Jakob Arnoldi

Derivatives Virtual Values and Real Risks

This article examines the financial technology of derivatives. Derivatives are financial products whose values are based on possible fluctuations in the values of underlying assets. Hence derivatives markets are markets that trade in the risks of other markets. In order for derivatives markets to function, forms of prognostication that can assess the possible future fluctuations of the underlying markets are necessary. What such prognostications do, the article argues, is to create information out of future possibilities. Building upon a notion of virtuality derived from Gilles Deleuze, Ulrich Beck and Niklas Luhmann, the article shows how market risks and uncertainties, by means of prognostications, cease to be mere possibilities and instead come to have virtual existence. Through the technology of derivatives, uncertainty and risk can be rendered virtual and be traded. The article suggests that this technology is an example of a new way in which capitalism is now expanding self-referentially as it creates markets out of markets; and of how it is colonizing the future by developing new technologies for ‘hyper-speculation’, that is, speculation not in the possible developments of a given asset but simply in the risk of such speculation.This article examines the financial technology of derivatives. Derivatives are financial products whose values are based on possible fluctuations in the values of underlying assets. Hence derivativ...

Niklas Luhmann An Introduction

The article is an introduction to a special section in TCS on the work of Niklas Luhmann. The first part of the article provides a general introduction to Luhmanns work with an emphasis on the basic elements of Luhmanns general systems theory, in particular Luhmanns notions of autopoiesis and meaning, and the traditions on which it is based. The second part of the text is a presentation of the articles in the special section.

Computer Algorithms, Market Manipulation and the Institutionalization of High Frequency Trading:

The article discusses the use of algorithmic models in finance (algo or high frequency trading). Algo trading is widespread but also somewhat controversial in modern financial markets. It is a form of automated trading technology, which critics claim can, among other things, lead to market manipulation. Drawing on three cases, this article shows that manipulation also can happen in the reverse way, meaning that human traders attempt to make algorithms ‘make mistakes’ by ‘misleading’ them. These attempts to manipulate are very simple and immediately transparent to humans. Nevertheless, financial regulators increasingly penalize such attempts to manipulate algos. The article explains this as an institutionalization of algo trading, a trading practice which is vulnerable enough to need regulatory protection.

Governance Structure and Related Party Loan Guarantees: The Case of Chinese Family Business Groups

Loan guarantees to related parties by affiliated subsidiaries within family controlled pyramids form a means by which the controlling family expropriates value from minority shareholders. The controlling family, however, will attempt to escape blame for the behavior. Using a sample of 1785 listed Chinese firms affiliated with family-controlled business groups, we explore how family governance structure affects the use of related party loan guarantees. As hypothesized, we find that affiliates with non-family chairmen, but with family directors or senior executives, issue larger volumes of loan guarantees to related parties, whereas affiliates with family chairmen and those with non-family interlocking chairmen do not. The behavior is moderated by regional institutional development.

China White Value, uncertainty and order in the Chinese culture industry

This article reflects on some themes in Harrison White’s work in the context of China, where the social and cultural construction of markets is quite literal. We explore how we get markets where previously there were no markets and draw on White’s central themes of ‘uncertainty’, ‘value’ and ‘order’. We maintain a distinction, with White and with Frank Knight, of risk, on the one hand, and uncertainty, on the other, where ‘risk’ has to do with entities that are in principle insurable or calculable and ‘uncertainty’ has to do with what is not calculable/insurable. An entrepreneur’s decision to enter a market, to invest in and enter a production market, entails what White calls a ‘commitment to facilities’. This, for White and Knight, is inherently incalculable, and hence uncertain.

The dual reality of the Chinese knowledge economy.

This paper draws on stem cell research and financial derivatives as two case studies to analyse the role of scientific knowledge and technology in the development of the Chinese knowledge economy. The findings suggest that, despite Chinas recent commitments in acquiring international expertise, there is a decoupling between knowledge acquisitions and applications in the institutionalisation of knowledge within these sectors. Scientific-based knowledge and professional know-how are on the one hand perceived as prime drivers of Chinas development, yet they on the other hand remain subordinate to existing administrative infrastructures. The paper further elucidates the causes and implications of this by describing the dual reality of knowledge in relation to an isomorphic process of rationalisation outlined by new institutional organisational theory.

Modernisering, social mobilitet og systemteori - en diskussion af Niklas Luhmanns systemteori

Title: Modernization, Social Mobility and Systems Theory - a discussion of the systems theory of Niklas Luhmann The article is concerned with the con¬cepts of meaning, self-reference and sy¬stems autonomy in Luhmann’s theory. The article takes as its starting point empirical data on intergenerational social mobility. Such emperical data indi¬cate, it is claimed, that questions can be raised regarding the concept of systems autonomy in Luhmann’s theory. Based on this, the article performs a more de¬tailed analysis of Luhmann’s theory of self-reference and meaning. Luhmann’s theory is contrasted with Bourdieu’s praxeology in order to show the diffe¬rences between the semantically based systems theory and the, to some extent, pragmatically based praxeology. Bour¬dieus praxeology contains a focus on the relations between social and mental structures which serves to explain social reproduction in spite of systems differentiation. An outline for a different approach that contains both semantics and pragmatics, thereby avoiding the neo-functionalism of Luhmann, is sket¬ched in the last part of the article. This is done by implementing a structuration approach in the systems theory.