Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-26T06:10:44.611Z Has data issue: false hasContentIssue false
  • English
  • Français

Rhetorical Metrics Building Securities Regulation in America’s Era of Booms and Busts, 1890-1940

Published online by Cambridge University Press:  17 April 2019

Pierre Pénet
Pierre Pénet*
Affiliation:
University of Geneva Paul Bairoch, Institute of Economic History [[email protected]]
Get access

Abstract

How do regulators regulate with metrics? This article offers a rhetorical approach to this question, using early U.S. securities regulation as a case in point, and reliance on credit ratings as empirical illustration. A rhetorical approach challenges economists’ claim that metrics are limited to providing technical guidance to policy formation: the fact is that the role of metrics in regulation can be appreciated only if technical and social aspects are considered together. A rhetorical perspective also fills an important gap in sociological studies of “co-production” that claim that procedural deliberation enhances the legitimacy of regulation but underemphasize the role of quantification when procedural rules are lacking. This article suggests that rhetoric is not suboptimal or irrational but a vital form of deliberation in contexts of uncertainty, when decision-making requires some amount of persuasion outside a procedural context. I observe that metrics can be a powerful vehicle of rhetorical change. Two components of rhetorical metrics are highlighted. First are cognitive clutches, or the capacity to shift prevailing models of attention. Second are actionable arguments, the capacity to embed cognitive deviance into a compelling argument for change. I conclude with reflections on the legacy of rhetorical decisions on current policy debates.

Résumé

Comment les régulateurs régulent avec des métriques ? Cet article répond à cette question au moyen d’une approche rhétorique. Le recours à la notation du crédit dans la régulation du marché obligataire américaine au début du xxe sert de cas empirique. Une approche rhétorique permet de relativiser l’idée répandue chez les économistes que les métriques n’ont d’autre utilité que de servir de référence technique dans l’élaboration des politiques publiques. On part de l’hypothèse alternative que le rôle des métriques dans la régulation ne peut être apprécié qu’en étudiant conjointement leurs aspects techniques et sociaux. Une approche rhétorique vient également combler une lacune dans les études sociologiques de la « co-production ». Ces travaux suggèrent que la régulation gagne en légitimité lorsqu’elle s’incarne dans des règles formelles de délibération mais négligent le rôle de la quantification lorsque ces règles font défaut. Cet article suggère que la rhétorique n’est pas sous-optimale ou irrationnelle mais une forme essentielle de délibération dans des contextes d’incertitude, lorsque la prise de décision exige de la persuasion dans des contextes d’informalité. On observe que les métriques peuvent être un puissant vecteur de changement rhétorique. Ces « métriques rhétoriques » impliquent deux composants : premièrement un « embrayage cognitif » pour réorienter les modèles d’attention des acteurs vers des sentiers nouveaux ; ensuite un « argument décisionnel » pour convertir la déviance cognitive en un argument convaincant de changement. On conclut avec une réflexion sur la postérité des décisions rhétoriques dans les débats actuels autour de la régulation.

Zusammenfassung

Wie regulieren Regulatoren mit Hilfe von Metriken? Auf diese Frage antwortet der Beitrag mit einem rhetorischen Ansatz. Als empirischer Fall dient hier die Verwendung von Ratings im Rahmen der Regulierung des US-Anleihenmarktes zu Beginn des 20. Jahrhunderts. Dank des rhetorischen Ansatzes kann die unter Ökonomen verbreitete Idee relativiert werden, dass Metriken ausschließlich als technische Referenz bei der Entwicklung öffentlicher Politiken dienen. Wir gehen von der alternativen Hypothese aus, dass die Rolle der Metriken bei der Regulierung nur gewürdigt werden kann, wenn gleichzeitig ihre technischen und sozialen Aspekte untersucht werden. Der rhetorische Ansatz schließt ebenfalls eine Lücke in den soziologischen Studien der “Koproduktion”. Diese Untersuchungen legen nahe, dass formale Beschlussregeln die Regulierung stärken, ihr Fehlen jedoch die Rolle der Quantifizierung mindert. Dieser Artikel legt nahe, dass Rhetorik nicht suboptimal oder irrational ist, sondern eine wesentliche Form der Überlegung in Unsicherheitskontexten darstellt, sobald Entscheidungen im informellen Kontext Überzeugungsarbeit erfordern. Metriken können ein starker Vektor rhetorischer Veränderungen sein. Diese “rhetorischen Metriken” umfassen zwei Komponenten: erstens eine “kognitive Kupplung”, um die Aufmerksamkeitsmodelle der Akteure auf neue Wege zu lenken; dann ein “Entscheidungsargument”, um die kognitive Abweichung in ein überzeugendes Argument für Veränderung umzuwandeln. Wir schließen mit einer Reflexion über die Berechtigung rhetorischer Entscheidungen in aktuellen politischen Debatten.

Keywords

Quantification and RegulationRhetoricInstitutional ChangeCredit RatingsInterwar United States Financial HistoryQuantification et RégulationRhétoriqueChangement institutionnelNotation du créditHistoire financièreQuantifizierung und RegulationRhetorikinstitutioneller WandelKreditratingamerikanische Finanzgeschichte zwischen den Weltkriegen
Type
Varia
Information
European Journal of Sociology / Archives Européennes de Sociologie , Volume 60 , Issue 1 , April 2019 , pp. 69 - 107
Copyright
Copyright © A.E.S. 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

BIBLIOGRAPHY

Abolafia, Y. Mitchel and Kilduff, Martin, 1988. “Enacting Market Crisis: the Social Construction of a Speculative Bubble,” Administrative Science Quarterly, 33 (2): 177-193.CrossRefGoogle Scholar
Benhabib, Seyla, 1996. “Toward a Deliberative Model of Democratic Legitimacy,” in Benhabib, Seyla, ed., Democracy and Difference (Princeton, Princeton University Press: 67-94).Google Scholar
Board of Governors of the Federal Reserve System, 1936. Federal Reserve Bulletin, June.Google Scholar
Bordo, Michael D, Redish, Angela and Rockoff, Hugh, 2015. “Why Didn’t Canada Have a Banking Crisis in 2008 (or in 1930, or 1907, or…)?” The Economic History Review, 68 (1): 218-243.CrossRefGoogle Scholar
Brine, Kevin R. and Poovey, Mary, 2017. Finance in America: An Unfinished Story (Chicago, University of Chicago Press).CrossRefGoogle Scholar
Bruno, Isabelle, Didier, Emmanuel and Prévieux, Julien, 2015. Statactivisme: Comment lutter avec des nombres (Paris, La Découverte/Zones).Google Scholar
Carruthers, Bruce, 1996. City of capital: Politics and Markets in the English Financial Revolution (Princeton, Princeton University Press).Google Scholar
Carruthers, Bruce and Espeland, Wendy, 1991. “Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality,” American Journal of Sociology, 97 (1): 31-69.CrossRefGoogle Scholar
Carruthers, Bruce and Lamoreaux, Naomi, 2016. “Regulatory Races: The Effects of Jurisdictional Competition on Regulatory Standards,” Journal of Economic Literature, 54 (1): 52-97.CrossRefGoogle Scholar
Cassis, Youssef, 2011. Crises and Opportunities: The shaping of modern finance (New York, Oxford University Press).CrossRefGoogle Scholar
Chancellier, Éric, 2006. “L’analyse des baromètres économiques de Persons et Wagemann instrument de prévision–instrument de théorisation, 1919-1932,” Revue d’économie politique, 116 (5): 613-632.CrossRefGoogle Scholar
Chandler, Lester, 1958. Benjamin Strong: Central Banker (Washington DC, Brookings Institution).Google Scholar
Cohen, Joshua, 1997. “Deliberation and Democratic Legitimacy,” in Bohman, J. and Rehg, W., Deliberative Democracy (Cambridge, MIT Press: 67-92).Google Scholar
David, Paul A., (1970). “The Landscape and the Machine: Technical Interrelatedness, Land Tenure and the Mechanization of the Corn Harvest in Victorian Britain,” in McCloskey, D., Essays on a Mature Economy: Britain After 1840: Papers and Proceedings on the New Economic History of Britain 1840-1930 (London, Methuen & Co Ltd: 145-204).Google Scholar
Davis, Kevin, Fisher, Angelina, Kingsbury, Benedict, and Engle Merry, Sally, eds, 2012. Governance by Indicators: Global Power Through Classification and Rankings (Oxford, Oxford University Press).CrossRefGoogle Scholar
Degenshein, Anya, 2017. “Strategies of Valuation: Repertoires of Worth at the Financial Margins,” Theory and Society, 46 (5): 387-409.CrossRefGoogle Scholar
Deringer, William, 2018. Calculated Values: Finance, Politics, and the Quantitative Age (Cambridge, Harvard University Press).CrossRefGoogle Scholar
Desrosières, Alain, 2002. The Politics of Large Numbers: A History of Statistical Reasoning (Cambridge, Harvard University Press).Google Scholar
DiMaggio, Paul, 1988. “Interest and Agency in Institutional Theory,” in Zucker, L. G., ed., Institutional Patterns and Organizations: Culture and Environment (Cambridge, Ballinger: 3-21).Google Scholar
Eccles, Marriner, 1935. Monetary Problems of Recovery. Address of Marriner Eccles, Governor of the Federal Reserve Board, before the Annual Midwinter Meeting of the Ohio Bankers Association, February 12, 1935, Columbus, Ohio.Google Scholar
Espeland, Wendy, 1997. “Authority by the Numbers: Porter on Quantification, Discretion, and the Legitimation of Expertise,” Law & Social Inquiry, 22 (4): 1107-1133.CrossRefGoogle Scholar
Espeland, Wendy, 2015. “Narrating Numbers,” in Rottenburg, R., Engle Merry, S., Park, Sung-Joon and Mugler, J., eds, The World Of Indicators: The Making Of Governmental Knowledge Through Quantification (Cambridge University Press: 56-75).CrossRefGoogle Scholar
Espeland, Wendy and Stevens, Mitchell, 1998a. “A Sociology Of Quantification,” European Journal of Sociology/Archives Européennes de Sociologie, 49 (3): 401-436.CrossRefGoogle Scholar
Espeland, Wendy and Stevens, Mitchell, 1998b. “Commensuration as a Social Process,” Annual Review of Sociology, 24 (1): 313-343.CrossRefGoogle Scholar
Federal Reserve Bank of Saint Louis, 1949. “The Federal Advisory Council. A Factor in Shaping Banking Policy,” Monthly Review, XXXI (1): 6-7.Google Scholar
Federal Reserve Board, 1930. 225 Bank Suspensions: Case Histories from Examiners’ Reports.Google Scholar
Flandreau, Marc, Gaillard, Norbert, and Packer, Franck, 2011. “To Err is Human: US Rating Agencies and the Interwar Foreign Government debt crisis,” European Review of Economic History, 15: 495-538.CrossRefGoogle Scholar
Fligstein, Neil, 1996. “Markets as Politics: a Political-Cultural Approach to Market Institutions,” American Sociological Review, 61 (4): 656-673.CrossRefGoogle Scholar
Fligstein, Neil, 1997. “Social skill and institutional theory,” American Behavioral Scientist, 40 (4): 397-405.CrossRefGoogle Scholar
Fligstein, Neil, 2002. The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies (Princeton, Princeton University Press).Google Scholar
Fourcade, Marion, 2011. “Cents and Sensibility: Economic Valuation and the Nature of “Nature”,” American Journal of Sociology, 116 (6): 1721-1777.CrossRefGoogle Scholar
Friedland, Roger and Alford, Robert, 1991. “Bringing Society Back In: Symbols, Practices, and Institutional Contradictions,” in DiMaggio, P. and Powell, W., eds, The New Institutionalism in Organizational Analysis, (Chicago, University of Chicago Press: 232-263).Google Scholar
Friedman, Milton, 1970. “A Theoretical Framework for Monetary Analysis,” Journal of Political Economy, 78 (2): 193-238.CrossRefGoogle Scholar
Friedman, Milton and Schwartz, Anna, 1963. A Monetary History of the United States, 1867-1960 (Princeton, Princeton University Press).Google Scholar
Friedman, Walter, 2013. Fortune Tellers: The Story of America’s First Economic Forecasters (Princeton, Princeton University Press).Google Scholar
Garvy, George, 1978. “Carl Snyder, Pioneer Economic Statistician and Monetarist,” History of Political Economy, 10 (3): 454-490.CrossRefGoogle Scholar
Harger, C. M., 1924. “The Examiner is Here,” American Bankers Association Journal, April 1924: 665, 670.Google Scholar
Harold, Gilbert, 1934. “Accuracy in Reading the Investment Spectrum,” American Bankers Association Journal, July 1934: 32, 44.Google Scholar
Hawley, Ellis W., [1966] 2015. The New Deal and the Problem of Monopoly (Princeton, Princeton University Press).CrossRefGoogle Scholar
Hilgartner, Stephen, 2000. Science on Stage: Expert Advice as Public Drama (Stanford, Stanford University Press).Google Scholar
Hirsch, Paul and De Soucey, Michaela, 2006. “Organizational Restructuring and its Consequences: Rhetorical and Structural,” Annual Review of Sociology, 32: 171-189.CrossRefGoogle Scholar
Holmes, Douglas, 2013. Economy of Words: Communicative Imperatives in Central Banks (Chicago, University of Chicago Press).CrossRefGoogle Scholar
Huault, Isabelle, Lazega, Emmanuel and Richard, Chrystelle, 2012. “Introduction: The Discreet Regulator,” in Huault, I. and Richard, C., eds, Finance: The Discreet Regulator: How Financial Activities Shape and Transform the World (Houndmills, Palgrave Macmillan: 1-16).CrossRefGoogle Scholar
Hughes Committee, 1909. Report of Governor Charles E. Hughes’ Committee on Speculation in Securities and Commodities.Google Scholar
Jasanoff, Sheila, 1990. The Fifth Branch: Science Advisers as Policymakers (Cambridge, Harvard University Press).Google Scholar
Jasanoff, Sheila, 1995. “Procedural Choices in Regulatory Science,” Technology in Society, 17 (3): 279-293.CrossRefGoogle Scholar
Jasanoff, Sheila, 2004. States of Knowledge: The Co-Production of Science and the Social Order (London, Routledge).CrossRefGoogle Scholar
Lamont, Michèle, 2012. “Toward a Comparative Sociology of Valuation and Evaluation,” Annual Review of Sociology, 38 (1): 201-221.CrossRefGoogle Scholar
Lampland, Martha, 2010. “False Numbers as Formalizing Practices,” Social Studies of Science, 40 (3): 377-404.CrossRefGoogle Scholar
Lascoumes, Pierre and Le Galès, Patrick, 2007. “Introduction: Understanding Public Policy through Its Instruments—From the Nature of Instruments to the Sociology of Public Policy Instrumentation,” Governance, 20 (1): 1-21.CrossRefGoogle Scholar
Lemos, Maria and Agrawal, Arun, 2006. “Environmental Governance,” Annual Review of Environment and Resources, 31: 297-325.CrossRefGoogle Scholar
Levi-Faur, David, 2005. “The Global Diffusion of Regulatory Capitalism,” The Annals of the American Academy of Political and Social Science, 598 (1): 12-32.CrossRefGoogle Scholar
MacKenzie, Donald, 2011. “The Credit Crisis as a Problem in the Sociology of Knowledge,” American Journal of Sociology, 116 (6): 1778-1841.CrossRefGoogle Scholar
March, James and Olsen, Johan, 1976. Ambiguity and choice in organizations (Bergen, Noway, Universitetsforlaget).Google Scholar
McAdam, Doug, 1982. Political Process and the Development of Black Insurgency, 1930-1970 (Chicago, University of Chicago Press).Google Scholar
McCloskey, Deirdre, 1998. The Rhetoric of Economics (Madison, University of Wisconsin Press).Google Scholar
Meltzer, Allan, 2003. A History of the Federal Reserve, Vol. 1 1913-1951 (Chicago, University of Chicago Press).Google Scholar
Mirowski, Philip, 1989. “The Rise and Fall of the Concept of Equilibrium in Economic Analysis,” Louvain Economic Review, 55 (4): 447-468.Google Scholar
Moretti, Franco and Pestre, Dominique, 2015. “Bankspeak: the Language of World Bank Reports,” New Left Review, 92: 75-99.Google Scholar
Muniesa, Fabian, Millo, Yuval and Callon, Michel, 2007. “An Introduction to Market Devices,” The Sociological Review, 55: 1-12.CrossRefGoogle Scholar
Ocasio, William, 1997. “Towards an Attention-based View of the Firm,” Strategic Management Journal: 187-206.3.3.CO;2-B>CrossRefGoogle Scholar
Ocasio, William and Joseph, John, 2005. “Cultural Adaptation and Institutional Change: The Evolution of Vocabularies of Corporate Governance, 1972-2003,” Poetics, 33 (3-4): 163-178.CrossRefGoogle Scholar
Olegario, Rowena, 2006. A Culture of Credit: Embedding Trust and Transparency in American Business (Cambridge, Harvard University Press).CrossRefGoogle Scholar
O’Sullivan, Mary A., 2016. Dividends of Development: Securities Markets in the History of US Capitalism, 1866-1922 (New York, Oxford University Press).CrossRefGoogle Scholar
Ott, Julia C., 2009. “‘The Free and Open People’s Market’: Political Ideology and Retail Brokerage at the New York Stock Exchange, 1913-1933,” Journal of American History, 96 (1): 44-71.CrossRefGoogle Scholar
Palyi, Melchior, 1938. “Bank Portfolios and the Control of the Capital Market,” Journal of Business of the University of Chicago, 11 (1): 70-111.CrossRefGoogle Scholar
Partnoy, Frank, 1999. “The Siskel and Ebert of Financial Markets: Two Thumbs Down for the Credit Rating Agencies,” Washington University Law Quarterly, 77: 619-712.Google Scholar
Pénet, Pierre, 2014. Calculating and Governing Risk in Times of Crisis. The Role of Credit Ratings in Regulatory Reasoning and Legal Change (1930s-2010s), Sociology PhD Dissertation: Northwestern University and SciencesPo Paris [retrieved from http://gradworks.umi.com/36/69/3669299.html].Google Scholar
Pénet, Pierre and Mallard, Grégoire, 2014. “From Risk Models to Risk Contracts: Austerity as the Continuation of Calculation by Other Means,” Journal of Critical Globalisation Studies, 7: 4-47.Google Scholar
Porter, Theodore, 1995. Trust in Numbers: The Pursuit of Objectivity in Science and Public Life (Princeton, Princeton University Press).Google Scholar
Posner, Richard, 1973. Economic Analysis of Law (Boston, Little Brown).Google Scholar
Power, Michael, 1997. The Audit Society: Rituals of Verification (Oxford, Oxford University Press).Google Scholar
Rao, Hayagreeva and Giorgi, Simona, 2006. “Code Breaking: How Entrepreneurs Exploit Cultural Logics to Generate Institutional Change,” Research in organizational behavior, 27: 269-304.CrossRefGoogle Scholar
Rao, Hayagreeva, Monin, Philippe, and Durand, Rodolphe, 2003. “Institutional Change in Toque Ville: Nouvelle Cuisine as an Identity Movement in French Gastronomy,” American Journal of Sociology, 108 (4): 795-843.CrossRefGoogle Scholar
Schneiberg, Marc and Bartley, Tim, 2001. “Regulating American Industries: Markets, Politics, and the Institutional Determinants of Fire Insurance Regulation,” American Journal of Sociology, 107 (1): 101-146.CrossRefGoogle Scholar
Scott, James, 1999. Seeing like a State: How Certain Schemes to Improve the Human Condition have Failed (New Haven, Yale University Press).Google Scholar
Seo, Myeong-Gu and Creed, W. E. Douglas, 2002. “Institutional contradictions, praxis, and institutional change: A dialectical perspective,” Academy of Management Review, 27 (2): 222-247.CrossRefGoogle Scholar
Shapin, Steven and Schaffer, Simon, 1985. Leviathan and the Air-Pump (Princeton, Princeton University Press).Google Scholar
Simon, Patrick, 2008. “The Choice of Ignorance: The Debate on Ethnic and Racial Statistics in France,” French Politics, Culture & Society, 26 (1): 7-31.CrossRefGoogle Scholar
Sinclair, Timothy J., 2010. “Round up the Usual Suspects: Blame and the Subprime Crisis,” New Political Economy, 15 (1): 91-107.CrossRefGoogle Scholar
Snyder, Carl, 1923. “The Stabilization of Gold: A Plan,” American Economic Review, 13 (2): 276-285.Google Scholar
Soroushian, John, 2016. “Credit Ratings in Financial Regulation: What’s Changed Since the Dodd-Frank Act?” Office of Financial Research Brief Series, 16 (4): 1-6.Google Scholar
Stäheli, Urs, 2013. Spectacular Speculation: Thrills, the Economy, and Popular Discourse (Stanford, CA, Stanford University Press).Google Scholar
Suddaby, Roy and Greenwood, Royston, 2005. “Rhetorical Strategies of Legitimacy,” Administrative Science Quarterly, 50 (1): 35-67.CrossRefGoogle Scholar
Supiot, Alain, 2007. Homo Juridicus: On the Anthropological Function of the Law (London and New York, Verso).Google Scholar
Thiemann, Matthias and Lepoutre, Jan, 2017. “Stitched on the Edge: Rule Evasion, Regulatory Networks and the Evolution of Markets,” American Journal of Sociology, 122 (6): 1775-1821.CrossRefGoogle Scholar
Congress, U. S., 1893. Speech of Hon. John P. Jones of Nevada on the Money Question, U.S. Senate, October.Google Scholar
Congress, U. S., 1926. Testimony on First Strong Bill Hearings: Stabilization, House Committee on Banking and Currency, April.Google Scholar
Congress, U. S., 1928. Stabilization, Hearing before the Committee on Banking and Currency, U.S. House of Representatives, March-May.Google Scholar
Congress, U. S., 1931. Operation of the National and Federal Reserve Banking Systems: Hearings Before a Subcommittee of the Committee on Banking and Currency, U.S. Senate, Third Session.Google Scholar
Weber, Max, [1894] 2000a. “Commerce on the Stock and Commodity Exchanges [Die Börsenverkehr],” Theory and Society, 29 (3): 339-371.CrossRefGoogle Scholar
Weber, Max, [1894] 2000b. “Stock and Commodity Exchanges [Die Börse],” Theory and Society, 29 (3): 305-338.CrossRefGoogle Scholar
Wilkinson, Harvie, 1938. Investment Policies for Commercial Banks (New York, Harper & Brothers Publishers).Google Scholar
Williams, James, 2012. Policing the Markets: Inside the Black Box of Securities Enforcement (Abingdon, Routledge).CrossRefGoogle Scholar
Yohe, William, 1990. “The Intellectual Milieu at the Federal Reserve Board in the 1920s,” History of Political Economy, 22 (3): 465-488.CrossRefGoogle Scholar
Young, James Harvey, 1989. Pure Food: Securing the Federal Food and Drugs Act of 1906 (Princeton, Princeton University Press).CrossRefGoogle Scholar