Abstract
This paper offers a cultural approach to technology as an alternative to what we see as a prevailing treatment of technology in social studies of finance. This latter treatment, which we refer to as the ‘tools of coordination’ approach, sees technologies as mediators of market behavior that promote standardization and coordination. While this may be one important function of some technologies, taking a cultural approach to studying financial technologies highlights other important aspects of financial activity – in particular profit making. Instead of focusing primarily on how technologies coordinate market behavior, we focus on how technologies enable profit-making practices, in particular arbitrage. In two different case studies, one examining arbitrage between stock exchanges during the late nineteenth century and the other focusing on contemporary high-frequency trading, we employ the cultural approach to technology. We find that while new technologies do eventually promote greater coordination in financial markets, they are initially deployed for the opposite purpose, to produce what we call network differentials that allow some to profit at the expense of others.
ACKNOWLEDGMENTS
A portion of the research in this paper was drawn from Carolyn Hardin's dissertation Arbitrage: A critique of the political economy of finance. The authors would also like to thank the Alliance for Social, Political, Ethical, and Cultural Thought at Virginia Tech for allowing us to present an early version of this paper at their annual conference in April 2014.
Notes
1. Its beyond the scope of this paper to create an exhaustive list of power relations involved in financial markets, but we can easily point to the ways that political power has become deeply entangled with financial wealth in the contemporary conjuncture, the forms of exclusionary power manifest in the membership structure of financial exchanges, the gendered and heteronormative cultural practices of financial firms, and more subtle forms of power, for example those demonstrated by the ‘culture of smartness' referenced by Karen Ho (Citation2009).
2. The self-negating feature of arbitrage does not always exist. Barriers to supply and demand, such as fixed prices, may result in ‘money machine’ arbitrage in which arbitrage profits can be perpetually achieved. In this paper, we will not examine this important exception. For more, see Hardin, Arbitrage (Citation2015).