The Great Recession and the Contradictions of Contemporary Capitalism

The Great Recession and the Contradictions of Contemporary Capitalism

New Directions in Modern Economics series

Edited by Riccardo Bellofiore and Giovanna Vertova

The current crisis is one of the great crises punctuating the long history of capitalism, and to be properly understood it is vital to take into account its ongoing structural transformation. This book offers plural perspectives on the Great Recession, placing the analysis of finance, class and gender at the center of the debate. It begins with a comprehensive insight into the crisis, before moving on to focus on debt, asset inflation and financial fragility. Following chapters discuss global imbalances, structural monetary reform and the management of public finance, including a investigation of the Italian experience. The book concludes with novel contributions on the gender dimension of the crisis and the analogies between a nuclear and financial chain reaction.

Chapter 5: Conventions and disruptions

Christian Marazzi

Subjects: economics and finance, money and banking, post-keynesian economics


The Keynesian concept of ‘convention,’ which appears for the first time in Chapter 12 of The General Theory, is a major contribution to the analysis of the functioning of financial capitalism in recent years. Along with the theory of regulation, the economics of convention, which has been developed in France since the 1980s thanks to the work of, among others, Aglietta and Orlean (1982), allows an interpretation of the formation of financial bubbles starting from the issue, central in finance theory, of uncertainty. Given that knowledge of the future cannot be objective, but is irreducibly subjective, it follows that the opinion of the multiplicity of traders plays a key role in determining the prices of securities. Consequently, the concept of the bubble, itself defined as a persistent gap between the value of the security and the price observed, loses its meaning. The theory of convention considers the financial market as a ‘cognitive machine,’ whose function is to produce a reference opinion, perceived by all operators as an expression of ‘what the market thinks.’ This is because of the self-referential nature of speculation, where each individual makes up his mind according to what he anticipates the majority opinion to be (the famous ‘beauty contest model’ used by Keynes 1936). The market price, as the expression of a salient opinion which imposes itself on agents, can therefore be considered as a convention.

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