The Sociology of Finance Carruthers and Kim ARS Paper

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Annu. Rev. Sociol. 2011. 37:239–59 Keywords

First published online as a Review in Advance on credit, trust, banking, financialization, disintermediation,
April 4, 2011
performativity
The Annual Review of Sociology is online at
soc.annualreviews.org Abstract
This article’s doi: The economic crisis of 2008–2010 stimulated an already growing so-
10.1146/annurev-soc-081309-150129
ciological interest in finance. Before the crisis, disintermediation and
Copyright c 2011 by Annual Reviews. securitization changed how the U.S. financial system operated, as bank
All rights reserved
operations shifted from the traditional originate-and-hold model to
0360-0572/11/0811-0239$20.00 originate-and-distribute. During the 1980s and 1990s, the overall size
and profitability of the financial system grew as deregulation unleashed
financial innovation and reorganization. Global shifts toward capital
market integration and liberalization created greater global interde-
pendence. Households in the years before the crisis also altered their
relationship to the financial system, increasing debt loads and overall ex-
posure to the stock market. Research reveals the importance of politics
for many financial market developments, various implications for cor-
porate governance, the continuing significance of social factors within
finance, and the role of theoretical and material devices in shaping fi-
nancial practices. Key directions for future research focus on finance
in relation to social inequality, informal sectors, valuation, and social
networks.
239
INTRODUCTION and lending, but also investing, rating, analyz-

ing, arbitrage, origination, taxing, underwrit-
American bankers used to follow the 3-6-3 rule:
ing, regulating, trading, listing, and hedging.
take in deposits at 3%, lend the money at 6%,
Not all actors can perform all actions, and they
and be on the golf course by 3 PM. Studying
are selectively paired. For instance, only a mem-
such bankers was like watching paint dry. But
ber of the New York Stock Exchange can trade
the boring stability of old-fashioned banking is
on the exchange, and ratings are done by a small
now gone. Indeed, the entire financial sector
number of credit rating agencies. Actions are
has become more dynamic and is characterized
governed by formal and informal rules, set both
by impressive innovation, growing complex-
privately and publicly. The Securities and Ex-
ity and interdependence, and sometimes dra-
change Commission imposes legal disclosure
matic instability. So even before subprime lend-
requirements on firms that issue publicly traded
ing and collateralized debt obligations (CDOs)
securities. But private actors such as the New
were cast as culprits in the latest economic cri-
York Stock Exchange or the Chicago Mercan-
sis, sociologists had begun to study finance.

tile Exchange also impose their own rules on
Finance involves an interconnected set of

market participants. And financial traders of-
four elements: actors, actions, contexts for ac-
ten develop informal behavioral norms among
tion, and rules governing action. The actors
themselves.
consist of individuals, who might be borrowers,
Promises form the core of finance. One
lenders, investors, bankers, brokers, traders,
party promises to pay a sum of money to
and so on. Organizational actors include banks,
another. Much financial activity involves, one
pension funds, insurance companies, tax au-
way or another, the design, production, distri-
thorities, hedge funds, pawn shops, venture
bution, evaluation, acceptance (or rejection),
capital funds, investment clubs, savings and
enforcement, and modification of promises.
loans, mutual funds, and credit unions, among
Promises can be simple or complex. A simple
others. Sometimes one actor provides the con-
loan involves money paid at one point in
text for others, leading to complex nested rela-
time, in exchange for a promise to repay the
tionships among them. The New York Stock
money (plus interest) later on. In making such
Exchange offers an institutional platform on
loans, lenders have to decide if they trust the
which investors trade equities, for example, and
borrower’s promise, and there are many ways
the Federal Reserve System regulates and man-
to make such a determination (Carruthers
ages the U.S. financial system.
2009). Their willingness to lend is tempered by
Other contexts for action include networks
how uncertain they are about the borrower’s
(like the informal hawala system, through which
willingness and ability to repay in the future
international remittances often flow, or the
and by the exposure entailed by the loan.
computer systems that link together investment
The evolution of credit decision making has
bank trading floors), markets (e.g., the U.S.
been a key part in the development of modern
housing market), the polity (wherein appeared
credit economies, but in general lenders try to
George W. Bush’s “ownership society” ini-
mitigate their uncertainty and vulnerability. A
tiatives, nineteenth-century populist criticisms
CDO is a highly complex financial instrument
of bankers, and recent outrage about bankers’
that combines and structures pieces of many
bonuses), laws and regulations (e.g., usury laws,
prior promises and issues new promises that
prohibitions on predatory lending, capital re-
are grouped into separate tranches (chiefly
quirements for banks, disclosure requirements
distinguished from each other by their senior-
for share offerings), and devices (stock tick-
ity). Rating agencies such as Moody’s are in
ers, computer screens, credit cards, financial
the business of evaluating promises and rating
formulas). Financial actions consist of various
financial instruments, including CDOs but also
activities, including simple borrowing, saving,
more ordinary corporate bonds. The economic
240 Carruthers · Kim

significance of promises has become particu- pp. 189–217; Halliday & Carruthers 2009),
larly obvious in the recent financial crisis, when and considers the embeddedness of financial
so many promises were broken that overall transactions in social networks (Smith-Doerr
confidence in financial institutions virtually & Powell 2005, Uzzi 1999). Financial institu-
disappeared (Swedberg 2010). tions play a key role in economic growth and
Finance is a renewed topic for sociology, so are relevant to studies of globalization and
and most research has focused on particular economic development (Gereffi 2005). Credit
combinations of the four financial elements. functions as a substitute for money, and credit
For example, Harrington (2008) examines arrangements have been important in sustain-
individual investors in amateur California in- ing consumer demand and have bearing on the
vestment clubs. Uzzi & Lancaster (2003) study sociology of consumption (Zelizer 1994, 2005).
how relations between bank loan managers and We start by reviewing the large-scale
their clients allow each to acquire critical in- changes that have recently made finance such an
formation about the other. Millo (2007) tracks interesting topic for sociologists. We then con-
the recent origin of index-based derivatives sider various connections to politics and public
in a nexus of financial innovation, organized policy and discuss how finance affects house-
exchanges, regulation, and financial theory. holds. Finally, we turn to the micro contexts
Guseva & Rona-Tas (2001) compare the for finance: the local settings in which financial
Russian and American credit card markets, activities unfold. It is usual to show how macro-
whereas Morgan & Prasad (2009) contrast scopic processes set the context for small-scale
the development of the French and American activities, but in finance the reverse also holds.
taxation systems. Arrighi (2010) views the rise Each of these topics covers an overlapping set
of finance capital macroscopically, as a stage of actors, contexts, activities, and rules.
in long-term cycles of capital accumulation
that unfold over centuries. Some financial
actors (e.g., banks and venture capitalists) have MACRO FINANCE
received more attention than others (e.g., pawn Changes in finance have motivated much re-
shops, credit unions, and bank regulatory agen- cent scholarly attention, and researchers note
cies). Likewise, there is more research on some various connections to macroscopic processes
activities (e.g., mortgage lending) than others such as globalization, deregulation, financial-
(e.g., borrowing from loan sharks or rating cor- ization, and neoliberalism. The United States
porate bonds). Despite many gaps, an expand- plays a leading role in all these changes and so is
ing mosaic of research uses methods ranging frequently the focus of analysis. One reason for
from old-fashioned ethnography to high-tech the attention on finance is simple: By various
network analysis and draws on many theoretical measures, the financial sector of the U.S. econ-
traditions. Overall, this mosaic reflects a grow- omy has grown significantly in the past several
ing appreciation of the sociological significance decades ( Johnson & Kwak 2010, p. 59). The fi-
of financial activities and institutions. nancial industry’s share of GDP increased from
Although interest in finance is rapidly around 15% in 1960 to roughly 23% in 2001,
growing, the sociology of finance draws on surpassing manufacturing in the early 1990s.
other research. Most obviously, classical soci- Finance’s share of corporate profits also grew
ologists such as Max Weber and Georg Simmel substantially over the same period (Dore 2008;
analyzed banking, money, and finance (Weber Guillén & Suárez 2010, p. 260; Krippner 2005,
1981, pp. 254–66, 279–80; Simmel 1978). Like pp. 178–79), and bank profits were particularly
economic sociology more broadly, the sociol- high in the decade before the recent crisis
ogy of finance attends to the institutional foun- (Tregenna 2009). Some of those extraordinary
dations for financial markets (Dobbin 2005, profits have been (unevenly) shared with
pp. 33–40), including law (Swedberg 2003, employees, and so financial sector wages rose
www.annualreviews.org • The Sociology of Finance 241

throughout the 1990s and 2000s (Philippon & Although the United States has never
Reshef 2009). A job on Wall Street became an been subject to IMF conditionalities (Babb
increasingly attractive prospect for Ivy League & Carruthers 2008), a domestic version of
college graduates. Furthermore, nonfinancial neoliberalism unfolded in the 1980s and 1990s
firms derived a growing proportion of their (Prasad 2006). Much of the New Deal financial
overall income from financial sources (Kripp- regulatory apparatus was pulled down, piece
ner 2005, pp. 185–86). For many years, for by piece (Davis 2009, pp. 116–21; Krippner
example, in addition to building cars, Gen- 2011, pp. 60–63, 102–5). Savings and loans
eral Motors made money financing car sales institutions functioned as inadvertent crash test
through GMAC, and GMAC expanded into dummies in being the first financial institutions
other financial services, including mortgages to be deregulated en masse. They were also the
and banking. Many of the largest firms, both first to produce an expensive crisis (Calavita
financial and nonfinancial, have become more et al. 1997; Seabrooke 2006, p. 115), but the
accountable to institutional investors (like pen- lessons of that episode were soon forgotten
sion funds), whose shareholdings have steadily in an era of triumphal hubris and “irrational
grown. Justified by agency theory and pushed exuberance.” Terms such as the Great Mod-
by institutional investors (Dobbin & Jung eration signaled the widespread belief that
2010), shareholder value became a guiding by the late 1990s the U.S. financial system
principle in corporate governance (Davis 2009). had entered a new era of good governance
Finance represents a leading edge of global- and rational risk management. The business
ization (LiPuma & Lee 2004, pp. 5–6; Obstfeld cycle became less volatile starting in the 1990s
& Taylor 2004, pp. 27–28). Global capital (Stock & Watson 2002), and some claimed that
markets are highly integrated, capital is mobile, macroeconomic stabilization policy had finally
and so financial changes and shocks quickly succeeded (Lucas 2003). Henceforth, financial
spread around the world. With little delay, for markets did not need government regulation
example, problems with U.S. subprime mort- because they could self-regulate.
gages crossed the Atlantic to trouble European Deregulation unleashed financial inno-
banks and pension funds. And Wall Street rat- vation and consolidation. Banks grew in
ing agencies pass judgment on borrowers from size and shrank in number, which mattered
around the world, including sovereign govern- because, among other things, large banks tend
ments (Sinclair 2005). Global financial markets to lend differently than small banks (Cole
have also conformed to global policy trends fa- et al. 2004). Financial conglomerates moved
voring deregulation. The neoliberal orthodoxy across formerly inviolable boundaries to merge
embraced by the International Monetary Fund commercial banking with investment banking,
(IMF) and World Bank favored the removal insurance, brokerage, wealth management, and
of capital controls, central bank independence, other financial services (Davis 2009, pp. 124–
privatization, and financial deregulation (Babb 26; Seabrooke 2006, p. 136). Furthermore, a
2009, p. 70; Brune et al. 2004; Polillo & Guillén shadow banking system formed as institutions
2005). Stock exchanges have also spread around like hedge funds and private equity groups
the world in the past several decades (Posner undertook bank-like activities without the
2005, Weber et al. 2009). Even China, which regulatory oversight to which banks are subject
has maintained close political control over (Stulz 2007). Investment banks began to
its development of a socialist market econ- create a stream of new financial products and
omy, has dramatically modified its financial techniques that were heralded as key tools for
system (Yao & Yueh 2009). When coupled a new era of risk management (Power 2006),
with the transition from command to market in part because of their exotic complexity
economies in eastern and central Europe, and the widespread employment of “quants”
market governance has become truly pervasive. (physicists and mathematicians) in their design

and application (Holzer & Millo 2005). Some when the Federal National Mortgage Associ-
financial trading continued to occur on formal ation (Fannie Mae) bundled home mortgages
exchanges, which offered relative transparency together and created simple pass-through
and some measure of standardization and securities to sell to investors (Stuart 2003,
regulatory oversight. But increasingly, other pp. 21–22, 68). But others securitized different
products were traded over the counter through income streams (accounts receivable, credit
opaque private networks and with little card payments, leasing revenues), and securiti-
oversight by anyone (Huault & Rainelli-Le zation can be done in more complicated ways
Montagner 2009). to create products such as CDOs (Coval et al.
Some forms of financial innovation chal- 2009, Benmelech & Dlugosz 2009). Either way,
lenged prevailing social norms. In the oil-rich banks recover their capital sooner (when the se-
states of the Persian Gulf, modern finance ran curitized loans are sold) rather than later (when
up against the strictures of Islamic law, includ- borrowers complete repayment), and so they
ing its ancient prohibition on usury (Warde are ready to lend again. In effect, securitization
2000). Evolving forms of credit that target poor turns bank loans, which are notoriously illiquid,
borrowers (e.g., payday loans) frequently raised into marketable securities. It also increases
the issue of predatory lending (Stegman 2007). the amount of money available to borrowers
Quinn’s (2008) study of viatical settlements because investors who would otherwise not
(a transaction in which a terminally ill indi- want to lend are often willing to purchase
vidual sells his or her life insurance benefits) highly rated securitized loans ( Johnson &
points out that some new products appeared Kwak 2010, pp. 76, 84). It can also, however,
morally problematic. Market participants wres- undermine a lender’s interest in ensuring that
tled with sharply conflicting rhetorical fram- a borrower is truly creditworthy (Immergluck
ings: that viaticals commercialized the sacred- 2009, pp. 100–5). With the originate-and-hold
ness of death; that they provided much-needed model, the bank directly suffered if it made a
assistance to the dying; or that they are simply bad loan. But with the originate-and-distribute
mutually advantageous transactions, devoid of model, banks no longer keep loans in their
moral salience. In general, the moral salience own portfolio, and thus the investors who
of finance is intermittent and selective, but it purchased the loan suffer if the loan goes sour.
never entirely disappears. The recent financial crisis has brought sev-
Many of the recent changes are subsumed eral of these trends together. In the early 1980s,
under the terms disintermediation and securiti- banks and savings institutions dominated home
zation. Traditionally, banks and other financial mortgage lending, but they were supplanted
institutions acted as intermediaries: taking by market-based lending by the early 1990s
money from savers and lending it to borrowers. (Adrian & Shin 2010, p. 604). Mortgage origi-
The challenge was to create a profitable nation proved to be extremely profitable in the
spread (lending money out at an interest rate early 2000s, and as the market for U.S. prime
sufficiently higher than what the institutions mortgages became saturated, lenders expanded
paid for deposits) and to manage the maturity into nonconventional mortgages such as Alt-A
mismatch (long-term assets versus short-term and subprime. With strong, worldwide demand
liabilities). This originate-and-hold model is among investors for highly rated securities
being replaced by an originate-and-distribute (some of it due to regulatory requirements),
model (Mizruchi 2010, pp. 122–23). Rather mortgage lending expanded dramatically
than hold loans to maturity, banks increas- and became more concentrated at the same
ingly securitize them (Davis 2009, pp. 37–38; time (Fligstein & Goldstein 2010, pp. 44–45;
Leyshon & Thrift 2007, p. 100). Securitization Rona-Tas & Hiss 2010, p. 146). Foreign
involves bundling loans together and selling investors were assured not only by the high
them to investors. On a large scale, it began ratings issued by Moody’s and Standard and

Poor’s, but also by the credit default swaps that such as the earned income tax credit, child tax
insured against default. As long as U.S. housing credit, and mortgage interest deductions, the
prices kept rising, even marginal borrowers U.S. tax code functions as a form of social pol-
could service their loans long enough to refi- icy (Howard 2009). Kiser & Sacks (2009) claim
nance their mortgages and accumulate home that contemporary African states could learn
equity. But once the housing bubble burst, from early modern European states about how
things fell apart quickly. Mortgage default rates to organize their tax systems. Kiser & Sacks
soared, and highly rated, mortgage-backed argue that, with sharp information asymmetries
securities and the CDOs built out of them also and poor monitoring, African states should
began to fail. Rating agencies downgraded so decentralize and privatize tax collection, rather
many AAA-rated securities that it became clear than build centralized tax bureaucracies, if they
their initial ratings were wildly inaccurate. want to raise revenue efficiently. Yet where
Financial firms were vulnerable to collapse taxes are concerned, politics often trumps effi-
because of how highly leveraged (i.e., depen- ciency, and informal rules may be preferable to
dent on borrowed money) they had become formal procedure. Martin’s (2008) analysis of
(Guillén & Suárez 2010, p. 267) and because recent U.S. property tax revolts suggests that
a surprising number held onto some of the these were largely prompted by the moderniza-
financial instruments they produced (Fligstein tion of property tax systems, where formal and
& Goldstein 2010, p. 32). Thus, losses in sub- transparent rules replaced older, informal sys-
prime mortgages turned into a more general tems dominated by favoritism and patronage.
credit crunch (Adrian & Shin 2010, p. 611). Modern tax systems meant market valuations
Large public entities such as nation-states for property, higher taxes, and unhappy voters.
have also been affected by financial develop-
ments. Researchers have long examined how
states extract resources and the fact that the POLITICS AND FINANCE
historical development of the state depends Financial markets are not autonomous or nat-
on its ability to mobilize resources through ural, given that they always operate in a po-
various means: taxation, confiscation, and litical context. Politics clearly played a role in
debt. Older comparative studies by Tilly processes of financialization because, as many
(1990), Goldstone (1991), Centeno (1997), have noted, deregulation of the financial sector
and others discerned different patterns of state did not happen on its own. The label neoliber-
fiscal development and the corollary role of alism (and more pointedly, market fundamen-
public finance in state breakdown. Fears that talism) has been attached to a package of pol-
contemporary globalization would eviscerate icy reforms that spread during the 1980s and
the ability of modern nation-states to set their 1990s and led to capital market liberalization
own taxing and spending policies have proven and deregulation in many countries. For exam-
to be overblown, and there has been no simple ple, increasing global flows of foreign direct in-
“race to the bottom” (Swank 2008). Investors vestment were made possible by the bilateral
do not always migrate to tax havens. Further- investment treaties that many countries signed
more, evidence from taxation often challenges with each other (Elkins et al. 2008). Within the
conclusions about public policy that are based United States, a series of legislative measures
on spending. For example, when looking dismantled much of the New Deal financial
at expenditures, many contrast threadbare regulatory apparatus and even prevented the
American welfare programs with lavish Euro- extension of surviving regulatory oversight to
pean welfare states. And yet the United States new financial activities such as credit default
has long possessed a more progressive tax swaps (Campbell 2010, p. 79). Supporters of
structure (Martin et al. 2009, p. 15; Morgan deregulation found powerful intellectual allies
& Prasad 2009), and through revenue features in Chicago school economists, who celebrated

the efficiency and rationality of markets. Grow- widespread bureaucratization of California

ing financial sectors have become powerful in- thrift institutions (predecessors of savings and
terest groups with considerable political clout loans), despite the fact that bureaucracy was an-
and ready to wield the threat of capital flight tithetical to the original mutualist values of the
against policies they do not like. Economic sec- thrifts. Rao & Hirsch (2003) examine the Czech
tors that benefit from credit flows can also form Republic during the Velvet Revolution of the
a political constituency in favor of particular 1990s, when democratization in the polity
credit policies. The housing industry, for exam- accompanied the transition to a market econ-
ple, supports the many ways in which the U.S. omy. Investment privatization funds were used
government steers credit into home mortgages. by incumbent commercial banks and insurgent
Corporate finance has also become a entrepreneurs in their struggle over the process
new venue for politics. Although companies of mass privatization. The ultimate prize was
have long had deep connections to politics control over the newly established market
(Carruthers 1996), recent decades witnessed the economy. Roe (2006) tests the argument
emergence of new political strategies targeting that legal systems determine long-term stock
corporate ownership via stock markets (King & market development by varying the protections
Pearce 2010). Various social movements have offered to outside shareholders: greater legal
embraced divestment as a form of collective ac- protections under Common Law (compared
tion, pressuring high-profile investors (such as with Civil Law) encourage more investment
universities and public pension funds) to divest and boost stock market growth. Hence, com-
shares in companies that undertake objection- mon law countries tend to have more highly
able policies or produce unwanted outcomes developed financial markets. Instead, Roe
(Soule 2009). For example, in the 1980s several concludes that historical events (such as World
American universities divested their portfolios Wars I and II) and political factors (such as the
of the stocks and bonds of companies that did power of financial interests) are more important
business in apartheid South Africa (Soule 2009, in shaping long-term trajectories. Similarly,
pp. 80–103). King & Soule (2007) find that Krippner (2011) describes financialization as
under certain conditions, protestors targeting a largely unintended consequence of attempts
corporations can influence investors and affect by U.S. lawmakers, starting in the late 1960s
corporate share prices. Various political agen- and early 1970s, to deal with the problems of
das have cumulated in the development of so- inflation and the deficit by deregulating the
cially responsible investing, which subjects in- financial system and attracting foreign capital.
vestment decisions to explicitly political criteria On a comparative scale, Verdier (2002)
(Vogel 2005). A socially responsible investment offers a political explanation for four aspects of
fund, for example, will often refuse to invest modern financial systems: their concentration,
in firms that manufacture alcohol or tobacco internationalization, market development, and
products, produce military weapons, or have specialization. His key explanatory variables
poor environmental or labor records. Various include state centralization and the political
codes now purport to measure the “social per- power of traditional economic sectors such
formance” of firms (Chatterji & Levine 2006), as agriculture, local retailers, and artisans
although their validity is sometimes question- (Verdier 2001, p. 331). Financial markets are
able (Chatterji et al. 2009). redistributive (in that they take savings from
The politics of finance vary with the polity. one place and invest them elsewhere), and
Although this has been increasingly well powerful traditional sectors tried to stop the
documented as an empirical fact, the overall mobilization of capital away from themselves
connections are not yet fully understood. and toward industry. Their choice of strategy
Haveman et al. (2007) find that Progres- depended on whether the state was centralized
sive Era political developments enabled the or decentralized. When local government

possessed significant autonomy, traditional in indebtedness came from mortgage debt

sectors used local banks, protected by local (and was tied to rising housing prices), and
government, to retain capital locally. overall indebtedness increased largely because
households with prior access to credit obtained
more credit, rather than because households
CONSEQUENCES OF with no credit were able to gain access (Dynan
MACRO FINANCE 2009, p. 57). The trend also coincided with
The large-scale changes of the last sev- increased income volatility (and inequality)
eral decades have directly affected ordinary and may represent an attempt by households
households. For one thing, financial assets to stabilize consumption in the face of unstable
constitute a growing proportion of total assets income (Dynan 2010). On the lender side,
for households in general, not just for the very adopting the originate-and-distribute model
wealthy (Keister 2005, pp. 8–11, 71–72). The put the stress on the volume of loans, and as
long-term shift from defined benefit to defined the prime mortgage market became saturated,
contribution pensions, such as 401(k) plans, has originators had to move down the income
exposed workers’ ability to accumulate assets distribution to maintain loan volumes. Rajan
for retirement more directly to the uncertain- (2010) even suggests that household debts rose
ties of the stock market (Hacker 2002, p. 153; because of easy credit policies put in place to
Shuey & O’Rand 2004). For instance, many ameliorate increased income inequality. Let-
retirements were postponed after the stock ting poor people borrow may have been more
market decline of 2008, and political interest politically palatable than overtly redistributive
in privatizing Social Security has diminished. interventions such as increasing tax progres-
Aside from pensions, households have also sivity. Others (e.g., Dore 2008, p. 1107) also
increased their involvement in the stock market recognize a broad connection between growing
through direct share ownership or via mutual economic inequality and changes in the finan-
funds and similar investment vehicles (Davis cial sector, but in truth the exact linkages have
2008, p. 15; Dynan 2009, pp. 65–66). Dore not yet been determined. Nevertheless, with
(2008, pp. 1106–7) claims that the rise in equity higher indebtedness and greater debt service
ownership in the United States and United obligations, households have become more
Kingdom became explicit policy goals starting vulnerable to decreases in income, unexpected
under the Reagan and Thatcher administra- expenditures, or increases in debt payments.
tions in the 1980s. Regardless of the reason, Job losses, the expiration of teaser interest rates
many people now have a direct financial stake for a home mortgage or credit card debt, or
in the stock market, which also gives market unexpected health care expenses can easily push
performance greater political salience. a highly leveraged household into a foreclosure
American households have recently become proceeding or even into bankruptcy.
more vulnerable to credit market conditions Although American households assumed
because of their indebtedness (Sullivan 2009). greater debt burdens, access to credit re-
Median household debt relative to income mains unevenly distributed. Not only do
grew from 0.14 in 1983 to 0.61 in 2008, and the racial disparities in wealth and income endure
median debt service ratio increased from 5% (McCall & Percheski 2010), but people’s ability
in 1983 to 13% in 2007 (Dynan 2009, pp. 54, to borrow money (and on what terms) also
59). Put another way, the personal savings rate varies across groups. The capacity to borrow
fell from an average of about 10% in 1980 to allows people to anticipate future income and
roughly 2% in 2005 (Dynan 2009, p. 51). More smooth current consumption, and access to
so than in the past, U.S. households spend credit is absolutely critical for the success of
more than they earn, maintaining consumption a business. Black-owned small businesses are
by accumulating debt. Much of this growth more likely to be denied credit, compared with

their white-owned counterparts (Blanchflower understand their own financial obligations

et al. 2003). Contemporary evidence also (Warren 2010, p. 402). People often use their
suggests that minority applicants are more social networks for financial information, but
likely than white applicants to be denied a poorer households are less likely to get advice
mortgage, controlling for various economic from a financial professional (Chang 2005).
variables (Pager & Shepherd 2008). Stuart Consumers may also not perceive how much
(2003) showed that such disparities resulted others’ interests diverge from their own. For
from long-standing organizational practices, example, mortgage brokers are often compen-
not just personal animus: Because the ability to sated via yield spread premiums, a payment
obtain a secured loan depended on the value of from the lending institution that depends on
the collateral, appraisal methods that systemat- the interest rate of a borrower’s loan ( Jackson
ically undervalued minority or mixed-income & Burlingame 2007). Although brokers often
neighborhoods had a discriminatory effect claim to be seeking the lowest interest rate for
(pp. 33–34). Access to other financial products, their clients, in fact they have a hidden (to the
such as insurance, also appears to have been borrower) financial incentive to steer borrowers
uneven when discretion entered into the un- into higher interest mortgage loans and can take
derwriting process. In particular, the emphasis advantage of naive or inexperienced borrowers
placed on the moral character of the applicant ( Jackson & Burlingame 2007, pp. 349–51).
invites biased decision making (Glenn 2000). Burdensome debts trouble both households
Various trends in household finance have and firms, but the legal system offers a way
combined to make the current recession out. Personal and corporate bankruptcy pro-
especially difficult for many people. Unlike two ceedings enact failure and provide a form of
previous recessions (starting in 1990 and 2001), redemption. An insolvent individual with more
the downturn that began in December 2007 liabilities than assets can file for bankruptcy,
involved a simultaneous decline in housing surrender his or her assets to creditors through
prices and the stock market. And unlike the a court-supervised procedure, and receive a
earlier recessions, the recent drop in household discharge from the balance of his or her debts.
net worth occurred in low- and high-income In effect, the debtor is forgiven remaining
households and in low– and high–net worth debts and enjoys a fresh start. Modern laws
households (Moore & Palumbo 2010, pp. 11– usually allow debtors to retain certain assets
12). With higher levels of indebtedness, partic- (like personal clothing) and some debts are
ularly mortgage debts, households in 2007 were nondischargeable (i.e., they encumber the
especially precarious, and so mortgage and debtor even after the bankruptcy proceeding).
credit card delinquency rates and bankruptcy People cannot escape child-support payments
rates have climbed much higher than in past or taxes, for example, by filing for bankruptcy.
recessions (Moore & Palumbo 2010, figure 3). Bankruptcy laws, and how they constitute
Financial innovation has tested the financial economic failure, are affected by politics.
literacy of ordinary households. Most people The 2005 amendments to U.S. bankruptcy
can navigate a world of savings and checking laws made it more difficult for individuals to
accounts and understand ordinary 30-year discharge their credit card debts, a change long
fixed-rate home mortgages. But the contrac- sought by credit card companies. Creditor
tual detail buried in contemporary credit card interest groups had argued that personal
agreements stymies most nonlawyers, and the bankruptcy rates increased because the stigma
financial obligations assumed under some- of personal bankruptcy had declined, and
thing like a floating adjustable-rate mortgage people had a weaker sense of obligation
with introductory teaser rate can be hard to to keep their promises. Although debtor’s
predict. Simple disclosure does not solve the prison no longer awaits the insolvent (as it
problem, and many consumers do not entirely did in eighteenth-century America), personal

bankruptcy remains a singularly disrup- MICRO CONTEXTS FOR

tive event with strongly negative connotations MACRO FINANCE
(Sullivan et al. 2006; Warren 2010, p. 394). Per-
When examined at the global level, modern fi-
sonal bankruptcies increase when the overall
nance looks exceedingly abstract, impersonal,
economy worsens, and many consumers have
and disembodied. Huge volumes of almost in-
recently felt the effects of the amended law.
comprehensibly complicated, intangible finan-
Insolvent corporate debtors have two
cial contracts with immense notional values are
main options: liquidation or reorganization
traded at lightning speed through advanced
(Carruthers et al. 2001, pp. 102–5). In the
computer networks that link the globe. Many of
former, corporate assets are pooled and dis-
the transactions involve program trading, and
tributed to creditors according to certain rules
so are executed algorithmically and without a
(for instance, secured creditors are paid before
human decision maker. Against this picture of
unsecured creditors, first mortgages before
abstraction, however, several scholars point out
second mortgages). Then the firm is simply
that contemporary global finance continues to

closed down, and employees lose their jobs. In a
unfold in very local and human-scale settings

reorganization, the troubled firm goes through
(Knorr Cetina & Bruegger 2002).
a process of organizational rebirth: debts are
In principle, modern financial transactions
renegotiated, costs are cut, and the firm may be
can be conducted from anywhere with a
shrunk, in order to return to profitable opera-
computer and Internet access. And yet, despite
tion. In both options, bankruptcy operates as a
this technological liberation from geography,
distributional exercise that shares losses among
modern financial markets cluster in a finite
corporate stakeholders, and in the proceedings
number of communities where people can, and
each tries to shift the burden onto someone
do, meet face-to-face, both in and out of work:
else. In a reorganization, for example, workers
lower Manhattan in New York City, the City of
want bank creditors to reduce their interest
London, Marunouchi in Tokyo, Bay Street in
charges rather than have wages slashed. Some
Toronto, and so on. Geographical concentra-
national bankruptcy systems are more debtor
tion creates a social connectivity that parallels
friendly than others, and even though lenders
and articulates with the economic connectivity
structure their loans to adapt to legal differ-
of global finance (MacKenzie 2004; Sassen
ences, credit recovery rates still vary across
2006, p. 27). Although the recent financial crisis
legal jurisdictions (Davydenko & Franks 2008).
was global in scope, many of the key players
Corporate bankruptcy laws also respond
came from surprisingly small communities:
to political forces. During the Asian financial
Mortgage originators were heavily concen-
crisis of 1997–1998, the IMF and World Bank
trated in Orange County, California; hedge
used the leverage afforded by their bailout loans
fund headquarters congregated in Greenwich,
to force Indonesia and South Korea to revise
Connecticut, and London’s West End; and in-
their bankruptcy laws (Halliday & Carruthers
vestment banks gathered together in New York
2009). During the 1990s, many countries
City and London (Pozner et al. 2010, p. 201).
adopted bankruptcy laws as a necessary part
The overlap of geographic proximity,
of the transition from a command to a market
social connection, structural equivalence, and
economy but then were reluctant to implement
financial market involvement helps to create
those laws because of the political impli-
well-defined peer groups for market actors.
cations of widespread corporate insolvency
Observers have often noted the prevalence in
(Carruthers et al. 2001, p. 106). China was slow
financial markets of herding and bandwagon
to adopt a new bankruptcy law, in part because
behavior, where people follow the crowd, and
of the political consequences of what such a law
contagion effects, where an innovation diffuses
might do to insolvent state-owned enterprises
rapidly through the financial community.
(Halliday & Carruthers 2009, pp. 249–50).

Decision making under conditions of uncer- Outside of leading-edge industries, social

tainty can produce widespread emulation, such relationships between bank loan officers and
that decision makers favor whatever course of borrowers affect the availability and pricing
action peers are currently pursuing. Bankers of bank loans to mid-sized businesses (Ferrary
are more likely to get into subprime lending if 2003, Uzzi & Lancaster 2003). However,
“everyone else” is doing it. And network con- Mizruchi et al. (2006) show that the impact of
nections within the community are frequently social relations on financing is contingent: The
the channels through which innovations and effect of director interlock networks on U.S.
information diffuse. Thus, researchers have corporate borrowing declined during the 1970s
found that institutional investors herd both and 1980s. Similarly, Lincoln & Gerlach (2004)
into (buying) and out of (selling) the shares of document the changing role of large banks
particular industries (Choi & Sias 2009). Simi- in Japanese business groups (keiretsu), which
larly, mutual fund managers are more likely to formerly used bank loans and equity ownership
buy (or sell) the same stock as other managers to forge the ties holding the group together. In
who are located in the same city (Hong et al. the transitional economies of eastern Europe
2005). Wall Street analysts also herd by initiat- and China, networks and factions also shape
ing or dropping coverage of NASDAQ-listed access to capital from external sources, such as
firms when their peers do so (Rao et al. 2001). foreign direct investment (Bandelj 2008, Stark
Cohen et al. (2007) find that mutual funds tend & Vedres 2006), and from internal sources,
to invest in companies when the mutual fund such as domestic banks (Shih 2004). Guseva
manager and corporate board member are em- (2008, pp. 86–90) documents the importance
bedded in the same educational network, in part of networks in the construction of a credit
because of joint access to private information. card market in post-transition Russia, whereas
Although social connectivity can take many Garvı́a (2007) underscores the role of social
forms, the significance of concrete social net- networks in syndicate lottery play in Spain.
works and relationships remains a recurrent Relationships continue to matter for finance,
theme of many sociological studies of finance. but how and why social networks matter
Venture capital is used to fund small-size high- remain works in progress.
risk firms (so-called start-ups) operating in Modern financial institutions are themselves
highly uncertain markets such as computer soft- embedded in networks of extraordinary size and
ware design and biotechnology. For every suc- complexity. If institutions are nodes, then the
cessful firm like Microsoft or Google, there are transactions among them, or claims and obliga-
a thousand failures. Research documents that tions they have to each other, form the links in
Silicon Valley firms and high-tech industries in a network. Given the very high volume of elec-
other areas are highly networked (Castilla et al. tronic trading that occurs every day, these net-
2000, Castilla 2003, Powell et al. 2005, Stuart works have an unusually high number of links.
1998, Stuart et al. 1999). A dynamic structure Using network analytic techniques originating
of relationships linking together law firms, ven- in sociology, nonsociologists have examined fi-
ture capitalists, universities, and start-up firms nancial networks in Austria (Boss et al. 2004),
allocates capital, propels technological innova- Hungary (Lublóy 2006), Great Britain (Becher
tion, circulates personnel, and tries to get small et al. 2008), and the United States (Soramäki
firms to the point where they can seek more et al. 2007), comparing their network structures
orthodox funding via an initial public offer- and drawing out implications for the stability of
ing (Ferrary & Granovetter 2009). Kogut et al. the overall financial system.
(2007) show that venture capital networks do Networks have played a role in shaping
not just agglomerate from the bottom up, but the organizational dynamics of financial
rather always involve both local and national deregulation. As regulatory barriers weak-
connections. ened in the 1990s, U.S. commercial banks

entered the market for investment banking lowers costs and narrows spreads, among other
services, including bond underwriting. Jensen trends (Stoll 2006).
(2003) finds that commercial banks that had For both participants and regulators, finan-
preexisting network ties to a debtor firm or cial markets are not places only for austere and
that possessed high status (defined in network dispassionate calculation. People trading on the
terms) were more likely to be the lead managers Paris Stock Exchange in the late 1990s routinely
in a bond issue. His results suggest that in displayed the full range of human emotions
some measure network relationships could be (Hassoun 2006), an ethnographic observation
transferred from one market to another. Jensen consistent with the psychological evidence of
(2008) also found that during the same period Lo et al.’s (2005) analysis of day traders and
incumbent investment banks were less likely Lo & Repin’s (2002) physiological evidence.
to partner with high-status commercial banks According to Pixley (2009), financial organiza-
in an underwriting syndicate, in part because tions operate with emotion rules that stipulate
high-status commercial banks posed more of a appropriate attitudes and comportment for per-
threat. sonnel (including the supreme self-confidence

Traditionally, organized exchanges and fi- noted by Ho 2009). Abolafia (2005) analyzed

nancial transactions involved mostly face-to- the transcripts of the meetings of the Fed-
face interactions. The London stock market, for eral Open Market Committee (FOMC), the
example, started in the coffee houses adjoining chief policymaking body of the Federal Re-
Exchange Alley in central London. There was serve System. Although the FOMC has abun-
little anonymity or impersonality when trading dant quantitative data and calculative capacity,
in small, stable groups. Several ethnographic the face-to-face meetings consisted of collec-
and qualitative studies have exploited this face- tive sense-making, multivocal interpretive work
to-face reality to explore the social texture of performed by participants to frame the econ-
finance. Ho (2009) studied entry-level hiring omy and pose plausible and legitimate policy
and training into contemporary U.S. invest- responses. Bandelj (2008) documents a more
ment banking, noting the strong tendency for dispersed form of sense-making by recogniz-
banks to recruit only from elite colleges and ing that foreign investment, like other cultural
business schools. The high social status of can- objects, possesses meaning. Newspaper debates
didates and their employers was emphasized re- about the significance of foreign investment in
peatedly during recruitment and hiring, culti- Slovenia reveal a complex of multiple and some-
vating and reinforcing a sense of collective self- times contradictory understandings.
worth verging on hubris (Ho 2009, pp. 40, 50, The micro context for market participants
75). Zaloom (2006) compared face-to-face trad- also includes the devices, techniques, and in-
ing in Chicago’s markets circa 2000 with elec- formation they use to comprehend and trade.
tronic trading in London. Chicago traders af- In studying these, some researchers have drawn
firmed the importance of personal relations in from prior work in the sociology of science
creating trust and supporting market liquidity (e.g., Knorr Cetina, MacKenzie) and under-
(Zaloom 2006, pp. 52–53, 61). Electronic trad- score the importance of distributed cognition
ing, by contrast, engendered a more technical (Vollmer et al. 2009). Preda (2009) shows
and rational comportment on the part of mar- that the nineteenth-century stock ticker trans-
ket participants (Zaloom 2006, p. 112). But it formed how shares were priced and how in-
is not that face-to-face trading is social, while vestors perceived prices. A public market price
electronic trading is anonymous. Rather, the is a social and technological accomplishment,
context for trading affects how markets are so- and Preda notes that the published lists used
cial. Of course, economists have also tracked to circulate price information in the early nine-
the shift to electronic trading, but their focus teenth century were unreliable, unsystematic,
is more on efficiency and how the transition out of date, and often simply false. In fact,

prices varied over the day, across traders, and two 1973 papers to answer the question: What
between purchases and sales (producing the is the value of an option (an option bestows the
spread). It was not until 1868 that the Wall right, but not the necessity, to sell, or buy, at a
Street Journal began to publish daily closing given price)? After its introduction, the Black-
prices (Preda 2009, p. 122), and price informa- Scholes model was quickly adopted as a canon-
tion diffused slowly at first. The stock ticker, ical device in options markets (and its inventors
however, gave brokerage offices direct access received Nobel prizes), although it was partly
to prices from the floor of the exchange, in real wrong (MacKenzie & Millo 2003, pp. 127–32).
time, and became the authoritative source of But the insight of the performativity approach
credible price data. Multiple and discontinu- is that we should not simply ask if the model
ous sources of price information were replaced was accurate or not. Rather, we should study
by a single, continuous, nationally distributed how the model was enacted, applied, or per-
stream of prices and price changes (Preda 2009, formed so that it could become more or less
p. 142). For someone sitting in a brokerage firm true. The significance of Black-Scholes lay in its
in Wichita, Kansas, in 1926, the stock ticker was prescriptive force, not just its descriptive verac-
effectively the stock market. ity. One finds a similar prescriptive/descriptive

In contemporary financial markets, the phe- duality in the efficient markets hypothesis
nomenology of trading is shaped by continu- closely associated with Chicago school eco-
ous flows of electronically mediated knowledge nomics and institutionalized in numerous index
and information. Traders typically view multi- funds (MacKenzie 2006, pp. 29–30, 84–88).
ple computer screens that portray a broad range Versions of the performativity idea lie be-
of information, from prices and trading vol- hind other discussions. According to Marron
umes to headline news. They are connected to (2007), the development of quantitative credit
each other via phone, email, instant messaging, scoring methods and their large-scale applica-
and text messaging. Looking at their screens, tion to consumer credit helped to institution-
they also monitor the ambient noise on their lo- alize (and not simply measure) particular con-
cal trading floor. The foreign exchange traders ceptions of risk. Vollmer et al. (2009) view the
studied by Knorr Cetina & Bruegger (2002, quantification of creditworthiness as a larger
p. 915) not only traded currencies, but also process of performativity that enhances overall
continuously exchanged information. And their calculability, commensurability, and standard-
interactions, conversations, and relationships ization. The idea of arbitrage is fundamental
with each other involved various kinds of reci- to financial economics as an intellectual disci-
procity and informal codes of conduct (pp. 924– pline, but it is also a practice that is enacted
28, 932, 936). In short, electronic markets did in concrete social, organizational, and tech-
not erase sociability—they facilitated its recre- nological circumstances (Beunza et al. 2006).
ation and redeployment into new forms. Smith (2007) draws on an older theoretical tra-
Conceptual devices have had as big an dition to argue that markets not only price and
impact on modern finance as physical de- allocate goods, but also generate the mean-
vices. Financial economics has become highly ings and shared understandings that govern
mathematical, and various proofs, ideas, and market practices and participation. And in her
formulas were enshrined in the markets as comparative study of economics professions,
traders adopted and implemented them and de- Fourcade (2009, p. 30) provocatively suggests
signed software around them. Performativity that economic knowledge may be performed
is a key concept in this regard (Callon 2007), differently in different national settings. Never-
and MacKenzie & Millo’s (2003) discussion of theless, the performativity concept has its critics
the Black-Scholes option pricing model offers (see Mirowski & Nik-Khah 2007).
an exemplary application (see also MacKenzie Several other cognitive devices, less formally
2006). The Black-Scholes model was derived in theorized than Black-Scholes, have been widely

institutionalized in the allocation and pricing Poor performance by rating agencies figured
of credit and include the credit ratings devel- prominently in the recent financial crisis and
oped for small businesses (Carruthers & Cohen prompted scholars and policy makers to wonder
2010), net present value calculations (Faulhaber how ratings became so central to the operation
& Baumol 1988), and the ratings issued by of modern capital markets. Investment banks
Moody’s, Standard and Poor’s, and Fitch securitizing home mortgages worked closely
(Rona-Tas & Hiss 2010, Sinclair 2005). Credit with the rating agencies to secure the high-
ratings and scores are now calculated for all est possible ratings for the securities they pro-
kinds of individuals and organizations and produced, and subsequent rating downgrades es-
vide a summary measure of the trustworthiness sentially proved that the initial ratings were
of debtors. Having spread over the twentieth overly optimistic (Carruthers 2010, pp. 163–
century, their near ubiquity transformed 67). Individual credit scores (i.e., FICO scores)
many types of credit decision making from an are now used to issue credit cards, to issue mort-
application of situated judgment into a more gage loans, and even to price automobile insur-
standardized algorithmic exercise (Marron ance. They pervasively affect a household’s ac-
2007, p. 104). When combined with cheaper cess to credit (Poon 2007) and also played a role
information technology, high volumes of in the subprime crisis (Poon 2009).
algorithmic credit decisions can be performed Other studies have focused less on devices
quickly and at low cost. Although quantification and more on the particular groups who use
connotes greater objectivity, some lenders still them. Beunza & Garud (2007), for example,
augment quantitative measures with socially examine securities analysts, who write reports
based information (Ferrary 2003), and the latter and make recommendations to investors and
continues to matter in some contexts (Berger & portfolio managers. Although analysts have am-
Udell 2002, Cole et al. 2004, Uzzi & Lancaster ple information, their recommendations are
2003). usually made under conditions of uncertainty.
The significance of agency-issued credit Beunza & Garud note their reliance on
ratings was further reinforced when ratings “calculative frames,” a coherent package of
were incorporated into public regulations and categories, metrics, rhetoric, and analogies, in
private contracts. Their simplicity and osten- deciding whether to make a buy or sell recom-
sible precision made them extremely portable mendation. Zuckerman (2004) also underscores
information. Both in the United States and the importance of the cognitive categories used
elsewhere, prudential regulations for pension by analysts. Stocks that do not map cleanly onto
funds and insurance companies commonly industry category systems (incoherent stocks)
prohibit investments that are too risky, where are more vulnerable to conflicting signals, and
risk is defined in terms of a privately issued rat- that vulnerability increases trading volume and
ing. Thus, an insurance company cannot invest volatility.
in corporate bonds that are below investment
grade. Ratings also figure centrally in the Basel
II bank standards, in which capital require- CONCLUSION
ments are adjusted by the riskiness of bank The current crisis accelerated an already
assets (Langohr & Langohr 2008, pp. 436–37). growing sociological interest in finance, and it
Outside of regulation, ratings have been confirmed the importance of the topic. As befits
incorporated as triggers in private contracts, so a global phenomenon, the leading research on
that, for example, a rating downgrade means finance is done by an international group of
that a borrower has to post additional collateral scholars who engage in genuine intellectual
or accelerate its repayments. High ratings exchange, unlike in many other areas of sociol-
also protect a fiduciary from legal liability if ogy. Studies of finance have also enabled new
investments go sour (Coffee 2006, p. 294). conversations between economic sociology and

the sociologies of science, culture, law, organi- inequalities, and all that engenders them,
zations, and the professions. And finance offers should be systematically extended to credit.
new ways to develop and extend older, core in- People gain differential access to purchasing
sights about the importance of social networks power through the income they receive (earned
and the embeddedness of finance. Much of the and unearned), the wealth they possess (inher-
research is empirically motivated in the sense ited and accumulated), but also through the
that finance has recently changed in interesting money they can borrow. Credit policies that ap-
and consequential ways. Finance is also central pear to benefit disadvantaged borrowers, such
to processes such as globalization and connects as subprime lending, may not have that effect
directly to the traditional sociological topics of (Rugh & Massey 2010). Some progress has been
inequality, politics, institutions, organizations, made in studying inequality and borrowing, es-
and public policy. For some, the growing pecially for specific types of credit such as home
salience of technical expertise, combined with mortgages, but the topic needs more work. A
finance’s higher status and power, activated second issue crosses between macro and micro
sociology’s debunking impulse. In the 1990s, finance. It is clear, for example, that credit circu-
modern finance started to look and sound like lates through formal and informal channels, and
the Great Oz, and sociologists sought for the although formal institutions are easier to study,
curtains to peer behind. Helpfully, the financial informal credit is often very significant. This is-
crisis blew those aside. sue concerns finance in relation to law and calls
We characterize current research as a mo- attention to the fact that formal and informal ar-
saic chiefly because it is more an assemblage rangements operate interdependently, not sep-
of scholarly activity than a sustained, coherent, arately. Third, the micro contexts for macro fi-
and unitary enterprise. Topics involve partic- nance call for further work. For instance, much
ular clusters of actors, activities, contexts, and of finance involves routine valuation, calculat-
rules, and some have been, and will continue to ing the current or future worth of something. At
be, more thoroughly covered than others. One the nadir of the current crisis, key financial ac-
group of scholars focuses on corporate gover- tors felt that market prices no longer reflected
nance and how firms became beholden to fi- fundamental values, and a battle ensued over
nancial markets and institutional investors, with mark-to-market accounting. The plasticity of
an emphasis on shareholder value and short- valuation is also apparent with every accounting
term share prices. Another group focuses on restatement, but such episodes do not simply re-
the techniques, methods, and practices of high flect valuation-gone-wrong. Rather, they reveal
finance, studying their adoption and spread, how much value is a contested and provisional
and viewing their significance from the per- judgment whose complexity lies buried beneath
spective of performativity. Several scholars have a surface of numbers and quantification. Finally,
imported sociology’s traditional focus on social although sociology already focuses on social
relationships and networks and used this to illu- relations and networks, and despite the well-
minate many aspects of finance. And, of course, recognized importance of networks for finance,
many are now diagnosing the current crisis. how and why networks matter remain open
Several directions for future research questions. Providing answers will encourage re-
seem especially promising. On the macro- searchers to consider the content and meaning
finance side, the study of income and wealth of social ties, in addition to their structure.
DISCLOSURE STATEMENT
The authors are not aware of any affiliations, memberships, funding, or financial holdings that
might be perceived as affecting the objectivity of this review.

ACKNOWLEDGMENTS
The authors wish to thank Wendy Espeland and Douglas Massey for helpful comments.
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SO37-Frontmatter ARI 11 June 2011 11:38
Annual Review
of Sociology
Volume 37, 2011
Contents
Prefatory Chapters
Reflections on a Sociological Career that Integrates Social Science

with Social Policy

William Julius Wilson p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 1
Emotional Life on the Market Frontier
Arlie Hochschild p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p21
Theory and Methods

Foucault and Sociology
Michael Power p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p35
How to Conduct a Mixed Methods Study: Recent Trends in a Rapidly
Growing Literature
Mario Luis Small p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p57
Social Theory and Public Opinion
Andrew J. Perrin and Katherine McFarland p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p87
The Sociology of Storytelling
Francesca Polletta, Pang Ching Bobby Chen, Beth Gharrity Gardner,
and Alice Motes p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 109
Statistical Models for Social Networks
Tom A.B. Snijders p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 131
The Neo-Marxist Legacy in American Sociology
Jeff Manza and Michael A. McCarthy p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 155
Social Processes
Societal Reactions to Deviance
Ryken Grattet p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 185
v
Formal Organizations
U.S. Health-Care Organizations: Complexity, Turbulence,
and Multilevel Change
Mary L. Fennell and Crystal M. Adams p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 205
Political and Economic Sociology

Political Economy of the Environment
Thomas K. Rudel, J. Timmons Roberts, and JoAnn Carmin p p p p p p p p p p p p p p p p p p p p p p p p p p p p 221
The Sociology of Finance
Bruce G. Carruthers and Jeong-Chul Kim p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 239
Political Repression: Iron Fists, Velvet Gloves, and Diffuse Control
Jennifer Earl p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 261

Emotions and Social Movements: Twenty Years of Theory

and Research
James M. Jasper p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 285
Employment Stability in the U.S. Labor Market:
Rhetoric versus Reality
Matissa Hollister p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 305
The Contemporary American Conservative Movement
Neil Gross, Thomas Medvetz, and Rupert Russell p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 325
Differentiation and Stratification

A World of Difference: International Trends in Women’s
Economic Status
Maria Charles p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 355
The Evolution of the New Black Middle Class
Bart Landry and Kris Marsh p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 373
The Integration Imperative: The Children of Low-Status Immigrants
in the Schools of Wealthy Societies
Richard Alba, Jennifer Sloan, and Jessica Sperling p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 395
Gender in the Middle East: Islam, State, Agency
Mounira M. Charrad p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 417
Individual and Society

Research on Adolescence in the Twenty-First Century
Robert Crosnoe and Monica Kirkpatrick Johnson p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 439
vi Contents
Diversity, Social Capital, and Cohesion

Alejandro Portes and Erik Vickstrom p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 461
Transition to Adulthood in Europe
Marlis C. Buchmann and Irene Kriesi p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 481
The Sociology of Suicide
Matt Wray, Cynthia Colen, and Bernice Pescosolido p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 505
Demography
What We Know About Unauthorized Migration
Katharine M. Donato and Amada Armenta p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 529
Relations Between the Generations in Immigrant Families
Nancy Foner and Joanna Dreby p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 545

Urban and Rural Community Sociology

Rural America in an Urban Society: Changing Spatial
and Social Boundaries
Daniel T. Lichter and David L. Brown p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 565
Policy
Family Changes and Public Policies in Latin America [Translation]
Brı́gida Garcı́a and Orlandina de Oliveira p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 593
Cambios Familiares y Polı́ticas Públicas en América Latina [Original,
available online at http://arjournals.annualreviews.org/doi/abs/
10.1146/annurev-soc-033111-130034]
Brı́gida Garcı́a and Orlandina de Oliveira p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 613
Indexes
Cumulative Index of Contributing Authors, Volumes 28–37 p p p p p p p p p p p p p p p p p p p p p p p p p p p 635

Cumulative Index of Chapter Titles, Volumes 28–37 p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 639
Errata
An online log of corrections to Annual Review of Sociology articles may be found at

http://soc.annualreviews.org/errata.shtml
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SO37CH12-Carruthers ARI 1 June 2011 11:48

Annu. Rev. Sociol. 2011. 37:239–59 Keywords

INTRODUCTION and lending, but also investing, rating, analyz-

sis, sociologists had begun to study ﬁnance.

Finance involves an interconnected set of

240 Carruthers · Kim

www.annualreviews.org • The Sociology of Finance 241

242 Carruthers · Kim

www.annualreviews.org • The Sociology of Finance 243

244 Carruthers · Kim

the efﬁciency and rationality of markets. Grow- widespread bureaucratization of California

www.annualreviews.org • The Sociology of Finance 245

possessed signiﬁcant autonomy, traditional in indebtedness came from mortgage debt

246 Carruthers · Kim

their white-owned counterparts (Blanchﬂower understand their own ﬁnancial obligations

www.annualreviews.org • The Sociology of Finance 247

bankruptcy remains a singularly disrup- MICRO CONTEXTS FOR

that contemporary global ﬁnance continues to

unfold in very local and human-scale settings

248 Carruthers · Kim

Decision making under conditions of uncer- Outside of leading-edge industries, social

www.annualreviews.org • The Sociology of Finance 249

threat. sonnel (including the supreme self-conﬁdence

Traditionally, organized exchanges and ﬁ- noted by Ho 2009). Abolaﬁa (2005) analyzed

250 Carruthers · Kim

effectively the stock market. ity. One ﬁnds a similar prescriptive/descriptive

www.annualreviews.org • The Sociology of Finance 251

252 Carruthers · Kim

www.annualreviews.org • The Sociology of Finance 253

Socioecon. Rev. 6:671–702

254 Carruthers · Kim

www.annualreviews.org • The Sociology of Finance 255

Law Bus. Financ. 12:289–361

256 Carruthers · Kim

Perspective. Cambridge, UK/New York: Cambridge Univ. Press

www.annualreviews.org • The Sociology of Finance 257

& Preda 2006, pp. 17–37

258 Carruthers · Kim

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Volume 37, 2011

Reﬂections on a Sociological Career that Integrates Social Science

with Social Policy

Theory and Methods

Political and Economic Sociology

Jennifer Earl p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 261

Emotions and Social Movements: Twenty Years of Theory

Differentiation and Stratification

Individual and Society

Diversity, Social Capital, and Cohesion

Nancy Foner and Joanna Dreby p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 545

Urban and Rural Community Sociology

Cumulative Index of Contributing Authors, Volumes 28–37 p p p p p p p p p p p p p p p p p p p p p p p p p p p 635

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