In this provocative look at one of the most important events of our
time, renowned scholar Arjun Appadurai argues that the economic collapse
of 2008--while indeed spurred on by greed, ignorance, weak regulation,
and irresponsible risk-taking--was, ultimately, a failure of language.
To prove this sophisticated point, he takes us into the world of
derivative finance, which has become the core of contemporary trading
and the primary target of blame for the collapse and all our subsequent
woes. With incisive argumentation, he analyzes this challengingly
technical world, drawing on thinkers such as J. L. Austin, Marcel Mauss,
and Max Weber as theoretical guides to showcase the ways language--and
particular failures in it--paved the way for ruin.
Appadurai moves in four steps through his analysis. In the first, he
highlights the importance of derivatives in contemporary finance,
isolating them as the core technical innovation that markets have
produced. In the second, he shows that derivatives are essentially
written contracts about the future prices of assets--they are,
crucially, a promise. Drawing on Mauss's The Gift and Austin's
theories on linguistic performatives, Appadurai, in his third step,
shows how the derivative exploits the linguistic power of the promise
through the special form that money takes in finance as the most
abstract form of commodity value. Finally, he pinpoints one crucial
feature of derivatives (as seen in the housing market especially): that
they can make promises that other promises will be broken. He then
details how this feature spread contagiously through the market,
snowballing into the systemic liquidity crisis that we are all too
familiar with now.
With his characteristic clarity, Appadurai explains one of the most
complicated--and yet absolutely central--aspects of our modern economy.
He makes the critical link we have long needed to make: between the
numerical force of money and the linguistic force of what we say we will
do with it.
