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Response to Steve on economics and the ‘flash crash’

I agree to an extent with Steve’s description of economics in his recent post as being a ‘guess-based pseudo science’ and thought it might be useful to consider briefly what economics is or indeed claims to be. Without wanting to give a full account of its terminological history we can turn to Agamben who in his recent book The Kingdom and the Glory reinstates the Greek word from which economy derives: oikonomia, as meaning household management or attendance to domestic needs. Agamben’s project argues that it is this form of household management that via the Christian Trinitarian doctrine rules us as a form of government – as an administration of man. I think the validity of this argument can be problematised on a number of levels, one being through the reintroduction of the modern notion of economics that must account for both the science of managing finite resources (oikonomia), as well as the production of wealth as seemingly infinite, as is the promise of the stock market. I wonder if it is therefore useful to introduce another Greek word to this discussion following the trajectory of Aristotle, Marx and more recently Alberto Toscano among others, which is ‘chrematistics’ – a term that is somewhat opposed to oikonomia in that it describes the art of accumulating wealth for the sake of itself rather than to satisfy need.

Perhaps the term ‘economic’ feels so inadequate to what Steve is discussing – a ‘flash crash’ that is ‘outside of human understanding at any given moment’ – because economics assumes an end (the successful management of things to satisfy need) and yet this end has shown itself to be wholly unattainable within the human-made system that is the material of economic investigation, namely capitalism. Chrematistics on the other hand serves itself as its own end (as an accumulation of wealth) and arguably offers us a better grasp of what the term ‘economics’ accounts for today. In this respect if we think of the transfer and accumulation of wealth that plays out in the stock exchange as an art form (a form of production existing outside of the realm of human necessity) as oppose to approaching it from the position of science, perhaps a different reading of the 20 minute period of the ‘flash crash’ can be carried out? I have not thought through the political implications of claiming the ‘flash crash’ as being available to some sort of aesthetic judgement but it might offer a further opening in this discussion of crisis that Steve has alerted us to.

By Alice


7 comments on “Response to Steve on economics and the ‘flash crash’

  1. john
    November 20, 2012

    I think this is a great response alice that draws some fundamental problems with steve’s post.

    Perhaps this can be added to somewhat by looking to Marx even further. In Volume 3 of Capital and what Marx calls “the conception of fetish capital”, that is,
    “In M — M’ we have the meaningless form of capital, the perversion and objectification of production relations in their highest degree, the interest-bearing form, the simple form of capital, in which it antecedes its own process of reproduction. It is the capacity of money, or of a commodity, to expand its own value independently of reproduction — which is a mystification of capital in its most flagrant form.”
    In focusing on some form of ontological significance of financial markets the unknowable thing-in-itself becomes the social relations of production; “in this form it no longer bears the birth-marks of its origin”.

    Reading the flash-crash as a “Synecdoche” of the financial crisis, i think, is exactly this fetishisation of capital accumulation. Rather, one should look to what endnotes called the “crisis of reproduction” ( “[L]abour-saving technologies tend to generalise, both within and across lines, leading to a relative decline in the demand for labour. Moreover, these innovations are irreversible: they do not disappear if and when profitability is restored (indeed, as we shall see, the restoration of profitability is often conditioned on further innovations in new or expanding lines). Thus left unchecked this relative decline in labour demand threatens to outstrip capital accumulation, becoming absolute.”
    Labour-saving in existing industries produces both surplus labour and surplus capital. The surplus capital is what has resulted in the process of “financialisation” as that which cannot re-absorbed by production. It then becomes the limit point of capital accumulation.
    On the other hand, and this is something we are seeing on a huge scale now, the surplus population become (contra Marx’s negative evaluation) something of a lumpen-population in that it is produced via capital accumulation, yet it can no longer be accounted for in capitalism. With the huge increase in youth unemployment in EU countries, the growth of slums in low GDP countries and so forth.

    “the “rise of finance” stories, in all their forms, obscure both the sources of financial capital, and the reasons for its continued growth as a sector even as finance finds it increasingly difficult to maintain its rate of return”

    I think what we should be looking for in stories such as the one steve explains is not an ontologico-political significance but rather seeing it as limit of capital accumulation in general

  2. Steve
    November 20, 2012

    Hi Alice

    Thanks for this – the distinction between oikonomia and chresmatistics is really useful, I hadn’t come across it before. We just read Sartre’s Critique of Dialectical Reason and there’s an aspect of this that feels relevant – Sartre is attempting to reground the dialectic: fundamentally on material scarcity and therefore human need. From this, the dialectic is posited as emerging from individual human praxis: the project or end of overcoming scarcity becomes the negation of the negation. Sartre is then basing his analysis on scarcity rather than the traditional Marxist surplus. This perhaps gives another perspective on your suggestion that chresmatistics is wealth accumulation beyond need – even an aesthestics of accumulation. This feels important to address and I’d be interested to hear your further thoughts when you’ve developed them.

    • Alice
      November 22, 2012

      *Steve I have to tell you I misspelled chrematistics in my initial post and you’ve copied it (it’s now corrected) – dyslexia and ancient Greek terms don’t mix well!

      Sartre’s regrounding of the dialectic sounds very useful to this discussion. I think the focus on scarcity, or perhaps even poverty over surplus/wealth is shown too in Agamben’s project though I’m not sure that he points to any possibility of overcoming such scarcity. I will follow this up with more as I get further along with my reading, but for now it seems the placement or attachments of the two oikonomia and chrematistics are significant – the first being linked to the finitude of the home, the domestic, the scarce, and the latter being something outside of this. It therefore interested me that you described a days trading as a finite system, as David picked up on in the comments.

  3. Steve
    November 20, 2012

    Hi John

    Thanks for your comments – I’m afraid I don’t really understand them, though. I can’t see how my approach – of taking a part of the financial crisis as the whole, in order to argue that economically-informed governmental rationality (the logic of austerity etc) is inherently unable to understand what is is talking about – could in any way be construed as a fetishisation of capital accumulation. What do you mean?

    I assume you mention labour-saving technologies as the ‘source of finance capital’ (not the only one, though, surely), but I don’t see how that’s relevant to my argument – unless it’s that we shouldn’t be discussing the finance system in any way other than the specific Marxist narrative you allude to (which feels somewhat doctrinaire)? And it would be great if the flash crash did signal the limit of capital accumulation, but I’d worry that the system’s more robust than you seem to suggest: so I’d say that it’s worth making ontological-political arguments rather than waiting for some messianic limit to arrive – because (to be provocative here…) what if this teleological narrative of capital accumulation etc also suffers from the inherent void I discuss, that of the inability of economic thought to know its subject matter?

  4. john
    November 21, 2012

    so there is some form of void that is inherent to economic thought in general? would you suggest that this is due, as you seem to suggest, simply to the speed and quantity of economic transactions or are there other factors? I basically didn’t get why you put the two (admittedly interesting) parts of your analysis together. Maybe i just didn’t “get” it. It all seemed a bit mystical

    what i was suggesting is that discussing the financial crisis outside of the economic system in which it is a part seems a rather strange thing to do, particularly when drawing an ontological significance from it. there are reasons for the growth of financialisation/2008 crash which can be explained, surely?

    I’m sorry i didn’t make myself clear, it was a rather rushed response. in terms of fetish capital (the fact that money appears to reproduce itself – M-M’ – akin to what alice mentioned with chresmatistics) what i was alluding to was that there is, within the financial system, both a distortion of the economic relations and yet money really does make itself. My suggestion is that by drawing something ontological from this could be guilty of distorting finance capital. there is more to the financial system than you suggest and hence could this your argument? Or, conversely, that by defining this void that can be seen by the flash crash you desire something like a transparency within the financial system?

    and in terms of the second part of my original post i was alluding to a narrative for the financial crisis which looked at more than simply a stock-market crash. What i was suggesting was that rather than the flash crash being that limit, rather capital is reaching a crisis of reproduction in which it simply can no longer reproduce the relations which underpin it. This isn’t a messianic limit (nor is it in any way doctrinaire?) but rather something heightened by the financial crisis, hence my allusions towards growing unemployment etc. This, not the void, can surely be a more coherent political dimension of the crisis, no?

  5. Steve
    November 25, 2012

    Thanks for the clarification, John, those are fair points and due (I think) to some confusion in the way I presented my argument – I’ve responded to a few points including yours in the comments to the original post.

  6. Pingback: Russell contra Meillassoux « Groundwork

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This entry was posted on November 20, 2012 by in Philosophy and tagged , , , , , , , .
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