This article develops a basic typological framework for understanding and analyzing financial risk from a political economy perspective. It is motivated by growing awareness of the contemporary significance of financial risk and by the fact that the political-economic literature on such risk currently lacks a workable heuristic. The framework distinguishes between and fleshes out what I refer to as the principal ‘value models’ of finance: fees, gains, premia, and spreads. Its primary aim is to facilitate the identification and conceptualization of: (1) the different risk configurations characterizing the heterogeneous political economy of finance; and (2) the different ways in which key stakeholders — such as finance capital, non-financial capital, and labor — come to be enrolled in such configurations. It also aims to contribute to the wider project of demystifying not just financial risk in particular but modern finance more generally.

Since at least the nineteenth century, economists have imagined the market as a profoundly rational way of organizing society. These visions betray a mechanical conception of economy. In many ways the contemporary financial economy does look like a machine. But if global finance is a machine, then there is something irrational, something supernatural – even magical – about the way it operates. It is not just the periodic bouts of mania, panic, and crisis; nor is it the apparently endless drive to accumulate, to conjure more and more wealth out of a void. It is that in these and other processes, a range of psychic investments are at work – curious attachments that bind us to money, to projected futures, to imaginary orders, and ultimately, to the modes of power upon which capitalism depends. The magical parts make and move the mechanical whole. This is the controversial idea developed in a string of new books to which this forum is dedicated.

For some decades now, progressively minded social scientists have argued that markets are too important to leave to economists — indeed, entire new subfields have formed in response to this concern. But this engagement with economic life has often been somewhat half-hearted. Particularly telling in this respect is the fact that these new fields have organized themselves centrally around the rejection of ‘economism’ — the idea that markets have self-regulatory properties. Scholars in fields such as political economy and economic sociology have devoted a great deal of energy to normative critiques of the market, but they have displayed much less interest in rethinking the core categories and principles of economic life itself. What the books considered here have in common, and what sets them apart from established ways of thinking, is a willingness to tarry with the paradoxes of money.

I have always been somewhat suspicious of attempts to theorize money in linguistic terms. Though the symbolic and conventional aspects of money make a parallel with language seem attractive, such attempts usually refrain from considering the consequences of the fact that money belongs to the order of private property, which is strictly opposed to the common sphere of language. Wouldn't conceiving of money as language force us to confront the abhorrent, monstrous possibility of words that can be owned?

To apply the term ‘magical’ to modern economic thought is to suggest that there remains within it an unassimilated and unexamined residue of irrational thought. Further, it is to hold that this remnant persists despite the discipline's century long attempt to create a ‘pure’ form of economic science. The specific instance of irrationality to which we refer is perfectly visible but systematically overlooked because it exists in economics' most basic assumptions: not only the assumptions about the causal mechanisms that determine human action, but even more in what is increasingly acknowledged to be the theoretical Achilles heel of economics, the concept of the market itself.

Mainstream economics must be conceived of as a sort of ‘dangerous’ knowledge – because its models (like the idea of efficient markets) offer no explanation for the regularity of crises and crashes in financial markets in the last decades; and because these models were also employed in the implementation and justification of these very markets. Just as the Lisbon earthquake of 1755 once shook modern theodicy to its foundations, so the financial tremors of the last twenty years threaten to undermine the scientific status of economic theory. What is at issue is nothing less than the validity, possibility, and tenability of a liberal or capitalist oikodicy, a theodicy of the economic universe. It is likely that we are dealing here with one of the greatest and most fatal of errors of modern economics.

In his campus novel Nice Work, David Lodge points to a certain affinity between the practice and rhetoric of high finance and the theoretical discourses central to the study of literature. From this point of view, and as, myself, a literary scholar who has tried to find ways to bring my own disciplinary training to bear on financial and economic topics, I am especially struck, in reading these four outstanding new books, by the strong element of ‘literarity’ that each displays – meaning not simply or necessarily a concern with literature as such, but with the problematics of language, rhetoric, narrative, metaphor, and semiosis that the study of literature opens out upon.