#693404 CEBRASPE (CESPE) - 2018 - Diplomata (Terceiro Secretário)

Text IV

A central conjecture of the social studies of finance is that equipment matters: it changes the nature of the economic agent, of economic action, and of markets.

Consider, for example, physical equipment such as the stock ticker or trading screens connected in electronic networks, which circumvent the most basic of all bodily limitations — the inability to be in two places at once. They made fine-grained knowledge of price movements available in close to real time to geographically dispersed market participants. Alex Preda conjectures, for instance, that the ticker helped prompt the rise of “chartism” or “technical analysis”: the belief — still widespread — that patterns can be found in price graphs that have predictive value. Actors’ equipment goes beyond physical technologies: their “conceptual equipment” also matters, or so the social studies of finance posit. Financial markets are complicated places. Given the limited memory and computational capacity of the human brain, economic agents must develop and acquire systematic ways of making sense of markets. Organizations must develop procedures for interacting with markets, and to an increasing extent those procedures are implemented in algorithms in automated pricing, trading and risk-management systems.

Sometimes, the ways of thinking, procedures, and algorithms that are employed derive from financial economics. Probably more often, however, practitioners’ ways of thinking and associated ways of acting have no direct connection to “academic” economics or indeed are regarded by economists as mistaken. Chartism is an example of the latter: financial economists regard it as on a par with astrology, but many traders take it seriously, and act on the basis of it.

“Public facts”, such as the LIBOR1, technical equipment, graphical presentations, and “conceptual equipment” are all aspects of the diverse cognitive and calculative processes that take place in financial markets. These processes are “distributed” in the sense that a given task is often performed not by a single unaided human but by multiple human beings, objects, and technical systems. To understand cognition that involves multiple collaborating human beings and/or interaction with objects and technical systems, one must go beyond the psychological or cognitive science analysis of the individual “bounded by the skin”.

As Hutchins puts it, “a group performing [a] cognitive task may have cognitive properties that differ from the cognitive properties of any individual”.

LIBOR stands for London interbank offered rate.

The interest rate at which banks offer to lend funds (wholesale money) to one another in the international interbank market (source: Financial Times).

Donald MacKenzie. Material Markets. New York: Oxford University Press, 2009, p. 13-6 (adapted).

Considering the grammatical and semantic aspects of text IV, decide whether the following items are right (C) or wrong (E).

According to the text, automated trading and other new technologies have made financial economics hegemonic among traders as a tool to interpret the gyrations of the financial market.