In this work I analyze commodity futures markets (CFMs) in order to shed light on the debated relationship between neoclassical economic theory and real-world markets. I show that CFMs clearly reflect a number of neoclassical aspects, but its asocial assumptions mean that the theory fails to explain how these came to be realized. Performativity theory, despite itself neglecting the ‘political’ factors of agency, power and distribution to a certain extent, proves to be a suitable alternative explanatory approach. Its idea of economic theory as a ‘blueprint’ can be recognized in conscious steps during the formation of CFMs, which increased the fit of these markets to the neoclassical ideal. Agency and power played a substantial role in shaping performative processes, which led to an approximation of market equilibrium and corresponding positive distributional effects. These outcomes proved to be instable, however, as the entry of big investors in the wake of the current ‘financialization’ of CFMs had disequilibrating consequences. The resulting instances of counterperformativity shifted the markets away from neoclassical theory and led to adverse distributional impacts.
Table of Contents
1. Introduction
2. From Neoclassical to Futures Markets
2.1 Neoclassical Market Theory
2.2 Politics and Neoclassical Market Theory
2.3 Commodity Futures Markets
3. Performativity and Politics
3.1 Approaches to Performativity
3.2 The Politics of Performativity
4. The Making of Commodity Futures Markets
4.1 Performing Commodity Futures Markets
4.2 The Politics of Commodity Futures Markets
4.3 Financialization, Bubbles and Counterperformativity
4.4 Distributive Impacts
5. Conclusion
Research Objectives & Core Themes
This work examines the relationship between neoclassical economic theory and real-world commodity futures markets (CFMs) by applying the theory of performativity. It seeks to explain how economic theory serves as a 'blueprint' for market formation and analyzes the distributive impacts that arise from these performative processes and their subsequent financialization.
- The role of neoclassical theory in the creation and transformation of CFMs.
- The application of performativity theory to understand conscious market making.
- The influence of agency, power, and political factors on market outcomes.
- The causes and distributive consequences of counterperformativity and commodity price bubbles.
Excerpt from the Book
Performing Commodity Futures Markets
In contrast to neoclassical theory, performativity assumes that markets do not simply emerge but are consciously made. According to the network approach, this making of markets requires the disentanglement of former relations between objects. These can then be framed to perform a new ‘socio-technical agencement’ (Callon 1998b:16-7). Looking at historical developments during the making of CFMs, three distinct disentanglements are identifiable. Firstly, their creation disentangled the relation between trading and the physical commodity itself. The standardization of wheat grades and measurements by the Chicago Board of Trade (CBOT) in 1859 allowed the treatment of individual produce shipments as one homogeneous commodity (Atkin 1989:47). Combining standardized grades with the existing forward contracts, the CBOT established the first functioning wheat futures market by around 1870 (Cronon 1991:123-4). Traders soon institutionalized the method of monetary settlement, which eliminated the need for physical delivery and raised the volume of produce traded as futures contracts many times above physical commodity production (Cowing 1965:5).
Summary of Chapters
1. Introduction: Presents the research aim of analyzing the relationship between economic theory and real-world commodity markets, introducing performativity as a lens for this inquiry.
2. From Neoclassical to Futures Markets: Details neoclassical market theory and its idealized abstractions, contrasting them with the structural reality of commodity futures markets.
3. Performativity and Politics: Explores various performativity approaches and highlights the need to integrate political dimensions like agency, power, and distribution.
4. The Making of Commodity Futures Markets: Empirically investigates the historical development, political influence, and recent financialization of futures markets, illustrating instances of counterperformativity.
5. Conclusion: Summarizes the findings on how conscious market making realized neoclassical ideals, while noting that subsequent instability has led to adverse distributive consequences.
Keywords
Commodity Futures Markets, Performativity Theory, Economic Theory, Political Economy, Equilibrium Economics, Financialization, Economic History, Wheat Markets, Agency, Power, Market Making, Counterperformativity, Distributional Impacts, Neoclassical Economics, Market Stability.
Frequently Asked Questions
What is the core focus of this research?
This work focuses on analyzing the relationship between neoclassical economic theory and real-world commodity futures markets (CFMs) to understand how theory influences market practices.
What are the primary themes covered in the study?
The study covers the construction of markets, the role of economic theory as a 'blueprint', the influence of political factors such as power and agency, and the impact of financialization.
What is the main objective of the thesis?
The main objective is to provide a middle-ground explanation for how aspects of economic theory are realized in practice, moving beyond mere ideological dismissal or naive acceptance.
Which scientific methodology is employed?
The author employs the theory of performativity, specifically utilizing a network approach to trace how markets are consciously made through disentanglement and framing processes.
What topics are discussed in the main body?
The main body covers the theoretical framework of performativity, historical case studies of wheat market formation, the impact of political and discursive power, and the consequences of recent market financialization.
Which keywords characterize the work?
Key terms include Commodity Futures Markets, Performativity Theory, Political Economy, Financialization, and Counterperformativity.
How does the author define the 'blueprint' role of economic theory?
The author uses the term to describe how economic models are not merely descriptive, but are consciously used to format and shape market realities during their creation.
Why is the concept of 'counterperformativity' significant to this work?
It is significant because it describes how the application of economic models can cause market reality to deviate from theoretical assumptions, leading to instability and adverse distributional impacts.
- Quote paper
- M.A. Matthias Baumgarten (Author), 2011, Performativity and Politics: The Making of Commodity Futures Markets, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/204036
