Visiting a museum in the Turkish city of Antalya a few years ago, I was startled to find–among the Greek and Roman sarcophagi–the tomb of a dog. The monument, for a dog named Stephanos, was discovered near Termessos in 1998, not far from the inscribed sarcophagus of Rhodope herself. The epitaph on Rhodope’s tomb–written in ancient Greek, like the one on Stephanos’ monument–states that she paid for her grave marker entirely by herself, which suggests that she was single. And wealthy.

It is not surprising to know that ancient people loved the animals who lived with them. But it was surprising to find that spending a lot of money on pets, which is commonly thought to be a recent phenomenon, is really nothing new. In the contemporary United States, the vast majority of households count pets among their members (63 percent as of 2006), and spend lavishly on their care: $43.2 billion in 2008, up from $23 billion in 1998. These figures break down as follows:

Food………………………………………………….$16.8 billion 
Supplies/OTC Medicine………………………..$10.0 billion
Vet Care…………………………………………….$11.1 billion
Live animal purchases………………………….$2.1 billion
Pet Services: grooming & boarding………..$3.2 billion<

Data from American Pet Products Association market research.

No data were available on expenses for sarcophagi, but animals seem to be playing a part in the economic surge of the American funeral industry. A simple pet cremation starts at $185, with additional charges for a burial, procession, and grave marker; apparently, one bereaved “pet parent” (the preferred term in use by funeral directors) paid $5,000 for a bronze sculpture of the deceased to mark the dog’s grave. Which brings us back to Rhodope, a woman of the ancient word, and her beloved dog Stephanos.

The limestone structure I saw in the Antalya museum was shaped like a modern doghouse, but with a roof ornamented like an ancient temple. The narrow front end of the tomb bore the inscription, which seems to have consisted of three epigrams; the first can no longer be read, but the second two have been translated thus:

(I) was Rhodope’s happiness.
Those who played with me
Called me lovely Stephanos.
Rhodope shed tears when I perished,
And buried me like a human.
I am the dog Stephanos,
And Rhodope set up a tomb for me. 

The sight of Stephanos’ tomb was so moving, because so unexpected: I had never heard that the ancient Greeks buried their dogs (or other animals) with sarcophagi and poems. But a little poking around on the internet revealed that the tomb of Stephanos was far from unique, but rather on the more elaborate end of a spectrum of such practices.

Here are some other texts, taken from ancient dogs’ gravestones, presumably on display elsewhere in the world (I am indebted to this blog for the texts):  

• Thou who passest on this path,
  If haply thou dost mark this monument,
  Laugh not, I pray thee, though it is a dog’s grave.
  Tears fell for me, and the dust was heaped above me
  By a master’s hand.

This epitaph reminds me of Argos, Ulysses faithful dog in the Odyssey, who was the first to recognize the returning king after 10 years’ absence from Ithaca: 

• This stone holds the white dog from Melita,
  The most faithful guardian of Eumelus;
  Bull they called him while he was yet alive
  But now his voice is ‘prisoned in the silent pathways of night.

I particularly love this last epitaph because it’s so easy to imagine how the dog memorialized in it would be pleased to know that she still scares the animals she used chase on the mountainside when she was alive:

• Surely even as thou liest dead in this tomb
  I deem the wild beasts yet fear thy white bones, huntress Lycas;
  And thy valour great Pelion knows,
  And splendid Ossa and the lonely peaks of Cithaeron.

All this love and expenditure directed at dogs reminded me of Leona Helmsley, the wealthy American businesswoman who left the bulk of her multi-million-dollar estate to her white Maltese, Trouble. When Helmsley died in August, 2007, she had four living grandchildren, two of whom she left nothing; the other two received $10 million each. But Trouble–the dog notorious for biting everyone except Helmsley–got a trust fund worth $12 million, and the right to be buried in the Helmsley mausoleum next to Leona. Helmsley’s brother also received a bequest of several million dollars–to pay for his services as Trouble’s primary caregiver!

I had to wonder why we never seem to hear about such extravagant expenditures on animals other than dogs. Where are the monuments to the faithful and affectionate rabbits? Or to the long-lived and highly-intelligent African grey parrots? Maybe such memorials exist, but since there are so many more dogs living with humans compared to other kinds of animals (75 million as of 2008, in the US alone), that when we read about funerary monuments for pets, odds are that the story will concern a dog. Your thoughts?

To see more on the sociological study of human relationships with animal companions, click here.

“By saying that someone becomes the owner of something, we are referring to a market transaction, while by saying that something is a good belonging to someone, we emphasize the fact that it has been incorporated into the world of someone, of which it has become an integral part.”
—Michel Callon and Fabian Muniesa, 2005: 1233

One of the most important concepts in contemporary economic sociology—the notion of “singularity”—can be illustrated through a well-known advertisement from the 1970s: the “My Bologna Has a First Name” campaign for Oscar Mayer. This short TV spot featured a song whose lyrics many Americans, young and old, know by heart:

            My bologna has a first name,

            It’s O-S-C-A-R.

            My bologna has a second name,

            It’s M-A-Y-E-R.

            Oh, I love to eat it every day,

            And if you ask me why I’ll say,

            ‘Cause Oscar Mayer has a way with B-O-L-O-G-N-A.

Here’s a link to the original 30-second spot. 

The central conceit of the ad, that consumers can differentiate among commodity lunchmeats such that one can be singled out as “my bologna,” is a nice illustration of the process of singularization, in which supply and demand relationships are shaped not only by prices but by the qualitative attributes of products. When a product is considered in a class by itself, that is the ultimate expression of singularization, as Harvard economist Edward Chamberlin first described it in his 1933 book, The Theory of Monopolistic Competition (probably one of the most lucid and sensible books ever written by an economist about markets—highly recommended).

Michel Callon and Fabian Muniesa took this idea further by looking at what happens to products after purchase. As the quote above from their 2005 Organization Studies article indicates, Callon and Muniesa are interested both in the market transaction (the price, the exchange of money for goods) and in the subsequent process through which the purchased object becomes integrated into the life and identity of the new owner. This illustrates the special contributions of sociology to the analysis of economic behavior: while economists (even the behavioral sort) would consider the purchase the endpoint of the analysis, Callon and Muniesa can go much further, delving into the social lives of transacted objects—a inquiry that until recently has been left to practitioners in marketing and consumer research.

One reason the Oscar Mayer bologna spot remains one of the most famous commercials of all time—35 years after it first appeared—is precisely because it illustrates a common but rarely discussed aspect of everyday economic experience: the bonding and identification process which occurs between consumers and their products. Many of us have these experiences of what psychiatrists call “cathexis” with consumer goods, but lack a common vocabulary to discuss this experience, since it falls outside the hegemonic discourse of economics—except perhaps as a perplexing “stickiness” in consumers’ brand loyalty or in producer pricing, virtually all of which gets black-boxed as “irrationality” or “noise” in models otherwise devoid of social influences. A few astute cultural critics have tried to unpack this process of bonding between products and consumers, notably Herbert Marcuse, who wrote of consumption-crazed 1960s America, “The people recognize themselves in their commodities; they find their soul in their automobile, hi-fit set, split-level home, kitchen equipment.”^[1] But other than these occasional critical reflections, the consumer experience and the post-purchase fate of objects were simply excluded from scholarly inquiry, leaving the field to practitioners.

Thus, the Oscar Mayer bologna commercial emerged not from a theoretical model consumers’ relationships to products, but through inductive inquiry—including focus groups consisting of children as participants (a methodological innovation, since virtually all consumer research prior to the 1970s was done with adults).  In fact, my mother—who worked at the advertising agency handling the Oscar Mayer account—says that the phrase “my bologna” actually came from me! Apparently, I opened the refrigerator one day to make a sandwich, and was dismayed to find, instead of the Oscar Mayer bologna I expected, some alien brand of lunch meat, at which I exclaimed, “Mom, that’s not my bologna!” I can’t vouch for the accuracy of this story, since I have no memory of the event, but I do know that the term “my bologna” struck a whole generation of kids as an apt description of their relationship with a branded product.

That in itself is rather strange upon further reflection. There is something particularly odd about identifying with one’s food to the point of anthropomorphizing it. “My bologna” is so fully singularized that it has both first and last names! The jingle almost makes it sound as if the lunch meat is an imaginary friend, except that it’s embodied and edible. So the product is defined by the child (as “my bologna”) while at the same time, the product defines the child; this is not made explicit in the advertisement, but is a kind of unspoken consequence of the cathexis between the lunch meat and its consumer. The child identifies with the brand Oscar Mayer as—the advertisers hope—the adolescent will later identify with specific brands of jeans, and the adult will identify with certain brands of automobiles and laundry detergent. (I examined this phenomenon at length in Pop Finance, in the context of investors’ stock picks; see particularly Chapter 2 on “identity investing.” Socially-responsible investing is a major instantiation of this phenomenon, as is the rapid growth of niche investment funds designed to meet the highly specific “economic-expressive” needs of various religious sects, along with secular interest groups.)

This process of mutual definition between product and consumer is termed “co-elaboration” by Callon and Muniesa, and—in my opinion—it’s a brilliant insight. Two points strike me as particularly important to note. The first is that the “sociotechnical process” of consumption does not stop with the purchase of goods: in fact, that’s only the beginning. Second, Callon and Muniesa take a radical, innovative theoretical stance simply by refusing to give precedence to human agents in their model of economic relations: products and consumers enjoy equal status and powers of defining reality. Indeed, tools of calculation—including everything from pencil and paper to abaci and computers—are co-equals with humans and products, sometimes competing, sometimes cooperating with one another.

This recalls the writings of science fiction and cyber-punk authors from Arthur C. Clarke and Phillip K. Dick through William Gibson and Neal Stephenson, in which carbon-based and silicon-based life forms exist in tension with one another. The theme of much of this literature concerns the emergent agency of the latter (such computers or robots and cyborgs) against their creators; here, we could think of Hal9000, the computer in the film “2001: A Space Odyssey,” who becomes a character in the narrative by defying his intended function as a tool for astronauts and asserting a will of his own—“I’m sorry Dave, I can’t do that.” Fast forward 20 years from the making of that film to the late 1990s, when children around the world began playing with “tamagotchis”—keychain-sized electronic “pets” that expressed needs for food and water, and which could die from lack of care. And sure enough, by 2001, humans were clearly accustomed to attributing agency and independence to the products and tools they bought, snapping up “Personal Digital Assistants” to fill the roles once occupied by human secretaries and spouses.

By putting human agents on an equal footing with “products” and “tools,” Callon and Muniesa do much moe than open the door to considering products as semi-autonomous agents in economic life, which is radical enough in itself. In addition, the theory of “co-elaboration” provides a way for scholars to examine a phenomenon of increasing importance in contemporary consumer activity: the ways in which products and tools change the people who buy and use them. (This has become a popular topic among futurists, many of whom write of an imminent “posthuman, biocybernetic” era in which humans and machines become seamlessly integrated.) Marketing practitioners, particularly in high-tech, have been aware of this and leveraged its profit potential for some time—perhaps most notably in the case of Apple Computer. After circling the drain in the late 1990s, leading to predictions of its imminent demise, the firm not only survived but thrived by treating the purchase of their electronic devices (supposedly their main business) as simply the beginning of a lengthy consumption process whose object was the personalization—singularization, if you will—of their products. However much profit Apple makes from the sales of iPods and MacBooks, the business model clearly centers on the subsequent purchases which enable consumers to make the products their own—notably music and software from iTunes.

These consumption possibilities, in turn, change us as consumers. Anyone old enough to remember wax LPs knows that people listen to music very differently now that it is no longer delivered to us via albums, which constrained listeners to consume songs in full and in a specific order. Naturally, there were ways to get around those constraints (getting up and moving the needle on the record player to skip to a favorite song, or creating a “mix tape” by recording songs from multiple albums), but they were cumbersome and inconvenient. Now, instead of listening to music in a format created by others, we can readily and cheaply create our own musical content and play order. We can buy music in much smaller quanta than were available even a decade ago, and due to the lowered cost of search, we may broaden our listening habits and preferences because we can buy one song at a time rather than investing in whole albums.

Recognizing the socio-cultural implications of economic activity turned Apple Computer from a dying firm to one of the most successful in its industry. Other computer manufacturers, like Hewlett-Packard, Dell and Compaq, did not see these possibilities, and instead saw themselves in a traditional economic way, as sellers of computers and other electronic equipment; their main concern was to make the sale. To the extent that they were concerned with what happened to their products after the sale, it was only in a technical sense, such as selling replacement toner and ink cartridges. The social life of products, and the ways that products can exert social influence on consumers, was not part of their business model. Those firms are suffering economically, while Apple has been doing better than ever.

By raising such issues as the “co-elaboration” of products and consumers to the level of scholarly inquiry, Callon and Muniesa’s theory showcases the strengths of a sociological approach to economic issues. In essence, they show how economic sociology picks up where economists leave off, examining phenomena of great theoretical and practical interest that often fall between the disciplinary cracks within social science. Their theory allows questions that have formerly been the domain of marketing and consumer research practitioners—questions about the post-purchase “lives” of products, how products shape and define their consumers, and how consumers use products as tools to understand themselves and make themselves understandable to others—available for sociological inquiry. This gives us reason to look forward to a future of fascinating research in hitherto un- or under-explored realms.  

Once upon a time, the phrase “The Lady or the Tiger?”–taken from an 1882 short story of that name–was a byword for impossible choices. The story took place in a mythical kingdom where justice was dispensed through the workings of chance. The accused were presented with two identical doors behind which awaited opposing fates: one concealed a hungry tiger, who would immediately devour the accused, while the other concealed a beautiful woman, whom the accused would have to marry on the spot. This doesn’t present a problem until the accused man is the lover of the King’s daughter; when the lover asks the princess for a hint as to which door to choose, she has to decide whether she’d rather see him dead or married to another woman. The story ended without the author revealing the princess’ choice or the lover’s fate; the unresolved puzzle thus secured the story’s role as a topic of speculation and “thought experiments” for generations to come.

This is by way of prologue to the economic sociological news that an American woman was recently offered a live tiger in exchange for her virginity. Now the woman has been running an auction for her virginity since September, so the offer didn’t come entirely out of the blue. But still, the offer of a live tiger (by a zookeeper in an undisclosed location) is incomparably bizarre.

It’s also deliciously ironic, in that it brings “The Lady or the Tiger?”  into a 21st century Western context, in which everything can be legitimately and publicly commodified so that there is no longer an irreducible opposition between lady and tiger. Instead, they are being offered as equivalents for exchange. Reduction of everything to a price tag puts everything up for grabs, and everything on an equal footing.

I stress the legitimate and public commodification of virginity, because of course, intact hymens have been put on the auction block for hundreds–perhaps thousands–of years. It still happens openly all over the world: Nick Kristof of the New York Times has done an excellent series on the selling of young Vietnamese girls (by their own families) into sex slavery in Cambodia. It even happens in the US, albeit under cover; since selling other people’s bodies is against the law, we only hear about it when there is a criminal investigation or a dramatization, like those surrounding the Fundamentalist Church of Latter Day Saints.

But what if you want to sell your own body? And what if you want to define it as an act of free market rationality–“I have something of value, and I should be compensated for it.” Or how about framing the sale of one’s hymen as a feminist act, by keeping the profits rather than having them expropriated by men or older women, as was the fate of Moll Hackabout (see below)? 

These are precisely the ideological claims of the lady–one Natalie Dylan, aged 22, of San Diego–who is being offered a live tiger in exchange for being sexually penetrated for the first time. Dylan’s reasoning, in her own words, is as follows (the phrases in boldface are my emphasis):

And the value of my chastity is one level on which men cannot compete with me. I decided to flip the equation, and turn my virginity into something that allows me to gain power and opportunity from men. I took the ancient notion that a woman’s virginity is priceless and used it as a vehicle for capitalism…  And for what it’s worth, the winning bid won’t necessarily be the highest—I get to choose.

Bidding for this prize was up to a reported $3.8 million earlier this month. Natalie’s ability to construct a narrative of empowerment and autonomy around the auction stems in part from her training in Women’s Studies, in which she received an undergraduate degree from Sacramento State University. She says the auction started as a “sociological experiment” on the value of virginity, as well as a practical means of raising money to fund her graduate studies in marriage and family therapy. She was inspired in part by her older sibling, Avia, who earned enough in three weeks working as a prostitute at Nevada’s Bunny Ranch brothel to put herself through graduate school. Sisterhood is powerful!

The life-world, by and large, characterized by value-rationality, begins to be eclipsed and absorbed in instrumental rationality, making persons become means to political and economic ends not in their interest, nor under their control.

• First, read about the colonization of the life-world by the market, using selections from Habermas, Marx, Weber, Kant.

• Second, write a paper describing a world in which selling sex (or reproductive material) wasn’t the only way for a young woman to make a big pile of money quickly, just to see if she could imagine such a thing–and to help her begin to see what it means to be “colonized” by an idea (somewhat like the strategy employed by the high school counselor working with the white supremacist teenager in American History X).

• Third, I would ask her to analyze her auction plan in relation to the valuation of other women’s virginity: what does it mean that she expects to command enough money for her hymen to put herself through graduate school, while the Vietnamese parents interviewed by Nick Kristof (see above) can barely clear enough from the sale of their virgin daughters into brothels to open a little hut selling rice and vegetables? Is it acceptable to her to profit from the same social system that led soldiers in Sierra Leone, the former Yugoslavia, and many other war zones, to target virgins for rape in order to inflict maximum damage on the enemy?

Perhaps none of these exercises would have changed Dylan’s mind. But I think we’d be hearing a lot less from her about empowerment. Instead of claiming “I’m seizing control of the commodification of women’s sexuality for my own benefit,” I imagine she’d say something more like, “I’m willing to enter into this corrupt and unfair exchange because it’s the only way I can make a fortune in a few months.” I’d prefer unpleasant accuracy to pleasant (self)deception any day. And maybe a more accurate perception of herself and her actions would lead her to do something positive, like donate proceeds of her auction to help the women whose trophy-virginity was taken without consent or compensation.

Fellow Contexts blogger Ron Anderson, aka the Sociological Eye (which sounds like a name for Philip Marlowe’s sidekick), invited me to guest-blog and requested that I address the impact of the market crash on investment clubs. This is the result. Turns out I had more to say than I initially thought possible! Blogging brings out my inner Proust.

Are you still cruising on an Obama-related endorphin surge? Wallowing in the afterglow of Inaugural optimism? This news story will snap you out of it like a cold shower:

MOUND HOUSE, Nev. — A downturn in the economy means an upturn in applications to some brothels.

A brothel owner says his industry’s resilience is attractive to many who are out of a job.

“There’s so many girls wanting to go to work because of the economy,” Dennis Hof, the owner of the Bunny Ranch says. “There’s layoffs in every sector of the economy… We get a lot of people from New York City wanting to come to work.”

“Air Force Amy” has been in the business for 19 years. She says she has seen a change in the types of woman applying for employment.

“We do see ladies with a great education, Masters degrees. And woman from all walks of life,” according to Amy. “It’s lot different from 20 years ago where it was just a street hooker from under the bridge. It’s a totally different ball game now.”

Sweet! Now the US can boast some of the most well-educated prostitutes in the world. In your face, Thailand!

If it weren’t so sad–at least to this female with a master’s degree, who’s thinking “there but for the grace of god go I”–the story would provide hours of entertainment. The potential for hideous puns seems virtually limitless, starting with the name of the city in the byline: Mound House. (Cue snickering by Beavis and Butthead .) It rivals even the mock-worthiness of Rudy Giuliani’s “welfare-to-work” program, which trained unemployed New Yorkers to read Tarot cards in preparation for glittering careers as “Psychic Hotline” operators. But I have Important Sociological Points to make, so the punning will be left as an exercise to the reader.

Being sarcastic provides me with a welcome–albeit temporary–distraction from this extremely depressing reminder that while America can elect a black man President, it can’t do much better by its female population than 18th century England once did. I’m referring, of course, to the series “A Harlot’s Progress,” by legendary engraver William Hogarth, which traces the sad fate of an innocent country girl who comes to big city–London–seeking employment. Instead of finding the work she’d sought–as a tailor or a maid–she ends up as a prostitute and dies in squalor shortly thereafter, of venereal disease.

Allow me to digress for a moment, in order to acknowledge the people who claim prostitution is an “empowering choice” for women–a job, just like any other, except that it pays better than most employment held by women (i.e., waitress, retail clerk, etc.).

There are many reasons to be skeptical of this argument, including the ways that current and former sex workers describe their experiences of and feelings about prostitution in first-person accounts. A post on the blog LuckyWhiteGirl.com expresses some other reasons for skepticism about the “benefits” of prostitution for women:

…[such] approaches argue that “prostitution is one of women’s best economic choices.”  It pays well.  And that’s a good thing, they say.  But we have to ask why is it one of our best choices?  Why are our bodies the most valuable possession we have as women?  Getting more money isn’t the end all and be all of liberation. It’s a pseudo-liberation.  It is not full liberation if it preserves the underlying structure of inequality which exists under the global capitalist system we have today.  There’s something inherently wrong with a system that makes women’s bodies their most valuable possession.

Right. Which leads back to the classic question for economic sociology: how do humans assign value to things, like human bodies, or pieces of artwork, or cars? 

My point: Why is prostitution still the default job for women, particularly in the United States, which boasts some of the finest universities and highest per capita incomes in the world? If we have the resources to educate women so well, to endow them with so much human capital, why can’t they translate that into economic capital (i.e., wages and salary) as effectively as men? After all, men have the physical ability to earn money for sex–why isn’t prostitution the last-resort job for most of them, as it is for most women?

To put it simply, men have more choices in the labor market than women. That doesn’t mean that men have it “easy” or that they don’t suffer from un- or under-employment. But it does mean that when men can’t work in the occupation of their choice, their alternatives are much more varied and appealing (economically as well as socially) than those facing women. As this chart from a 2007 United Nations report shows, while the United States is still leading the world in wealth and opportunity, those assets are so highly concentrated in the hands of men that even the poorest countries in the world do a better job of allocating resources fairly. Simply put, the left-hand column of the table shows that American women get about the same share of their country’s resources as women in Bangladesh and Zimbabwe; while the Americans’ share may be much larger in absolute terms, their position relative to men is as disadvantaged as that of women in countries that are barely functioning at all, let alone claiming to be the land of opportunity:

The human development index (HDI) measures average achievements in a country, but it does not incorporate the degree of gender imbalance in these achievements. The gender-related development index (GDI), introduced in Human Development Report 1995, measures achievements in the same dimensions using the same indicators as the HDI but captures inequalities in achievement between women and men. It is simply the HDI adjusted downward for gender inequality. The greater the gender disparity in basic human development, the lower is a country’s GDI relative to its HDI….Out of the 156 countries with both HDI and GDI values, 106 countries have a better ratio than United States’s.

Table 2 shows how United States’s ratio of GDI to HDI compares to other countries, and also shows its values for selected underlying values in the calculation of the GDI.

What’s shocking is that education–human capital development, in sociological parlance–is supposed to broaden one’s opportunities, regardless of gender, race or age. On this basis, many people have fought long and hard for equality of educational opportunities in the US (e.g., Brown v. Board of Education). But it turns out that the “return on investment” in human capital is entirely different for women versus men, whites versus non-whites, and so forth. So, all other things being equal, a woman won’t get the same labor market benefit (i.e., salary, status, advancemet opportunites) from a master’s degree as a man will.

Unfortunately, President Obama’s plans for the economy are likely to exacerbate these problems. His economic jump-start program will create lots of new jobs–but almost entirely in occupations dominated by men, like construction. What about reversing the trend, to inject some distributive justice into those plans? This would be a great time to rebuild the country on a more equitable basis. That’s change we still need.

The cult classic film “Repo Man” turns 25 this year, and I’d like to mark the occasion by quoting this exchange between two of the lead characters. The context here is the moral justification for taking away people’s cars by stealth and subterfuge–an activity that looks very much like simple auto theft–when those people fail to make their contractual payments. According to Bud, the wizened Yoda to Otto’s Luke, repo work not only isn’t “stealing,” it’s a blow for justice and the American Way::

Bud: Credit is a sacred trust, it’s what our free society is founded on. Do you think they give a damn about their bills in Russia? I said, do you think they give a damn about their bills in Russia?

Otto: They don’t pay bills in Russia, it’s all free.

There’s something poignant now, even charmingly retro in the post-apocalyptic financescape of 2009, about the phrase “Credit is a sacred trust.” It seems to belong to another world.

Former Federal Reserve Chairman Alan Greenspan might have been thinking of Bud when he said in a 1990 commencement address at Harvard College,

Trust is at the root of any economic system based on mutually beneficial exchange. In virtually all transactions, we rely on the word of those with whom we do business…If a significant number of business people violated the trust upon which our interac­tions are based, our court system and our economy would be swamped into immo­bility.

Prophecy, or just a gloss of the Gospel According to “Repo Man?” You decide.

As for Otto’s utopian vision of the Russian socio-economic complex, credit cards and cowboy capitalism put an end to all that. For an excellent account (no pun intended), see Prof. Alya Guseva’s recent book, Into the Red (Stanford University Press, 2008).

Meanwhile, Happy Birthday “Repo Man!”

The Catastrophe Haiku Challenge of December 11th brought many delights, not least of which was the realization that this blog has at least five readers (still counting myself) instead of the three I estimated. Huzzah!

Not only did the Challenge produce some fine entries (see the Comments section below the December 11th entry) but it introduced me to some kindred spirits, including one Tony Alfidi–a finance professional based in San Francisco–who has been blogging his own financial haiku (and limericks!) for some time. Check out his witty prose (and verse) stylings at alfidicapitalblog.blogspot.com.

Here are two of my favorites from his oeuvre, reproduced here with his gracious permission:

The Haiku of Finance for 12/18/08

Closing out short calls
Cash went to money heaven
Be careful next time

The Haiku of Finance for 12/18/08 (inspired by Bernard Madoff)

Smiling, lying guy
Trusted by rich investors
“Made off” with their cash

I find it strangely comforting to think of my life savings at peace in “money heaven.” I hope it’s next to “pet heaven,” so that the dollar bills can frolic with the souls of my late lamented hamster, Sunshine, and a passel of goldfish that have passed through my life.

Watching the financial mayhem unfold over the past weeks has been uncannily reminiscent of the early 1980s, when the AIDS virus was first discovered on American shores. The impact of the crisis has been startlingly similar to that of the deadly disease whose contagion changed the world forever just a generation ago. As in the early days of AIDS, the sources of the current crisis are poorly understood but its fatal effects are all too evident–a toxic combination that has spread fear around the world. We’re witnessing a kind of global infection among our social and economic institutions, and may need to start thinking like epidemiologists—the scientists who fight the spread of AIDS and other diseases—in order to stem our losses.

Epidemiology, a word with Greek roots, literally means “the study of what is upon the people.” Typically, it means the processes by which infections spread through populations. But there are a number of reasons to think that an epidemiological model is appropriate to our current socio-economic crisis, and can help us make sense of “what is upon the people” now.

What can we learn by taking an epidemiological approach to the market meltdown? Three things, all of which were applicable to the AIDS crisis, too. The point is not to drum up sympathy for financial firms, which would seem to deserve little of our compassion, and certainly far less than victims of disease. Rather, these observations highlight the social processes through which we respond to spreading crises, and how those processes can make a bad situation worse.

1) Failing to act on signs of danger allows a problem to become an epidemic.

The panic spread by the AIDS virus was driven in large part by its terrifying unknowns: though its fatal effects quickly became apparent, it took almost 25 years to track down its origins to chimpanzees in southern Cameroon. Turns out that AIDS has been present in humans–who hunted and ate the chimps—since at least 1930, but it took 50 years to mature into a global epidemic.

Just as AIDS appeared in the 1980s, as if out of the blue, the collapse of the global economy has seemed similarly unexpected to many investors. After all, only a little over one year ago—in October 2007—the Dow Jones Industrial Average ended several trading days above the 14,000 mark. Who could have predicted that the index would plummet by almost 50% in 12 months, and that we’d be contemplating the bankruptcy of such institutions as General Motors?

In fact, some of the most distressing news about the current crisis is that people in the financial industry did see this crisis coming years ago, but nothing was done to stop it. Instead, that knowledge became the basis for unimaginable profits. Last spring, John Paulson (no relation to Treasury Secretary Hank) topped the list of world’s highest-paid hedge fund managers, earning $3.7 billion for 2007 after directing his firm to short-sell America’s sub-prime mortgage markets. And Paulson was no lonely prophet, crying out in the wilderness; he had lots of company. In 2006, at the same time Paulson was warning his fund’s investors about the imminent collapse of the mortgage market, brokers on the NYSE were predicting that GM would go bankrupt by 2009. Other hedge funds, like the UK’s GLG were busy making piles of cash on the basis of such predictions: so much so that the top three executives in the fund split a $1 billion paycheck for 2007.

Over the next year or two, we can expect to learn that the “sudden” collapse of the world economic system was in fact an open secret in the financial industry, and probably elsewhere. Given the close connections between Wall Street and Washington (it should help that our Treasury Secretary used to run Goldman Sachs, right?), this begs the same question that haunted America during the AIDS epidemic: what were our elected representatives and regulators doing when there was still time to prevent, or at least mitigate, the damage?

2) Putting ideology above pragmatism only makes the crisis worse.

If you were alive during the early days of the AIDS epidemic, you may recall that once the disease was identified, it was thought to be limited to gay men and IV drug users. Unfortunately, the ideology of the time turned that into a rationale for complacency: in the eyes of some who had the power to make a difference, the plague was a just consequence of high-risk behavior by a sub-set of the population who didn’t deserve help.

We all know how well that worked: just ask anyone who had a blood transfusion during that period. While then-President Ronald Reagan dithered, refusing to allow public service announcements to even mention safer sex practices that might have limited the spread of the disease, HIV infection rates exploded, reaching millions of people worldwide who had never had gay sex nor used drugs. Oops.

Reagan’s heirs have now had the opportunity to show how that “ideology first” strategy plays out when the economy gets sick. So, in the name of a theory—free market capitalism—Republicans let Lehman Brothers, mired as it was in toxic sub-prime mortgage debt, go bankrupt instead of arranging the kind of bailout or buyout that AIG enjoyed. For about five minutes, this looked like a win for the non-wealthy majority whose taxes pay for the bailouts, and a rare show of congruence between talk and action on the part of the political right. Two cheers for the Lehman liquidation!

The third cheer was silenced by the realization that as Lehman went down, it would take the rest of the market with it—including parts that had no direct exposure to the sub-prime crisis and were thought to be safe as houses (pun bleakly intended). The Reserve Primary fund, which had made the kind of ordinary short-term business loans known as “commercial paper” to the venerable Lehman Brothers, became the first public money market fund in history to “break the buck:” that is, since it would never get repayment on its loans to Lehman, the Reserve fund’s share price dipped below $1. Because money market mutual funds are supposed to be as secure as savings accounts, this one event caused the entire credit system to hit the breaks, hard. Since it appeared the anything could happen, and nothing was safe, banks wouldn’t even make short-term loans to each other, to say nothing of businesses and individuals. And that’s how the DJIA lost another couple thousand points. Oops.<

3) As the contagion spreads, it destroys the trust needed to fight it.

Our current economic crisis could be explained with haiku-like simplicity, as follows:

· no trust means no credit—nobody can get a loan

· no credit means no capital to make payroll or build things

· no capital means no capitalism

Congress may have approved a $700 billion bailout package, but since the banks who got the money are hoarding it instead of lending it out as intended, we accomplished nothing besides adding a zero to the national debt.

How could this happen? Part of the problem was undoubtedly that the bailout came with no strings attached and no oversight—a political move which will live in infamy. Perhaps more importantly, the bailout didn’t directly address the trust problem: there was nothing in the deal to either assure banks that the risks of making loans had returned to an acceptable level, or to force them to lend despite heightened chances of default.

Moreover, banks realized, as did many others, that by allowing Lehman to go bankrupt, the US government had given the remaining firms in the financial industry a really good reason to lie about the true extent of their exposure to the sub-prime crisis. Following the Lehman liquidation, there was an undignified scramble to make firms look financially healthier than they really were, distancing themselves as much as possible from bailouts and forced mergers. They may have fooled Congress, but not the banks.

And thus we find ourselves re-learning one of history’s most important lessons about plagues: trust is among the first casualties. Fear of each other erodes the very cooperation we most need to contain the crisis. Thus, when banks stopped lending to each other, as well as to the mortgage and commercial paper markets, they deepened the crisis in much the same way as institutions and individuals did when faced with the spread of AIDS in the early 1980s. As the virus spread, and became associated with gay men and IV drug users, those groups became literally untouchable—including by the doctors and nurses whose care they desperately needed. And when it became clear that the disease was not limited to “high-risk” groups, even hospitals turned away the infected until the practice was halted by a series of court decisions and new legislation.

Now that we find ourselves facing the economic equivalent of AIDS, we are making the same mistakes our forebears made in the face of those earlier contagions. Even those who aren’t directly harmed by the sub-prime crisis are infected with fear. What can we do differently this time? Unfortunately, the time for early action has passed. That leaves us with pragmatism and cooperation, two of the great virtues traditionally attributed to Americans. Let’s live up to our reputation and reject the ideologies and isolation that have only made things worse.

One of the best bumper stickers I ever saw was on a red Chevy truck in Northern California about 15 years ago: it read, “In case of Rapture, this vehicle will be unoccupied.” That slogan came to mind following the uncanny confluence of God and Mammon in America in recent weeks. First we got a Vice-Presidential candidate, Sarah Palin, whose Pentacostal faith includes belief in the Rapture, in which God takes all the “elect” (those “saved” by belief in Jesus Christ) into heaven, leaving behind the “unrighteous” to suffer the throes of the world’s end. Next we got hit with the Economic Apocalypse, in which some of the “elect” (like A.I.G.) got raptured into the heavens of solvency, while the rest of us have been left behind to gnash our teeth and rend our garments, tormented by a plague of foreclosures and bankruptcies. Coincidence? You decide.

Living as an expat in Germany, I get a lot of questions about Americans’ behavior. Most recently, I’m being asked why we accept the selective bailout of some failing businesses—many of which have appear to have brought about or hastened their own demise with irresponsible debt—while the vast majority of us will receive no assistance at all. It seems particularly galling to these European observers that our political leaders scold us for our bad financial habits, then turn around and use our tax dollars to bail out firms whose risky borrowing and lending practices are incomparably more destructive than our own. Those are usually the same politicians who voted to stiffen the penalties for individuals declaring bankruptcy, and who wouldn’t dream of supporting “socialist” programs like a national healthcare system, but who are all too ready to socialize the debts of private firms.

The Europeans I know ask: why aren’t Americans taking to the streets to protest this outrageous inequity? In answer, I can only refer them to one of their own best thinkers, the late German social scientist Max Weber. Almost a century ago, Weber had a revelation of sorts about the connection between the near-simultaneous rise of Protestantism and capitalism in 16^th century Europe. His theory, sketched out in “The Protestant Ethic and the Spirit of Capitalism,” suggested that among the unintended consequences of writings by Martin Luther and John Calvin were the spiritual legitimation of profit and the release of individuals from the moral obligation to share their wealth. In fact, believers in predestination came to see material prosperity as a signal from God that they were among the saved: after all, they reasoned, God would hardly allow the elect to suffer privation during their time on earth if they were destined to spend eternity in the many mansions of the Father.

Thus, economic inequality was interpreted as a sign of divine judgment: both riches and poverty were deserved. This laid a semblance of fairness over conditions that otherwise might seem patently and intolerably unjust. And it dampened Americans’ impulse to revolt against the unequal distribution of wealth: the majority-Protestant American colonies might take up arms over taxation without representation, but it took a majority-Catholic country like France to rebel in the name of an impoverished, starving peasantry, giving “Equality” and “Brotherhood” as much weight as “Liberty.”

While these beliefs may seem anachronistic, they are deeply embedded in American life, particularly in the way we think about fairness and the distribution of wealth. The Puritan colonists were fervent Calvinists, and the institutions they and their descendants established became the basis for our nation’s financial and legal systems. They also created the templates for today’s “culture wars,” which aren’t just about abortion or gay marriage, but about who deserves to be “saved” economically.

The conflict we’re seeing now is just the most recent engagement in a long national struggle. During the Gilded Age of the late 19^th century, notions of Social Darwinism became popular by updating the Puritan perspective with a pseudo-scientific twist: arguing that Nature, rather than God, created the rich and the poor through a process of “natural selection.” That is, wealth was a reward for superior genetic fitness, while the biologically “unfit” were condemned to poverty. But while this theory shifted the source of socio-economic division from God to Nature, and redefined the defect as biological rather than spiritual, the result was the same: the poor were still “undeserving” of any help. It’s interesting to note that the “War on Poverty” 60 years later was led by the nation’s first Catholic President, John F. Kennedy.

This history, in turn, suggests a legitimate policy reason for Americans who support the separation of church and state to care about the religious beliefs of candidates for the nation’s highest offices: their faith will shape how they perceive the distribution of wealth, including the provision of government aid to businesses and individuals in financial distress. With the economic End Times upon us, and the election just six week away, we’re awaiting a new answer to an old question: Who among us will be saved this time, and who left behind?

Update: a shortened version of this post was published as an op-ed piece in the Philadelphia Inquirer on November 18th. See it here!

Remember the story of Dr. Frankenstein and his monster? In Mary Shelley’s original book, the doctor isn’t evil—just a brilliant scientist out to prove his talent through innovation. Quite unintentionally, by building something more complex that he can manage, Frankenstein creates the means of his own destruction, and destroys many other lives in the process. This may turn out to be the same narrative structure upon which our current financial crisis turns.

While there may indeed have been “greedy CEOs” and “reckless speculators” running amok on Wall Street, it is more plausible that those who created and benefited from recent financial innovations were just rational capitalists rather than evil geniuses bent on defrauding the public. That is, the people who brought us the Byzantine structures of the subprime market (credit default swaps, anyone?) were too busy pursuing their own self-interest and maximizing profits to realize that they were building a system that exceeded their understanding or control.

If, instead of imaginary monsters, you want to be scared of something real, try this: the biggest problem Americans face right now is that no one really understands what’s happening in the markets. The system is so complex, it overwhelms even the financial professionals and policy experts who are paid to understand it. And this suggests a very different strategy for addressing the global market crisis than those we’ve been offered: instead of using the same tools that created the mess in order to fix it, or declaring open season on CEOs and hedge fund managers, we should be applying complex systems analysis to the problem.

The science of complex systems has been around for decades, but has only recently been applied to questions about financial markets. Research centers like the Santa Fe Institute in New Mexico have pioneered the use of complex systems models to explain biological phenomena like aging and gene expression. These are instances of what the late mathematician and computing visionary Warren Weaver called “organized complexity:” they involve seemingly random events, but only because they are governed by rules and interconnections that elude current models and measurement tools. These phenomena are often misclassified as cases of “disorganized complexity” and analyzed—incorrectly and with misleading results—using tools designed for understanding random activity. Foremost among these tools are the statistical methods favored by physics and its imitators in the social sciences: economics and finance.

There is good reason to suspect that our financial experts and policy makers are not the right people to fix the current market mess. It might seem as though those who created the problems would have the most insight on what went wrong; but instead, it’s likely that the system crashed in part because of their inadequate grasp of the social forces underpinning markets. Finance is dominated by a misplaced faith in the “efficient markets hypothesis:” the theory that people don’t make prices, markets do; as a result, prices move randomly, much like particles move under the Second Law of Thermodynamics. Uncritical belief in randomness has created an impasse, such that academic research either consigns great swathes of financial behavior to the dustbin of “irrationality,” or concedes the inadequacy of their models by adopting the behavioral assumptions of sociology and psychology. In practice, the randomness-based theories embraced by finance scholars and professionals have produced debacles like Long Term Capital Management, brought to us in part by two Nobel Prize winners in economics. If that caliber of expert could do so much damage working with inappropriate models and analytical tools, why should we expect any better from their less-illustrious colleagues?

If we really want to get our financial system up and running again, we’re going to have to wade into issues that have nothing to do with random movements of particles or prices, and everything to do with the kind of “messy” social behavior excluded from analysis in economics and finance. Issues such as trust, which we need to understand in order to solve the problem of banks who won’t lend to one another. Or the challenge of pricing—something that, as we saw in last week’s sell-off and this week’s record-setting recovery, is neither random nor in any sense governed by an invisible hand. These are very practical, brass-tacks issues for which economists, finance professionals and policy-makers have dubious models, at best.

You probably know the saying, “if all you have is a hammer, everything looks like a nail.” To solve a complex problem like the market crisis, we need people with a wide array of tools at their disposal. If the US government thinks it worthwhile to employ a Chief Economist, why not someone who understands the human factors that move markets—a Chief Sociologist, or a Chief Psychologist? Historically, the argument has been that economics is a “practical,” applied social science with outstanding predictive powers, while sociology and psychology are too focused on exploration and explanation. But this view is long out of date: economics has changed dramatically since the computing revolution of the mid-20^th century, becoming so theory-oriented that data from the real world is largely irrelevant.

Sociologists and psychologists, however, are almost entirely data-driven. We tackle messy practical problems head-on, without excluding the factors which make social systems complex: emotions like fear, greed or confidence that drive so much of economic behavior; trust in institutions like banks and courts of law; and the fragile, unspoken agreements we make allowing us to exchange pieces of paper for essentials like food and housing. This is the kind of expert needed to address the breakdown of a system grown too complex for its own creators.