The Empire of Value

André Orléan; translated by M. B. DeBevoise

An argument that conceiving of economic value as a social force makes it possible to develop a new and more powerful theory of market behavior.With the advent of the 2007–2008 financial crisis, the economics profession itself entered into a crisis of legitimacy from which it has yet to emerge. Despite the obviousness of their failures, however, economists continue to rely on the same methods and to proceed from the same underlying assumptions. André Orléan challenges the neoclassical paradigm in this book, with a new way of thinking about perhaps its most fundamental concept, economic value.Orléan argues that value is not bound up with labor, or utility, or any other property that preexists market exchange. Economic value, he contends, is a social force whose vast sphere of influence, amounting to a kind of empire, extends to every aspect of economic life. Markets are based on the identification of value with money, and exchange value can only be regarded as a social institution. Financial markets, for example, instead of defining an extrinsic, objective value for securities, act as a mechanism for arriving at a reference price that will be accepted by all investors. What economists must therefore study,Orléan urges, is the hold that value has over individuals and how it shapes their perceptions and behavior.Awarded the prestigious Prix Paul Ricoeur on its original publication in France in 2011, The Empire of Value has been substantially revised and enlarged for this edition, with an entirely new section discussing the financial crisis of 2007–2008.

A Note on the Translation vii  Tables and Figures ix  Introduction 1  Part I Critique of Political Economy  1 Substance Value 9  The Substance Hypothesis • Barter and the Exclusion of Money  • The Undervaluing of Exchange • Order from Disorder • The Fetishism of the Commodity • A Singular Science  2 Market Objectivity 37  The Utilitarian Relationship to Things and the Problem of General Equilibrium • Walrasian Adjustment and Mediation by Price • The Mimetic Hypothesis • Asymmetric Information, Quality, and Conventions • Uncertainty and Money • Market Objectivity and Ideal-Type Models  3 Scarcity and Status 85  Utility versus Prestige • Scarcity Reconsidered • Veblen ’ s Theory of Emulation • The Mimetic Model of Competition  • A Return to Value  Part II The Institution of Value  4 Money 107  Money versus Value • The Conceptual Origins of Money  • Currency Crises • The Objectivity of Value • The Quantity Theory of Money • Economics and the Social Sciences  5 A New Approach to Value 141  Money and Confidence • Common Emotion • Durkheim ’ s Theory of Value • The Role of Religion • The Liberal Conception of Money • Monetary Miracles  Part III Market Finance  6 Financial Valuation 175  The Probabilistic Postulate and the Intrinsic Value of Shares  • The Efficiency of Financial Markets • Radical Uncertainty and the Irreducible Subjectivity of Individual Valuations  7 Liquidity and Speculation 197  Enterprise and Speculation • Liquidity as a Social Institution  • Self-referentiality and Conventional Belief • The Inefficiency of Financial Markets • Excessive Volatility, Speculative Bubbles, and Blindness to Disaster • Liquidity and Convention  Part IV Self-referential Finance and the Subprime Crisis  8 Euphoria: 2003 to 2007 241  The Real-Estate Bubble • The Credit Bubble • The Mechanisms of Euphoria • Securitization and the Role of Economists • The Underestimation of Credit Risk • Bubble or No Bubble? • The Market Weighs In  9 The Crisis: 2007 to 2008 285  The Panic of August 2007 • Deleveraging • The Role of Financial Liquidity  Conclusion 311  References 325  Index 343