In this paper, I use the case of financial economics to show how an innovative idea can shape a research agenda. I focus on why the efficient-market hypothesis, crystallized in Eugene Fama’s research, acquired core theoretical status in the discipline of financial economics, whereas the Capital Asset Pricing Model, championed by, among others, Fischer Black, did not. I draw attention both to differences in the networks propagating these models, in particular differences in cohesion and coherence, and to differences in the methodologies underlying the models. I argue that Fama’s use of “data-dredging” techniques and frequentist statistics increased the coherence of the intellectual circle around him, turning the analysis of efficiency into a collective project oriented towards the discovery of objective properties. By contrast, Black’s adoption of more subjectivist methods exacerbated the individualistic tendencies of his approach and his network, increasing the incoherence of his research group.

The trans-disciplinary New Institutional framework identifies the importance of incentive structures in preventing opportunism in market making. In recent decades this theoretical tradition has increasingly shifted its attention from formal institutions to identify the significance of cultural processes in countering uncertainty, bounded rationality, and information asymmetries. More specifically the New Institutional perspective tends to focus on the formal mechanisms producing and reproducing culture, as opposed to an examination of specific cultural content. This attention to formal mechanisms means that value-rational action and commitments in market making receive insufficient attention. In order to examine the problems entailed in this trend, the case study of a financial market in which market making was constituted by the values of loyalty, duty, and honor of traders is used.

The grip of austerity in European politics since 2008 presents a double puzzle: electorally weak center-left parties offering no definite alternative, and the surprisingly efficient pursuit of “fiscal consolidation”. To understand this double puzzle this article investigates the institutional bases of alternative economic thinking during the 1930s versus the post-2008 crisis years. Noting the recent prominence of a new social type, the European economist-technocrat (eet), I highlight the historically specific order to which the eet is indigenous: rarefied, international professional circuits that tend to work over, not through, party politics. This contrasts sharply with the nationally-based, party-connected economists who developed new economic orthodoxies between the 1930s and 1960s, including Keynes himself. Approaching the study of economic culture in the public sphere in a Polanyian moral markets framework, I argue that the linkages between European economics and financial technocracies help to explain Europe’s double puzzle. Theoretically, I argue that a focus on expertise and parties, and not just states, is central to our understanding of economic culture in the public sphere.

This article examines public debates on the legitimacy of banking profits in the 2008 credit crunch. A content analysis of 957 newspaper articles published in Germany and the UK in the early weeks after the Lehman Brothers collapse examines critical statements directed at illegitimate forms of financial profit in order to identify the cultural legitimacy of financial capitalism. The conceptual framework provided by the French sociology of justification points to the role of shared orders of value as a normative reference for public discourses. In both national debates, four important boundaries for legitimate profits were drawn that concerned the problems of ownership, risk-management capacities of traders, fraudulent client relations, and speculative gambling. The meaning of this classical moral criticism of banks was transformed in the context of the 2008 crisis: a line between “normal” and “excessive” financial profits was drawn, defining an area of legitimate profit-seeking that hewed to the basic assumptions of the market model. Economic theory was used as a scheme of public economic morality. The seemingly harsh critical debate effectively reproduced a legitimate image of a functioning financial market, deflecting public attention away from the structural ambivalences of financial profit-seeking and granting legitimacy to the institutional status quo of financial capitalism.

The paper considers the impact of the current economic crisis on post-socialist welfare capitalist states through an examination of two most different cases: neo-liberal Estonia and neo-corporatist Slovenia. The crisis prompted the most sustained political contestation with respect to each model in two decades. Considering national public sphere discussions within a broader European context, the paper shows how transnational advocates of austerity reinforced Estonia’s neoliberal model but emboldened critics of the Slovenian model to roll back the state. While public sphere debates within small, peripheral states must be understood within transnational contexts, in both cases we can observe more continuity than change in the collective ideas underlying each model.

This paper uses theories of small states (e.g. Katzenstein) and nationalism (e.g. Gellner) to explain why Denmark and Ireland responded to the 2008 financial crisis in different ways. In Denmark, a coordinated market economy with considerable corporatism and state intervention, the private sector shouldered much of the financial burden for rescuing the banking sector. In Ireland, a liberal market economy without much corporatism or state intervention, the state shouldered the burden. The difference stems in large part from the fact that Denmark had comparatively thick institutions and a strong sense of nationalism whereas Ireland did not. Lessons for the theories of small states and nationalism are explored.