Ok, this is going to come out shabbily:
There is a paper I’m working on, for which I’ve been really interested in discretion. If one of the places where sociology can and should contribute to discussions of markets is in the organizational and institutional constitution of price, another is in the creation of action around choice.
We actually have a paucity of vocabulary around choice in markets. There are the central motifs of price and quantity – the formalisms required to make price and quanitity (or liquidity as Carruthers and Stinchcombe would say) free-floating. These are actually quite astounding if you look at the history of futures markets, the work required to make contracts enforceable, stable, standardized. All this so that people could extract the ‘economic’ decision-making from the ‘social’ environment (I’ll rant again that this is a theoretical rather than an empirical distinction).
There is also something that Anselm Strauss called ‘articulation work.’ This is the work that is required for cooperative action. Not just ‘institutions’ in the North sense of rules of the game, but ongoing, complex work of making sure that multiple actors can act both in solidarity and in competition. I like to think that this is what Abolafia was getting at in his book Making Markets – the opportunism and restraint that underlie many of the buy/sell decisions expressed by his traders. The contemporary expression of articulation work is in the wonderful work of Leigh Star, whose work on infrastructure, CSCW (computer-supported cooperative work), and categories, is well-grounded in Strauss and an undervalued application to technology.
What I have in mind is something like ‘flexible formalisms’. This is the ability to change the rules, make exceptions, put the formal structure aside, all in the interests of maintaining the smooth operation of work, in this case markets. The downside of this kind of work is nepotism, cronyism, ends-oriented political action (ahem, US Senate). But the upside of this kind of work is to make clear the kind of things that smooths work out.
Two examples, one from life and one from research.
1) Coming home from vacation in Ireland, my partner and I had to transfer in London from Aer Lingus to American Airlines. The plane, originally scheduled to leave us with something like a 4 hour layover, instead was delayed, then delayed again. We tried to call ahead to AA in London, tried to get the Aer Lingus people to help us make alternative arrangements, all to no avail. Mostly, they told us not to worry, that someone from the airline would surely be in London awaiting our arrival.
Right. So as we are frantically running through LHR trying to make our plane, we finally arrive, 20 minutes before the plane is scheduled to leave, to the ticket counter. A wonderfully British woman told us, sorry, it’s too late to board, the plane has completed boarding at the gate. We say, we tried to call, we ran through the airport, our luggage is aboard, we’re already screened. She replies, sorry, nothing she can do. Against policy. We say, can we speak to a supervisor. She replies, unconvincingly, I am a supervisor. She tries to wave us away, telling us that she can spend no more time with us. We look around, not a single other passenger around. We say (er, shout at this point), what else are you planning on doing?
Finally, we ask her what gate the plane is leaving from. She tells us, and then says, but you shouldn’t go there. It won’t help. Then she calls ahead to the gate to tell them that we shouldn’t be allowed on the plane. We run for the gate where, now 5 minutes until departure time, we plead with the gate attendant to let us on. Look, we’re here, the plane is here, just let us on, please! With nothing but our e-ticket receipt and our sweating, exhausted, pathetic looks, they find us seats, issue us boarding passes, and let us on the plane.
Lessons? First, discretion ultimately lies with the gate personnel. No one else. Second, devotion to policies and rules without discretion makes for fair-but-insane organizational processes.
2) Here’s where I want to end up. In futures markets, the shift from open outcry to electronic trading has actually reduced the amount of flexible formalism available to market participants. In open outcry trading, because the constitution of the market is intimately linked to the community of traders standing in the pit, working together as well as in competition, there is a surprising amount of flexibility available to participants.
In electronic trading, the formal rules of exchange are embedded in the technology itself, which results in a greater split between ‘market’ and ‘market participants’. To wit, if you make a mistake in the electronic forum, the mistake can only be ‘fixed’ by means of financial remediation (that is, by writing a check for the amount that should have been made versus the amount that was actually made due to the error. In open outcry, there are a number of strategies that participants can use in order to ‘fix’ the error before it becomes official – they can bust trades under certain circumstances, they can help each other out, they can provide a check against the intentions of any of the participants.
It seems to me that electronic trading actually squeezes the process to make it appear more market-like, according to what markets are “supposed” to look like in theory – anonymous buyers and sellers, straight-through processing, fast, networked. But electronic trading also creates exactly the environment that we know contribute to ‘normal accidents’ – tightly coupled, complicated technology, limited discretion allowed to participants.
We need to think more about this, I would think.