it (which is possible
since it is an objectified thing, that holds together), and slots into another world, that
of the buyer, which has been configured to receive it. It becomes entangled in the
networks of socio-technical relations constituting the buyer's world.
This work of adjustment is the substance of any market transaction; only the
terms of its implementation vary. But the essential point made by Chamberlin is that,
in all cases, there can be no transaction without the individualization of the product,
that is, without the qualification and adjustment implied by such individualization.
This position leads him to the extreme argument that advertising, the seller's location
and the salesperson's smile are not simply cosmetic contrivances used superficially
and artificially at a late stage to personalize an otherwise impersonal good. The
famous black T Ford, for which the customer can choose the colour as long as it is
black, is no exception to the rule. In general a black Ford does not exist, there are only
model T Fords, which may be black but which are individualized as soon as a buyers
decide to turn them into constituent and often central elements of their own worlds8.
The question that then arises concerns the obviously multiple and varied
conditions and modalities of this process of individualization and singularization of
products through which they are transformed into goods adjusted to the buyer's
world. To understand this diversity one has to bear in mind the twofold constraint
weighing on a product if it is to become a good: that of objectification (it has to be a
thing) and that of singularization (it has to be a thing whose properties have been
adjusted to the buyer's world, if necessary by transforming that world to produce the
adjustment and attachment it triggers). Objectification and singularization are
produced simultaneously; objectified properties are those that allow the
individualization of the good.
A description of the variety of the modalities of objectificationindividualization of goods does not fall within the scope of this article. Many studies
on the subject are now available. We simply want to make a few points which help to
clarify the conditions of the calculability of goods.
First, the properties which define the good as an individual good and
constitute its profile or identity are neither intrinsic nor extrinsic. Two symmetrical
mistakes have to be avoided. The first would be to say that its properties are
constitutive elements of the good. The second would be to say the opposite, that is,
that the good is simply a blank screen on which social representations are projected,
This point of view is now easy to agree with. The omnipresence of innovation and the increasing role
of services have familiarized us with the idea of a singularization and individualization of products.
But when Chamberlin was writing, deep in the era of Fordism, it took a lot of courage and
imagination to put forward such claims. Chamberlin himself, in his discussion of the essential
difference between monopolistic competition and imperfect competition, highlighted the fact that
readers did not understand the argument (Chapter 4).
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since its properties, reduced to mere meanings, are given to it by consumers or
society. In the first case the good is considered to be objectively describable, for
example in an unquestionable list of characteristics. In the second, all possibility of
objectification of the good is denied, and the multiplicity of points of view and
representations is emphasized. On the one hand Lancaster; on the other, Baudrillard .
As soon as one agrees that there can be no market transaction without a process of
objectification and singularization, the opposition dissolves. The purchase is not the
result of a subject-object encounter, external to both, but of a process of attachment
which, from qualification to re-qualification of the product, leads to the
individualization of its properties. This does not mean that all re-qualifications are
possible or that all strategies of attachment are equally probable. Properties are coproduced, which does not prevent them from being either real or singular.
Second, this co-production of objectified and singular properties, which allows
the appropriation of a good and its entry into the buyer's world, necessitates a
sequence of work starting with the product design. This work involves also a large
number of intermediaries who can be called professionals of qualification (including
in the downstream part of the process, the packagers, merchandizers, marketers,
advertisers, but also those who arrange goods on shelves, decide the localization of
agencies, and so on: ref: Cochoy) and whose role is starting to be studied in earnest.
Brand names, like personal relations with salespersons, are clearly part of this
process of qualification and singularization.
Third, the adjustment process increasingly involves a systematic and
sometimes lengthy exploration of the network of entanglement constituting the
(potential) buyer's world, especially in the service sector. One of the skills of
designers, sellers and their colleagues is to be able to investigate, with the buyer, her
attachments in order to be able to propose new ones and to deduce the most
appropriate profile. This work is never more clearly visible than in market
transactions on the Internet.9 Yet, as Miller shows, in a traditional market like the car
market (i.e. sales and not rental), this exploratory work that allows the definition,
objectification and individualization of the good to which the customer decides to
become attached, also plays a large part. There is therefore no irreducible opposition
between entanglement and market transaction (Miller does not see it, but Slater,
commenting on Miller, rightly points it out). The paradox is that, to achieve the
alienation of the good through which the buyers and the sellers will become
strangers, increasingly heavy investments in the investigation of entanglements and
in their reconfiguration are necessary. In short, to expand the market it is necessary
to produce more and more entanglements. The proliferation of merchandize goes
hand in hand with the proliferation of non-market attachments (ref Licoppe)10.
FIGURE 1 ABOUT HERE
Amazon is a good example of these strategies. To every buyer is associated the list of her previous
purchases. Amazon, on the basis of this record, is able to make individualized suggestions about what
could (or should!) be the next purchases.
10 The seller might be described as Serres parasites. He investigates and calculates relations without
being caught up in the world he is trying to explore and to reconfigurate. Ref: Tiago. Morena.
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We have said enough to introduce the notion of calculability of goods. By
being endowed with properties, which both objectify and individualize it, a good
becomes calculable by the consumer who has been enrolled in this process of
objectification-individualization. By qualifying a good, that is, objectifying
properties, which by individualizing it produce its adjustment to a singular
consumer, its evaluation by its future buyer is made possible. In other words, for the
buyer, evaluating a good is evaluating her attachment to it.
In the evaluation of the good, and consequently in the fixing of its monetary
value, we see the key role played by qualification, that is, by the objectification of
singular properties that individualize the product. No calculation of the value of a
good is possible if it has not been individualized, for the value of a good is nothing
but the value of the buyer's attachment to that good, an attachment that implies the
incorporation of the good into the buyer's world. The buyer can embark on that
evaluation only if the good has been endowed with properties which make
distinctions enabling her both to define the good and to compare it to other goods
(see Cochoy and Buridan). In the vocabulary of professionals of qualification, this
work has a name: positioning. As marketing manuals say, positioning defines
consumer-targets (singularization) while defining the field of competition.
Individualizing a good means endowing it with properties that distinguish it from
other goods which then become comparable11. Economic life is a long series of such
re-positionings or, in our vocabulary, re-qualifications12. Comparability might be
achieved by a large variety of means, like the establishment of metrological networks
to objectify and measure certain properties, the creation of quality labels and, more
generally, the enforcement of quality standards (FED, Thévenot).
Being individualized the good counts for the buyer who can consequently
make calculation on it. Being comparable to other, at least substitutable, goods, it
provides the buyer with the possibility to measure just how much she is attached to
that particular good rather than to any other)13. The value of the good is calculable
because its properties make it calculable
A good is therefore not calculable "in itself" (as assumed by so-called
hedonistic methods, for example), which does not mean that it has no importance in
the calculation of its value by and for the consumer (as in the reduction of goods to
their symbolic dimension). It is made calculable through a process of qualification
which necessarily involves individualization, that is, some form of participation by
the buyer (or one of her representatives), and in the same time some sort of
similarities between differentiated goods. 14
This is the first step of what we defined as the calculating process (another way of phrasing that is to
say that calculating means calculating positions: cf. The Laws of the Markets).
12 Slater notes, for example, how low-calorie bread, through a series of requalifications (packaging,
distribution network, advertising, etc.) was repositioned to spread from the narrow market of women
wanting to diet, to the broader health product market. This repositioning produced a new good with
new properties, combined with older properties that were maintained but whose significance was
thus modified.
13 This situation is clearly described by economic theory in the concepts of cross elasticity or, more
generally, opportunity costs.
14 On the centrality of operations of classification, Bowker + Star, Sorting things out.. Conventions of
quality as analyzed by Eymard-Duvernay and Thévenot play a crucial role in creating diverse
possibilities of equivalencies and similarities between different individualized goods. Ref Descola.
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As suggested above, this process constitutes any market transaction. We can
nevertheless maintain that as such it assumes an increasingly central role.
Investments made in order to achieve such individualization are continuously
growing. One reasons is probably increasing competition which naturally makes
attachments more and more difficult since they are constantly threatened by the
strategies of detachment devised and deployed by competitors (ref: Callon et alii,
The economy of qualities). Another reason is the spread of NICT which facilitate this
singularization and the adjustments it involves. The service sector clearly illustrates
this evolution, but it is probably in financial markets and, more particularly,
derivatives markets, that the trend is most clearly visible. There, the product,
elaborated by a bank for an industrial client who wants to be protected against
financial risks, is often reduced to a mathematical formula, usually very complicated,
which can be used at any point in time to calculate the financial yield of this product
in relation to variations in the values of other financial entities. The product, a
mathematical formula, is both objectified and singularized: objectified because the
properties which qualify it by defining it have progressively been stabilized and set;
and singularized because these properties have been determined in such a way as to
adjust it as well as possible to suit the client's needs. This mathematical formula
generates a number that can be compared to other numbers. It is singular and
comparable, and consequently calculable, but in a way that is immediate (Lépinay).
More generally, but probably to a less extreme degree, goods whose qualification
leads to quantified properties – as in the case of industrial convention of quality
(B&T) – are profiled to allow numeric calculation. In all instances, calculability
involves the dual process of objectification of properties which, by being
individualized, allow the attachment of goods and at the same time the evaluation of
that attachment whose monetary equivalent provides a numeric and relative
measurement.
Calculative agencies
Calculable goods make calculation possible. But for calculation to take place,
there have to be calcutating agents15.
Rather than talking of calculating agents, I prefer the idea of calculative
agencies (Ref Callon: Laws of the m). First, this notion highlights the idea that they
are not individuals, people, but most often hybrid collectives, what B. Latour has
called centers of calculation. Second, it emphasizes the fact, related to the first, that
To calculate does not mean necessarily doing mathematical or even numerical calculations.
Calculation starts by establishing distinctions between things, states of the world, by ranking them
and by imagining and evaluating courses of actions associated to those things or states as well as their
consequences. By giving such an extended, but usual, meaning to the notion of calculation we try to
avoid the conventional but too sharp distinction between judgement and calculation. Judgement, as
far as market transactions are concerned, is better to be considered as a rudimentary form of
calculation based, like in the Pierre Bourdieu sociology of consumption, on a very simple operation of
social distinction. In order to avoid such an opposition that leads to the classical divide between what
is categorized as social and what is categorized as economic, we prefer to consider a whole spectrum
of types of calculation from the most simple and elementary ones to the more sophisticated and
complicated ones.
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these agencies are equipped with instruments: the calculation does not take place
only in human minds; it is distributed amongst humans and non-humans (see Mac
Kenzie).
The notion of distribution is of course crucial. It is not enough to say that
human flesh-and-blood agents, faced with difficult calculations, use tools, without
which they would never be able to manage. The famous thesis of M. Weber on the
role of double entry bookkeeping (DEBK) in the rise of capitalism is a good
illustration of this possible misinterpretation. Yamey, criticizing Weber's thesis, or
rather its reformulation by Sombart, affirmed, for example, that without
entrepreneuship a simple bookkeeping tool could not have led to the rise of
capitalism. It is not double entry bookkeeping that calculates, he says, but the human
agent, in this case the entrepreneur who decided to use it (ref). In front of another
audience I should have spent a good deal of time disproving this very commonly
held thesis, especially in economics. For Chandler and then Williamson, but also for
Simon, it is because they are faced with complicated accounting tasks that agents, to
relieve their brains and enhance their performance, devise efficient tools and create
rules and routines or set up organizational devices to calculate for them. The notion
of a distributed calculative agency is more demanding and makes it possible to avoid
this objection. The entrepreneur, who is supposed to calculate the return on
investment, does not use the DEBK to effect a more precise, rapid and exact
calculation, the idea of which existed before the tool itself. It is the couple constituted
of the entrepreneur + the double entry bookkeeping that conceives of this calculation
and performs it. We could go so far as to say that DEBK, simply by being there,
available, proposes this calculation to the entrepreneur who accepts the invitation
and in return asks DBEK to do the calculation16. That is why, in order to be clearly
understood by economists and management scientists, Miller is probably right to use
the notion of calculative practices (see also Vollmer) to avoid turning once again to
an instrumental view of calculative tools. But, because the notion of practice is too
general and too restrictive (it is for example contradictory with the very idea of
agency), we prefer that of calculative agency which enables one to maintain the
possibility, under certain circumstances, of strategic action while authorizing a great
diversity of forms of agencies.
The market transaction, in which the good switches hands from the seller to
the buyer, takes place between two calculative agencies, each calculating the good in
its own way. These calculations (sometimes) result in an agreement on the price
(which may be set beforehand or negotiated during the transaction). The question is
now: how can calculative agencies be characterized? To answer this question we can
rely upon a set of studies which are not only very rich but also cover a very complete
range of calculative practices developed in economic activities, on both the supply
and the demand side (Stark, Miller, Vollmer, Powell, Akrich and Law, Berry, Lave,
Conein, Cochoy, Preda). These studies show in particular the existence of a series of
asymmetries which could be summarized as follows.
• There is strong asymmetry between calculative agencies. Put simply,
agencies' calculative powers and the complexity of the operations they can perform
See the notion of affordance interestingly translated into French by promission (promise +
permission).
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are very unequally distributed. For example, the face-to-face between supply and
demand in a supermarket involves (at least) two calculative agencies, although one
of them (that of the supply) is infinitely better equipped than the other. To be sure,
the consumer is never alone, isolated. He is also distributed and relies in particular
on references, marks, and all sort of preformatted and precalculated information
provided by the supermarket and its arrangement. Packaging, the organization of
shelves, relations of proximity between products, brand names, labels, and testing by
tasting17, all constitute a system of distributed cognition which participates actively
in the qualification process. The consumer can also perform tests at home, with
friends and family, and discuss the results. He reads magazines and books that guide
his choices. He is engaged in relations of prescription that multiply by division his
reflection and action. His companion, who has discussed the matter with colleagues
at work, draws up a list, a veritable cognitive prosthesis, of products to buy.
Consumer unions organize comparative tests that conclude with multicriteria
evaluations (Di Maggio, Conein, Cochoy, Méadel, Akrich & Rabeharisoa, Dubuisson,
Mallart).
But no matter how strong it is, the calculative agency that evaluates the
attachment of goods to the consumer's world remains weak compared to the
calculative power of the supply which is usually heavily equipped at least in the case
of a supermarket. From design right down to the positioning of products on shelves,
a series of professionals is involved, all working in a coordinated way, exploring the
distributed consumer's world to better integrate the product into it by playing
skillfully on product qualification. The supermarket material device, which, as we
have just pointed out, is mobilized by consumers in the calculation of goods, is itself
largely the result of a calculation performed by the supply. By inspecting the shelves,
reading labels and reading guides or instruction manuals, the consumer continues a
calculation planned by professionals of qualification. There are even life-size
supermarkets set up to investigate and observe consumer behaviours. Thus, we
clearly have two calculative agencies that meet, and one of the two is better equipped
than the other.
From this gap we should not conclude that asymmetries always develop in the
same direction or that they are set for once and for all. In some cases the buyer has
calculative power superior to that of the seller (as in certain sub-contracting markets).
In other cases one of the agencies, initially in an inferior position, gradually acquires
tools allowing it to change the balance of power and to become more active in the
process of qualification and individualization: the struggle for more autonomy or
more recognition might explain why some agencies make efforts to enhance their
calculative equipment. The increasing role of consumer organization or the
obligation for enterprises to take environmental criteria into consideration in their
own calculations are two examples of such a reversal.
In other words, and this point is now well documented, the difference
between the calculative capacity of a child hesitating between two packets of sweets
or between two pokemon, and that of the manager of a supermarket does not stem
Involvement of consumers in testing activities become more and more frequents. Recently a French
bank has proposed to its potential clients to test its services during a six-month period without any
engagement.
17
11
(only) from their own calculative competencies. They are essentially the consequence
of the asymmetry of equipment. For example, as J. Lave clearly showed, the fact that
a consumer does not use arithmetic when he shops does not mean that he does not
calculate. He does calculate, but uses other instruments and procedures 18The
difference is that facing him is a multitude of professionals armed with computers,
comparing code bars, adding up prices to the last cent, monitoring variations in
stock, measuring returns on investment, evaluating the impact of an advertising
campaign, establishing econometric models intended to give a stylized
representation of worlds of consumption, etc.19
• The second asymmetry concerns the type of calculation. The customer
calculates an attachment; the seller performs a series of calculations in order to
evaluate stocks, for example, or to measure profits or markets shares. It is clearly in
this respect that we can say that values are radically different. A particular consumer
may be attached to a good which he finds aesthetically attractive, and agree to pay a
price for that attachment, while the seller will simply record a rate of return on the
investment. But this asymmetry (what elements are entered into the calculation?) is
not always definitive. For some market transactions the buyer may acquire specific
tools, sometimes even provided by the seller, as it might be the case in the property
market with the calculated negotiation of the granting of loans, for example. In this
case the buyer does not only evaluate his attachment to a good that has been
adjusted to his world; he becomes in addition a calculative agent capable of
budgeting her own expenses and income. (cf. Bourdieu). On the other hand a seller,
first configured as a classical capitalist calculative agency, can suddenly drop his
usual calculating tools and re-evaluate the good he was about to sell by measuring
his own attachment to it.
• The third asymmetry is more difficult to define but nevertheless very
important. It describes a given calculative agency's ability to integrate the results of
other calculative agencies and to capitalize on them. That is the case for example of a
firm that decides to create decentralized profit centers or business units, and
delegates calculations to this large number of distributed calculative agencies. It then
simply collects and summarize the numbers produced by those agencies (see Miller).
On the supply side, the extent of this double movement of proliferation and
integration of diversified calculative agencies, taking part in the process of good
qualification, is obviously variable. But it is generally more developed than on the
demand side. The consumer usually does not have this capacity to mobilize (and
control) a large number of autonomous calculative agencies. Imagine what the
market transaction would be if the client in a supermarket, standing in front of a
shelf, had direct access to the calculative capacities of a consumer union or to the
results of laboratory tests performed at his request.
This asymmetry can act inversely, depending on the nature of the market
transaction. It can also change. Aren’t you amazed by the number of buyers in
cf. Cochoy and the notion of "qualcul" ("qualculation") to denote this form of calculation that is not
necessarily based on arithmetic.
19 The current situation in Europe is very interesting from this point of view. We witness sellers and
consumers armed with calculators converting local currencies into Euros – calculators distributed
freely, which redistribute the use of digital calculation.
18
12
supermarkets who use their mobile phones to consult, in real time, distant
interlocutors whose opinion they are obviously requesting. The Internet and ecommerce give the buyer some ability to mobilize diverse calculative agencies
accessible on line, especially in the exemplary case of financial markets.20
The qualification of products, that is, the objectification-singularization of their
properties, affords the conditions for calculation. This calculation is performed by
calculative agencies who are all differently equipped and organized.
Convergence on an agreement is the result of possible stabilization of the good
whose calculable and calculated properties result in a single evaluation depending,
in particular, on the calculative tools and devices used. But this agreement also
depends on the mechanisms and modalities through which the different calculative
agencies connect and encounter one another. It is this calculated encounter that
constitutes the third point of entry into an analysis of the market as a calculative
device.
Calculated exchanges
Calculable products which are calculated by calculative agencies involved in a
transaction: the description of the market as a calculative device is starting to become
clearer. To complete it, we still have to consider the mechanisms through which
supply and demand meet each other. These encounters, also calculated (see later),
help to make the market a calculative device capable of making (incommensurable)
values commensurable.
The very notion of a market is highly problematical, for it often implies the
existence of an abstract space in which aggregated demands and supplies encounter
and cross one another, and through successive adjustments end up defining what is
commonly called the market price. In this conception, the abstract market is a
structure that frames and formats every individual commercial transaction. It is
totally in line with the famous definition proposed by Cournot:
"Economists understand by the term market not any particular marketplace in
which things are bought and sold, but the whole region in which buyers and sellers
are in such free intercourse with one another that the prices of the same goods tend
to equality easily and quickly". (ref)
If, as many authors have noted, concrete markets are under-analysed, it is
probably due to the key position that this abstract conception of the market has long
occupied in economic theory. This conception has not only helped to make concrete
markets invisible, it has also led to insurmountable logical and theoretical difficulties.
The issue over which market theory has stumbled is obviously mechanisms of
aggregation of individual and separate supplies and demands. The case of Walrasian
equilibrium is a perfect example. The problem is not only that an exceptional set of
conditions have to be met in order to produce a Walrasian-like type of environment
(see Guerrien). Also, in referring to the famous tâtonnement process according to
For a good illustration of this point see the study by Lépinay and Rousseau on amateur online
traders.
20
13
which actors discover an equilibrium price, Léon Walras himself will not provide a
proper description of the mode of functioning of this mechanism.21
When we talk about abstract conceptions of the market, we mean precisely
this: attempts to find a coherent explanatory principle that are based on a shortcut,
an ellipsis. All situations in where the market is invoked as a single, abstract
principle misses, at some point or at another, the explanatory key that will describe
the aggregative effect. Of course, concrete markets can be devised so to meet some of
the characteristics of abstract markets: we think about anonymity procedures,
clearinghouse procedures, or auction protocols. Garcia (ref.) has provided us with a
very interesting example about the construction, under the direct influence of
neoclassical theory, of a blind auction protocol for strawberry trading in a French
rural market. In financial markets, automated quotation can offer us other interesting
examples in this vein (ref. Muniesa). But, besides the fact that such examples are still
quite rare, those markets will not be abstract markets in the sense of markets in
where the aggregative phenomena is to be “abstracted”.22
Our approach enables us to avoid this dead end. We have chosen as a starting
point the market transaction itself, not the macrostructure of a hypothetical abstract
market, but what could be called its microstructure (a concept borrowed from
financial market specialists).23 With this focus on singular market transactions we do
not put aside the phenomena of aggregation and production of possible macroregularities; on the contrary, it facilitates their understanding and analysis, for two
reasons at least.
First because (see above) the process of qualification of products that
transforms them into calculable goods leads to the temporary establishment of
differences and similarities. These, by making them substitutable, to varying degrees,
for other (objectified and singularized) goods, produce a series of connections and
interdependencies between market transactions. The calculation of an individualized
good involves necessarily other goods for which it can be substituted. As Chamberlin
says: "the whole is a […] network of markets linked together on the basis of one
market per seller".24 Competition between calculative agencies, which is a matter of
consumers' attachment and detachment, is inscribed into the calculation of products
during their process of individualization-differentiation.25
See Teira Serrano for an exploration of this fundamental elusiveness. Walras used the example of
Paris Stock Exchange as an intuitive illustration of his tâtonnement process (Ingrao and Israel). But the
mechanism that allow actors to find (to calculate) the accurate price, dynamically and without trading
at “false prices”, is missing from his theoretical construction.
22 Those markets can be referred to as abstract markets if we understand this expression not in the
sense of “abstracted” but in the sense of “mediated”. Simmel has developed a theory of monetary
abstraction that fits these second use of the notion (ref. Philosophy of money).
23 The term is widely used in regards to financial markets (ref. R. A. Schwartz, M. O’Hara, A.
Madhavan, R. Lee). The role played by technological frames has recently been emphasized through
the term market technostructure (see R. A. Schwartz). Microstructure is a convenient notion to
designate a set of limited transactions and agents within a particular exchange architecture. It must
not be understood as the opposite of macrostructures.
24 H. White used this statement when considering that a firm's consumers were the mirror in which it
could observe the behavior of rival firms.
25 Here again we must underline the role played by standards, legal classifications, etc., in the
construction of spaces of similarities.
21
14
This organization of competition – and it is on this point that we want to
concentrate now – also implies a set of rules and devices whose existence, hidden by
the concept of the anonymous abstract market, has progressively been discovered
and recognized. This discovery is primarily owing to the practical problems raised
by the organization of financial markets and electronic markets, but also to the
upsurge of the experimental economics (P. Mirowski). The expression of singular
supplies and demands, as well as their encounters – in other words the establishment
of a set of connected market transactions –, cannot be reduced to the unproblematical
intersection of two aggregated curves. These intersections, or encounters, which
concern a large number of separate calculative agencies, must themselves be
organized. It is the modalities of this organization, generally not well known, on
which we would now like to focus.
The idea that the organization of the linking up of supply and demand is an
issue in its own right is not, as such, anything new. The classical distinction between
auction markets, markets in which prices are the result of pairwise negotiations, and
markets in which prices are posted, shows the diversity of forms of organization.
This diversity is even greater if we take into consideration the existence of different
types of auction and the possibility of hybrid forms (see Klemperer for an overview
of auction theory).
This diversity obviously raises several questions. Two are relevant here. The
first relates to the description and characterization of this diversity; the second to
relations between the forms of organization of market transactions and the
characteristics of the aggregated market (can one, for example, link certain rules to
certain performance criteria such as efficiency, liquidity, transparency, fluidity, etc.).
The following two examples, presented in a stylized form, will enable us to clarify
these questions a little and to suggest possible answers.
First, using an example borrowed from Kirman – that of the Marseille fish
market – we show: a) that these microstructures exist (and are complex) and b) that
they can produce global and unpredictable regularities. In the case of the Marseille
fish market, the aggregated market is competitive whereas the behaviours of
individual agents are non-competitive. In short, there is something that can be
described as an aggregated market, but its structure, if we stick to this word, is the
outcome of the organized composition of a great number of singular market
transactions; it is not the frame that defines the rules and format of these
transactions. We then provide a few examples of the problem posed by the
organization of the calculated encounter between supply and demand, based on
studies of financial markets and their microstructures, and particularly the
interpretation proposed by F. Muniesa.
• As Kirman notes, fish markets are a very old institution that can be found as
far back as ancient Rome. They are also a traditional subject of study in economics:
"Firstly fish is a perishable good and the fact that stocks cannot be carried over makes
the formal analysis of the market simpler. Secondly the organisation of such markets
varies from location to location with little obvious reasons. In Iceland for example
there are 32 auctions, 18 of these are English, i.e. rising price and 14 are Dutch, i.e.
descending price. At Lorient in France fish is sold through a combination of pairwise
trading and auction, whilst at Sete it is sold by Dutch auction. The fish market in
15
Sidney is conducted as two simultaneous Dutch auctions" (ref Kirman, p. 4). He
adds: "The comparison of different outcomes under different forms of organisation is
an obvious research topic but one which has not received much attention to date".
(ref ibid, 4).The Marseille fish market is very interesting for several reasons :
- First because very detailed data on transactions exist. The data set
consists of the details of every individual transaction made over a period of three
years. The data is systematically collected and recorded by the Marseille Chamber of
Commerce which manages the market. The following information is provided for
each transaction: the name of the buyer; the name of the seller; the type of fish; the
weight of the batch; the price per kilo at which it was sold; the order of the
transaction in the daily sales of the seller. The data run from 1 January 1988 to 30
June 1991. The total number of transactions for which we have data is 237,162.
- Next, because its organization is original. On the wholesale fish
market for Marseille, situated on the coast at Saumaty on the northern outskirts of
the city, and open every day of the year from 2 a.m. to 6 a.m.26, over 500 buyers27 and
45 sellers come together, although they are not all present every day. Over 130 types
of fish are traded. Prices are not posted and total stocks are not common knowledge
at the beginning of the day. All transactions are pairwise. There is little negotiation
and prices can reasonably be regarded as take it or leave it prices given by the seller.
The analysis of these data shows that a high proportion of buyers is loyal to
their sellers. Moreover, in the same day a seller agrees to different prices for different
customers, that sometimes vary widely: "successive prices charged for the same type
of fish to different buyers may differ as much as 30%". This distribution is stable from
one day to the next and, contrary to what may be expected, during the same day we
witness no drop in price. Paradoxically, it seems, it is the most loyal customers who
are systematically charged the highest prices.
- Finally, because the gap between the real market and the abstract market is
maximal. On the fish market, individual behaviors obviously do not correspond to
what one expects in a competitive market. Yet the economist's calculation of the
aggregated market shows that it follows perfectly the law of demand: when the
demand increases prices increase and vice-versa.
This example shows two things. First, it shows the complexity of rules which
organize the expression of supply and demand and the encounter between the two,
and which specify the conditions of the calculation of goods that precedes the
transaction. We clearly see from this case that it is not enough to say that products
are calculable (and so they are for, as shown by the buyers' loyalty to their sellers, the
singularization of goods, despite their apparent standardization, is very high: we are
really in the configuration described by Chamberlin). Nor is it enough to say that
agents are equipped with calculative tools (and they clearly are because buyers are in
turn sellers who have to balance their accounts). To account for the realization of
transactions, it is necessary to add – and this is obviously Kirman's contribution –
that transactions take place in a very well defined spatial and temporal frame, that
they are pairwise, with an undisclosed and un-negotiated set price, a high degree of
variability of prices for the same seller and the same fish, strong loyalties, and so on.
26
27
The fish market is now open during the day rather than at night.
In fact some 1,400 buyers appear in the records but many of these were hardly present at all.
16
The fact that the transaction takes place at a certain price is the result of all these rules
that along with calculable products and calculative agents contribute to constitute the
fish market as a powerful calculating socio-technical device. To demonstrate the
existence and functioning of this machine, Kirman very cautiously develops a model
into which he enters certain rules governing the encounter between supply and
demand, certain calculative competencies of agents, and certain simplified forms of
qualifications of products (a sole sold by seller X is radically different to one sold by
seller Y). This model enables him to obtain some of the valuations produced by the
real market (distribution of stable prices over time; higher prices for the most loyal
buyers, etc.). This simulation shows that, to explain the prices on which transactions
are concluded, it is necessary to consider that the rules organizing encounters
between supply and demand participate directly in the calculation of values: in this
sense they are an essential component of the calculative device.
The second result highlighted by simulation (and in which Kirman was keenly
interested) is that the composition of these non-competitive micro-transactions
results in the constitution of an aggregated competitive market. This result probably
explains why, when the market was to be reorganized, neither buyers nor sellers
were in favour of the change. The market organization evidently satisfies the agents,
taken individually, since they engage in loyal behaviors over long periods; it also
shows a collective efficiency that could hardly be improved on. The important point
in this demonstration is that there is no one best way: the efficiency of the abstract
market does not imply a single form of competitive organization. Note, also, that the
aggregated abstract market is a reality calculated by the economist and not a frame
that formats transactions. Transactions are framed and formatted by a set of rules
that have nothing to do with the abstract market and serve no purpose in its
description. In fact there are more than rules, because a large number of material
devices are also required for the organization of these encounters and the
effectiveness of the rules.
Can we still talk of an aggregated market? Yes, but provided that we do not
exclude the mechanisms of aggregation and mise en relation, for they alone explain
the possible production of regularities28. The famous law of the market (when
demand increases, prices increase) is one of the possible results. And even when it is
observable, it does not act like a structural constraint. In particular, we should
beware of the dialectic temptation to consider that this regularity, once produced,
frames market transactions. What this example shows so remarkably well is that
between macro-regularities and particular transactions lie the qualification of
products, the calculating agencies, and the rules and material devices organizing the
encounter between supply and demand. Any analysis that considers the market
without describing all these elements has missed the point.
• The second example will help us to advance in our understanding of these
mechanisms. What is surprising in the case of such a classical and old market as the
fish market, is far less so in the case of more modern ones such as financial markets
(For the exemplarity of financial markets see Mac Kenzie). In fact it was for the
description and analysis of the functioning of the latter that the tremendously useful
notion of “microstructure” was developed. This concept enables us to go from the
28
Sophisticated and complicated behaviors may lead to simple aggregate properties.
17
organization of individual market transactions to possible global regularities or,
more exactly, to ask open questions about mechanisms of aggregation that until now
were a neglected or underestimated problem.29 How are supply and demand
expressed? By what procedures are they connected? What type of dynamic
equilibrium is achieved? These questions, by no means new, lead to the well-known
theoretical invention of the Walrasian auctioneer, a fictional character responsible for
the thankless task of adjusting demand and supply around a market price. This
virtual, moral and efficient being has been severely tested by NICT. It has been
necessary to explain very precisely the different operations to be performed in order
to produce the adjustment of supply and demand and pricing. 30 To denote these
rules which are now partly inscribed in computer programs, P. Mirowski has
suggested using the notion of an algorithm that clarifies the steps to follow. These
algorithms presuppose technical devices, calculative competencies, and identified
and stabilized goods. In electronic financial markets, more than in other markets,
they must be made visible and formalized.
The computerization of real financial markets shows the diversity of possible
algorithms and the socio-technical devices they mobilize. It also reveals the difficulty
of evaluating the overall effects produced by these rules. We will simply give a few
examples here to illustrate some of the multiple choices with which the designers of
algorithms are faced (ref: Muniesa). In the early automation of Paris Stock Exchange
(automated quotation was introduced in 1986), the actors at work were confronted to
a multiplicity of strategies and to wide opened controversies in where regulatory
issues, computer concerns and political decisions were consistently blurred. An
important choice, for instance, was to opt for either an order-driven market or a
quote-driven market (those options were both matters of institutional organization
and technology framework). In the former, price determination and allocation
between matching counterparts are delegated to the machine, while in the latter it is
a flesh-and-blood agent, the market maker, who publishes his own bid and ask
prices. In an electronic order-driven market, orders transmitted to an electronic order
book are conveniently queued and matched by a double-auction algorithm according
to a complex set of priority rules. For opening prices, for instance, the logic program
calculates aggregated functions of supply and demand: more precisely, it searches
the price that will maximize the overall volume exchanged and minimize the amount
of unexecuted orders. For the quote-driven alternative, it is the market makers who,
by trial and error (and in competition between them), try to link up supply and
demand. The order-driven solution was, in the end, the alternative favored at Paris
Stock Exchange. Toronto Stock Exchange’s technology CATS (Computer Assisted
Trading System) was adopted, and carefully adapted to the local environment in
order to abolish open outcry. Was this technology performing a strict order-driven
architecture, a fully blind auction protocol? In fact, and depending on an amount of
heterogeneous circumstances, we often deal with hybrid market forms, combining
order-driven, quote-driven and OTC (Over the Counter) elements. This was the case
Provided that microstructure is not used to designate a separate level of analysis.
“Walras himself could not have been so far as us in the details” (our emphasis), said one of the
leading actors of exchange automation at Paris Stock Exchange, referring to the complexity of the call
auction algorithm (Muniesa 2000, p. 151).
29
30
18
at Paris Stock Exchange with the implementation of a parallel OTC system for block
orders, or with the decision of disclosing the identity of potential counterparts in the
trading screens (allowing traders to one-to-one negotiation prior to order matching).
Other choices illustrate this possible and effective diversity of algorithms. For
example in 1994 the abolition of round lots quotation at Paris Stock Exchange, a
remnant of the open outcry system, made it possible to absorb individual
shareholding that was difficult to take into consideration when trading round lots on
the market. The determination of opening and closing prices is also a good example
of the variety of algorithmic solutions31. The switch from continuous time quotation
to a single-price call auction is a choice that has significant consequences on the
setting of closing prices32.
The list of options for order formats, order matching, price determination and
shares allocation could be extended. This list shows both the existence and the crucial
role of these algorithmic solutions. They not only frame the expression of supply and
demand but also determine the actual way in which what economists call price
discovery operates. This discovery is a complicated business because it consists in
taking into account – but how? – a large number of supplies and demands that have
to be connected – but how? – to each other. Instead of two aggregated curves
crossing each other, we have a wide variety of algorithmic configurations relying on
material, technical and organizational devices, and on embodied competencies, all of
which produce widely diverse arrangements.
Finally these experiences of automation and computerization of financial
markets show that there is no straightforward relation between the choice of an
algorithm and the resulting performances for the aggregated market.33 Once again,
the one best way is invalidated – which is hardly surprising for the sociologist – and
along with it the claim that overall performance can be deduced analytically from
options concerning the microstructures of transactions.
From the fish market and the financial markets examples at least three
tentative conclusions can be drawn:
• There exists a wide variety of rules and material devices to organize the
encounter and aggregation of multiple supplies and demands. These combinations of
rules and material devices act, as suggested by P. Mirowski, as algorithms which
determine how transaction are connected one to each other and how they can act one
upon each other. This is why it is possible to say that this encounter is calculated. The
existence of these procedures and their diversity have long been hidden or even
denied by the belief in the existence of an abstract market, a structure framing
singular market transactions. The recognition of the existence and importance of
“An opening algorithm is a communication technology for framing allowable messages between
traders, together with a set of rules or algorithms that transforms traders’ signals into a set of opening
price and quantity allocations amongst market participants” (ref: Domowitz).
32 This is one solution for avoiding manipulation of prices at closure. But this solution have to confront
other alternatives: Paris Stock Exchange was one of the first marketplaces to implement a call auction
at close, while other markets opted for taking the average price of last trades to determine closing
prices (see Muniesa 2000.
33 To take just one example among many, Ian Domowitz, a specialist in financial markets recognizes
that: "there is a tremendous variety of possible opening mechanisms. There is no single opening
method that is 'best' for all markets". (ref)
31
19
these rules and devices, that we can agree to call algorithmic configurations,34 prompts
us to reject the inaccurate and simplistic view of pricing based on the intersection of
two aggregated curves. To be sure, there is intersection, but the calculation of these
intersections is obtained with a complex algorithm that organizes the exploration of
supplies and demands and governs their encounters and interconnection. The fish
market and financial markets illustrate at once the complexity, diversity and
irreducible nature of these algorithmic configurations. We can not talk, abstractly, of
the Marseille fish market or the Paris Stock Exchange without providing the precise
description of these configurations. "The" market does not exist independently of
those rules that, in a certain sense, define what the market is. We can see why the
analyses of real and of abstract markets have been dissociated from each other for so
long; the mechanisms of aggregation and composition were simply ignored or
simplified to the extreme.
The reader will notice that we use the notion of algorithmic configuration to
refer to a wide variety of arrangements that does not always imply computerization.
We also apply it to organized market space or, we might say, market architecture.
This includes regulatory issues at large, even if such issues are not explicitly
translated, at some point or another, into machines (but still always translated into
socio-technical devices). Should we temper this use of the notion of algorithm and
underline its metaphorical character? We prefer not. First, and this is a lesson learned
from the history and the sociology of computers, a computer is not far from behind
precisely a matter of organized social space (see Campbell-Kelly and Aspray on
Babbage and on Von Neumann, and Collins on machine-like action). But second, and
more important, we are interested in emphasizing the logical properties of an
algorithm when referring to market organization. An algorithm is a logical program:
the emphasis is precisely on coupling the notion of logic (often used to refer to a
single operative principle, like when we hear about the logic of the market or the
logic of capitalism) with the notion of program (a concrete set of instructions that are
contingent to a specific situation and/or task, and that implies a variety of possible
solutions). If there is a notion explicitly devised to define the complexity and
multiplicity of logical steps needed the achievement of a concrete operation in a
concrete situation, this is the notion of algorithm:
“The distinguishing feature of an algorithm is that all vagueness must be
eliminated; the rules must describe operations that are so simple and so well defined
that they can be executed by a machine.” (Knuth 1996: 59).
• These algorithmic configurations produce overall effects, more or less stable
regularities. But these regularities can never be directly deduced from the
observation of the conditions in which singular transactions take place. The effects of
composition preclude such deduction. Conversely there is no straightforward way
from individual transactions to overall regularities. Put in a nutshell, there is really
something that can be described as an aggregated market but this aggregated market
does not constitute a constraining frame; it is the outcome of the organized encounter
of a large number of individual supplies and demands. In addition, and this point is
extremely important, the total explicitation of these rules is probably an impossible
task, especially since their functioning and interpretation imply material devices and
34
A more correct term would be socio-technical algorithm.
20
tacit know-how that can not be formalized (see Callon 1998 for a similar argument
about framing and overflowing).
• From the above we conclude that algorithmic configurations always have a
situated character which makes their identical transposition to other places and other
markets improbable.
Experiments, simulations, modelling
Let us recap. A real market can be described (at least partially) as a device for
the evaluation of goods which are the objects of transactions. This calculation is
possible only if the goods are calculable, by the calculating agencies, and if an (more
or less) stabilized and formalized algorithmic configuration organizing the encounter
between supply and demand exists. This simple statement shows the diversity of
possible forms of organization of markets taken as devices for calculating prices. A
good can be made calculable, that is, individualized and objectified, in a thousand
different ways. Calculative agencies are as numerous and varied as the tools they use
and the hybrid collectives to which those tools belong. Algorithmic configurations
are also similarly multiple and diversified. Moreover, relations between these three
components make the picture even much more complicated.35
The diversity of forms of organization of markets raises a series of questions.
One of them concerns their origins. For example, how can the organization of the
Marseille fish market be explained? Why this calculative device and not another?
Likewise, how can the organization of the calculation of Paris Stock Exchange, the
NASDAQ, etc. be explained? This question is very general and could be applied to
any concrete market, for instance the early nineteenth century cement market in the
US or car rental in France.
This type of exploration is a major undertaking. We will limit ourselves here
to a few thoughts intended to highlight a recent trend that complicates usual
interpretations in terms of self-organization but makes realist, in the same time, the
idea of the malleability of economic worlds.
For a growing number of markets there are actors who explicitly raise the
question of the practical organization of the calculation of the value of goods. This
calculating machine, the concrete market, is the object of more and more research,
experimentation and development. Studies such as those of Kirman obviously pave
the way for simulations and experiments that could raise the question of other forms
of organization for the auction fish market. This possibility, outlined very roughly for
the Marseille fish market, is already a reality for other markets.
Francesco Guala (ref) provides a very striking illustration of this design and
development work, that could be called the social engineering of markets. He relates
the history of the auctioning of Hertzian frequencies by the US federal government in
the early 1990s. The stated aim of the government (in reality the Federal
Communication Commission) was multiple. The auction was to be organized in such
For sake of clarity we have neatly distinguished the three components, but there are obvious
interrelations. For example the classification of goods is both linked to their calculability and to the
organization of the encounter between supplies and demands. But from an analytical point view they
can be nevertheless distinguished.
35
21
a way as to allocate frequencies to those companies that would exploit them most
efficiently with optimum valorization. They also had to avoid monopoly situations
and facilitate the promotion of small companies, rural telephone companies and
firms owned by representatives of minority groups or by women. The terms of
reference therefore combined considerations and values that were political, economic
and social. The main question was: what form of organization should be chosen so
that the market reaches a compromise between these different conceptions of the
good?
The answer proved to be very difficult to find. 36 But the most interesting
aspect, for us, is that it was formulated after a real R&D process, in the sense given to
the term in Frascatti's manual.
To launch reflection on the matter, the federal agency proposed an auction
system in two stages (combinatorial auction)37. The firms concerned did not know
what to think about that. Two of them, Pacific Bell and Air Touch Communication,
decided to recruit three of the best economists specialized in game theory (including
Milgrom and Wilson) and asked them to evaluate the proposal and possibly to make
counter-proposals. The economists soon gave their verdict: no theoretical evaluation
was possible; the problem was too complicated. They simply – although it can be
considered as a lot - provided examples of the functioning of the algorithm that gave
inefficient allocations. Then, based on various theoretical intuitions, they proposed a
different organization, that of simultaneous ascending bid auction. But there again, it
turned out that the theoretical demonstration of the effects produced was proved
impossible. To compare the different systems, it was decided to launch laboratory
tests.
Designing the experiments raised a whole series of questions that the
economists had not considered in their theoretical models. For example, how could
the non-circulation of certain information (concerning the number of players,
decisions to withdraw, etc.) be guaranteed? What rate of incrementation should be
chosen for the auctions? How many rounds should be organized to allow the
revision of strategies without favouring some participants? What time lapse should
be observed between rounds? What conditions of eligibility should be set for
participation? What terms should govern withdrawal? How should rules be
formulated and transmitted? These options, among others, concerned rules as such
but also implied the establishment of a set of practical arrangements and forms of
material organization. From abstract theoretical reflection (game theory) the
economists moved on to real experimental laboratory research in which theory and
practice, deduction, induction and bricolage were combined. Like in any R&D
process, once certain solutions and devices had been tested, the problem of scaling
up and development arose. The lab research was followed by a first scale one test,
monitored by observers. After further adjustments, the real auction was launched. Its
organization was thus the outcome of a genuine R&D process.
Mainly because it concerned a market of interdependent goods. Wavelengths cover territories and
have to be juxtaposed to allow long-distance communications.
37 In which goods are initially auctioned in packages, with a sealed-bid mechanism, and then on an
individual basis.
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In the final analysis, we can say that "the" wavelength allocation market was
designed in a laboratory and developed through a series of experiments performed
on different scales. In these experiments the different components and performances
of this particular calculative device were tested and progressively evaluated.
Economics and economy have probably never been so directly related to each other.
The term market-maker would be apt for this social engineering which, like any
elaboration of machinery, is the result of pluri-disciplinary cooperation. This
automatically brings to mind the birth of thermodynamics and everything it owes to
the observation and mastery of steam engines. The economy of markets is (at last!)
entering its scientific, because experimental, phase. It is focusing on the functioning
and organization of real markets and becoming aware of the fact that no simple
analytical treatment can get through its complexity. It may eventually be possible to
design and to operate purified calculative devices, close to abstract models.
However, there is still a long way to go before reaching the point at which abstract
and concrete markets are adjusted to each other, like machines and their theory,
thermodynamics38.
In our view this evolution, which is taking economics from formal theory of
abstract markets to the experimental science of real markets conceived as complex
devices for calculating the value of goods, and which simultaneously causes the
organization of these markets to depend on laboratory work undertaken under the
leadership of economists and their colleagues, informaticians or psychosociologists,
is concerning a growing number of markets. As we have seen, this is the case of
financial markets in which the conception of microstructures is already generating a
huge volume of experimental research. It is also the case of e-markets and may
perhaps be the case one day of the fish markets for which Kirman proposed models
that could lead to real research programmes to further our understanding of their
functioning All these experiments should contribute to a real economic engineering.
After all, the now famous strawberry market described by Garcia is the result of a
real social engineering process, performed under the responsibility of an economist
(ref).
Naturally, in these R&D studies it is the algorithms that link up supply and
demand on which most of the effort is concentrated, probably because that is where
the biggest lack of knowledge is to be found. In this lab research and the consequent
developments, hypotheses are made on agents' calculative competencies and on the
calculability of goods. But they do not yet generate the same theoretical and
experimental investments even if interesting assumptions are made on the
distribution of competencies between agents and rules, especially by evolutionary
economics: as, for example, calculative competencies are reduced to a minimum, the
idea being to find the most efficient algorithmic configurations that could function
even with "stupid" agents). But such simplifications on the competencies of
calculative agents are often possible only because the products are themselves highly
stabilized and qualified in advance. If we were to simulate a market for which the
calculability of products was of prime importance, such simplifications would
For an interesting discussion of the epistemological questions raised by this new form of economics
see Guala.
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probably be counter-productive39. We could, moreover, imagine that in such cases
ongoing observation of the functioning of scale 1 markets might constitute the best
research strategy, especially since these non-stabilized markets, with changing
calculative agencies, make intensive use of communication technologies, thus
facilitating observations and calculations on those observations. In short, we need to
plan experiments performed directly on scale 1. This opens a vast field for research.
It may well be that other social sciences like sociology and anthropology are called
on to carry through such experiments.
Conclusion
We started this paper with the now widely accepted hypothesis that markets are
organized, that their forms of organization vary, and that none of them can be
considered to correspond to the one best way. This hypothesis seems particularly
productive when we conceive of markets as devices for calculating the value of
goods, and for finding out, at the same time, acceptable compromises between
separate worlds and values that are uncertain, fuzzy and contradictory. To sum up:
economic markets are not frames or (macro)structures. The abstract model of
markets and its spatial metaphor, as epitomized by Cournot definition, are both
inadequate to describe how goods are evaluated. Instead we have showed how
fruitful could be the concrete organized markets approach. We have thus suggested
that this markets could be described as consisting of three interrelated elements: for it
to be possible to calculate the value of goods and to set prices which lead to an
agreement, the products have to be calculable, calculative agencies have to calculate
them, and algorithmic configurations have to organize the expression and encounter
of supply and demand.
Apart from highlighting these three elements, which enable us to shed some
light on the diversity of organizational forms of real markets, we have emphasized
the importance of research and development in the creation and testing of these
calculating devices. Actors can thus conceive of a better adjustment between real
markets and the goals they intend to give to them. We can imagine that not only the
social sciences and computer sciences but also other stakeholders could become
involved in these R&D and design activities. Consequently, everything that is said on
technical democracy, on public debate and on the involvement of concerned groups
in technical issues, applies to economics as soon as it becomes a real experimental
science based on laboratory research (Ref Callon, Lascoumes and Barthe).
A final objection must be at least briefly discussed. Behind the variety of forms
of calculation, which is the main result of our analysis, is there not the same logics,
that of calculation? Economic markets could be said hegemonic because they impose
more and more widely and forcefully the same law: you shall calculate! In a certain
sense this is correct. But one of the advantage of our approach is: first to clarify the
fact that there are many ways for calculating values and for reaching compromises;
Here we naturally think of the lab work that would be required to clarify the effects produced by
the granting of a particular type of property right on genetic sequences (EST), software or cultural
products. It would be the only possibility for getting out of the current deadlock in which specialists
cannot agree because they confine themselves to abstract reasoning. We would then talk not of
applied economics but of economics as an experimental science.
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and second, and more important, to suggest that open discussions and even public
debates are possible on how to make and organize these calculations and even on
how to refuse that certain values be calculated.
More generally speaking, calculation, as cogently demonstrated by Porter and
Barry (ref: ), do not mean depolitizing. One way for making this point, in the case of
economic markets, is to consider what economic theory calls market failures. One can
imagine failures related to the impossibility of performing calculations or to the
unsatisfactory nature of the calculations. One can, for example, try to understand
why this calculating machine sometimes breaks down, so that the calculation cannot
be done. Algorithms can also be criticized for not taking into account certain
calculative agencies that would like to participate in the calculation. The conditions
of calculability of certain products (and hence their qualification) could be criticized
and redefined, for instance by demanding and imposing that products take into
account environmental effects or children's rights. Finally certain goods could be
made uncalculable, by making them public (as said in economic theory), that is,
common and non-individualized.
At the end, instead of abstract (global) markets that impose their (in)human
logic which is possibly counterbalanced by local relations and identities, we have
markets that can be organized in different ways, especially even when the question is
how to find out a compromises between different conceptions (of the value) of
goods.
The qualification of goods
Seller
G
Buyer
sociotechnical
world of
the buyer
attachment
individualisation
entanglement
PROCESS OF QUALIFICATION
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FIGURE 1