"The Quants of Wall Street: Risk and the Ethics of New Financial Technologies"
SJWG Rapporteur Report
3 March 2016
Critical Listener Report by Andy Murray, Sociology
Sherry Paul CFP®, CIMA®, CRPC®, Senior Vice President, Wealth Advisor, UCSC Alumna
Daniel Friedman, UCSC Distinguished Professor of Economics, Author of Morals and Markets
Anne Price, Program Director of the Closing the Racial Wealth Gap Initiative, Insight
Moderated by Joe Klett Visiting Professor of Sociology at UCSC and Nirvikar Singh, Director
of the Center for Analytical Finance, Distinguished Professor of Economics at UCSC.
Co-Sponsored by the Blum Center, Center for Analytical Finance, Center for Labor Studies,
Cowell College, Re-Thinking Capitalism, and the Sociology Department.
This Science & Justice Working Group event was a relatively large affair, consisting of three
panelists and two moderators. Its attendees filled the large room, meaning there were too many
folks for the usual Science and Justice Research Center introductions. The participants varied in
their backgrounds. The first, Sherry Paul, is a UCSC alumna and a wealth advisor who works on
Wall Street. The second, Daniel Friedman, is a Distinguished Professor of Economics at UCSC.
The third, Anne Price, works out of Oakland for the Insight Center for Community Economic
Development, where she directs an initiative to address the racial wealth gap. UCSC faculty
members Joe Klett, Visiting Professor of Sociology, and Nirvikar Singh, also a Distinguished
Professor of Economics, served as moderators. The event was put on by a larger-than-usual
number of co-sponsors, showing that the matters of concern—wealth inequality and the winners
and losers of high tech finance—speak to many audiences. Jenny Reardon, Director of the
Science and Justice Research Center, provided some more specific framing questions in her
introduction: are the instruments and intricacies of finance capital too complex to understand? Or
are we simply not looking at them closely enough? If the latter is the case, what could cause us to
start looking, if such a major event the 2007-08 financial crisis wasn’t enough of an impetus?
After all, multiple people in the room had personal stories about home ownership and loss of
value suffered as a result of the crisis.
Sherry Paul opened with a few jokes about her time at UCSC and how she found her way back (a
story that, like the financial crisis, was linked to disaster and misunderstanding) before moving
into the meat of her talk. Paul discussed the democratization of financial access and situated her
role as a financial steward who helps to protect individuals and families from the risks of
markets. Nonetheless, she talked about her move into finance capital as moving “into the belly of
the beast” and to “the dark side.” She spent a lot of time focusing on the “humanity” aspect of
finance, rather than the “math,” noting that the latter is much easier to learn. She compared
Silicon Valley to Wall Street, noting its lack of inclusion of women and people of color, and
suggested that high tech finance, in a sense the marrying of Silicon Valley and Wall Street,
represents a second iteration of the Industrial Revolution. Ultimately, her main points were about
restoring and managing the human element of finance, better managing human behavior around
investment rather than turning to robotic financial advisers. In defense of what amounts to an
improved market rationality, she asserted that “markets tend to revert to the mean no matter what
point they’re at in an industrial revolution.” Nirvikar Singh followed up on Paul succinctly,
affirming that “technology is not a substitute for ethics.”
Daniel Friedman attempted to summarize “the good, the bad, and the ugly” of markets, asking
what they do and don’t do well, and how financial capital instruments change things. First, he
asserted that markets scale up well and that they aggregate their participants’ resources and
information. However, markets can “go bad” when cheating, exclusion, currying favor, and
buying influence occur. Friedman asserted that this can happen very easily, and was in fact
dominant in markets until about 200 years ago. Markets, he argued, are also prone to bubbles and
crashes. “The ugly” is that because of these tendencies, markets must be regulated, but this
impedes both “good” and “bad” finance. He talked about financial instruments that increase the
efficiency and scalability of trading at the expense of personal connections, arguing that such
technologies may increase market instability. He argued that changing the way in which time is
measured—“making time granular in a different format”—could solve some of the issues with
such high-frequency trading. He went through his final bits of advice quickly, advocating “smart
regulation” and proper incentives.
Anne Price began her talk by noting that she was “probably going to be the oddball.” Her
discussion focused on accumulated, structural inequalities. These racial inequalities mean that
simply guaranteeing access to financial markets is insufficient if greater wealth equality is indeed
the goal. She framed the push for racial wealth equality as about “movement building” and
“pulling the curtain back.” She portrayed finance capital as a siphon deliberately designed to take
wealth from people. Metaphors and language were very important to her framing of markets, and
she insisted that language that grants agency to “the economy” obfuscates how “people create
and make deliberate changes to the economy.” She argued against viewing economics as
something that just happens, and instead viewing it as a series of choices, often motivated by
emotion rather than facts. Price received loud applause at the end of her talk, the loudest of the
event.
During the questioning, each of the panelists solidified their positions. In response to a question
from Nirvikar Singh about robotic financial advisers, Sherry Paul argued that she was against
them because they would deepen existing inequalities, allowing people to capitalize on a lack of
trust. She again argued for changing the way people approach markets and advocated having the
“greedy investor [not be] the assumed and presumed definition.” In response to a question from
Joe Klett, Dan similarly reasserted that there needs to be an ethical foundation for finance
capital, or it will not work—though it was not entirely clear what “working” meant in this
instance. Returning to discourse, Anne Price lamented that the housing crisis was a missed
opportunity to talk about the roles of the government and personal responsibility in markets.
The transition to audience questions made it clear that there was a notable tension between a
more favorable, optimistic view of markets—such as that espoused by Sherry Paul and Daniel
Friedman—and those who made the argument that inequality is an inherent feature of a market
system—as Anne Price did. This tension was the most notable of the event, as most of the
audience questions came from sociology graduate students and professors. After noting the
growing inequality in Silicon Valley, a few audience members asked if there was an inherent
logic to markets that means that they require the existence of an underclass, or if the problems
could be fixed through some form of regulation. These questions were greeted with an
acknowledgement of their scope, observations that time was limited, and laughter. This really
exposed the rift in beliefs about markets, made all the more clear when a sociology graduate
student pointed out that in in order for markets to “always recover” as Paul had asserted they do,
they require intervention in the form of taxpayer money. “Is the market becoming a religion?” he
asked, echoing Price’s earlier points about the importance of discourse—in this case about faith
in the ability of the market to “recover”—and about paying attention to the actual economic
decisions that people make.
These themes, of the logic of markets, and the role of individual agency and action versus
economic structure, proved to be the sticking points. These points were reiterated in the brief
closing statements that each panelist made. Price most walked the line between individual
agency and inherent logics, paying a great deal of attention to longstanding structural
inequalities, while also emphasizing the choices that people deliberately make to change the
economy. Paul, on the other hand, argued that there is no inherent logic to markets, that they are
merely “systems being created by people.” Despite this, she also acknowledged that capitalism is
fundamentally selfish, but returned to market optimism by asserting that we need to figure out a
way for “selfishness to allow us to work together.” Friedman seemed to err more on the
structural side, finishing by saying that markets could potentially function well and stay in
recovery for a long time, but that it was the nature of markets that there would be periodic crises.
While we ran out of time on this particular day, these tensions between the agency of individuals
and institutions, structures, and logics—longstanding in the social sciences—can provide plenty
of fodder for future conversations: about how people make markets and how markets make
people, and about what kinds of futures the new technologies of finance capital are helping usher
into existence.
