Uncertainty: the Curate's egg in financial economics

Abstract

Economic theories of uncertainty are unpopular with financial experts. As sociologists, we rightly refuse predictions, but the uncertainties of money are constantly sifted and turned into semi-denial by a financial economics set on somehow beating the future. Picking out 'bits' of the future as 'risk' and 'parts' as 'information' is attractive but socially dangerous, I argue, because money's promises are always uncertain. New studies of uncertainty are reversing sociology's neglect of the unavoidable inability to know the forces that will shape the financial future.

The absorption and multiplication of uncertainty in machine‐learning‐driven finance

“…Thus, the article contributes to the literature on uncertainty in economic sociology and the social studies of finance. Several economic sociologists have explored uncertainty (Arnoldi, 2006; Beckert & Berghoff, 2013; Carruthers, 2013; Chong & Tuckett, 2015; Esposito, 2013; Esposito & Stark, 2019; van der Heide, 2020; Langley, 2012; Lockwood, 2015; Pixley, 2014). However, this article is, to our knowledge, the first to explore how market participants deal with and are affected by the uncertainty associated with the use of ML models in financial markets.…”

“…Drawing on Knight's understanding of true uncertainty and, responding to Beck’s ( 2009 , pp. 17–18) apparent confusion of risk and uncertainty, Pixley ( 2014 , pp. 201–202) argues that “the financial future is not certain ‘in parts,’ it is unavoidably unknowable.” To compartmentalize the future into knowable probabilities is, according to Pixley, an illusion.…”

Swaps e empresas públicas em Portugal: uma história de poder, cisnes negros e ilusões

“…A inovação financeira, ao gerar produtos complexos apenas conectados indiretamente com a produção de bens, cria níveis adicionais de incerteza. Tendem a produzir -se sucessivas camadas de complexidade que afastam progressivamente os resultados gerados por esses instrumentos da realidade dos seus ativos subjacentes (Pixley, 2014). Um dos sintomas mais evidentes destes desenvolvimentos pode ser encontrado no crescimento exponencial dos contratos derivados (Arnoldi, 2004).…”

“…Neste contexto de incerteza, os decisores não têm instrumentos fiáveis que os orientem (Pixley, 2014). A sua experiência de vida e memória histórica constitui uma das poucas pistas de que se podem socorrer.…”