New Books in Finance

The authors of Chains of Finance: How Investment Management is Shaped (Oxford University Press, 2017) make points that professionals already know and that end-investors ought to know: that there are a lot of cooks in the investment kitchen, and that the investment process is materially shaped by the chain of individuals and institutions that go into manufacturing investment products. Advisors, consultants, compliance, sales, portfolio managers, analysts, traders, distributors, custodians---these job titles are just part of that machinery. And they all interact with one another in a variety of ways. Most people operating in a complex industry understand that there is a lot going on behind the scenes that affects the ultimate outcome of the manufacturing process or service generation. Investment management is the same. Chains of Finance is part of a growing literature in the social studies of finance that highlights that investment is an interactive social process, not a cut and dried application of some algorithm, even when it is promoted as a computer-driven, machine only exercise. Please listen to my interview with one of the authors, Philip Grant, here....Daniel Peris is Senior Vice President at Federated Investors in Pittsburgh. Trained as a historian of modern Russia, he is the author most recently of Getting Back to Business: Why Modern Portfolio Theory Fails Investors. You can follow him on Twitter @Back2BizBook or at http://www.strategicdividendinvestor.com Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

Federal housing finance policy and mortgage-backed securities have gained widespread attention in recent years because of the 2008 financial crisis, but government credit has been part of American life since the nation’s founding. Sarah L. Quinn’s new book dissects the political and social development of these policies in American Bonds: How Credit Markets Shaped a Nation (Princeton University Press, 2019). Quinn is associate professor of sociology at the University of Washington.From the 1780s, when national land credit policy was established, to the postwar foundations of our current housing finance system, Quinn examines the evolution of securitization and federal credit programs. American Bonds shows that since the Westward expansion, the U.S. government has used financial markets to manage America’s complex social divides, and politicians and officials across the political spectrum have turned to land sales, home ownership, and credit to provide economic opportunity without the appearance of market intervention or direct wealth redistribution. Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

How are markets made? In Automating Finance: Infrastructures, Engineers, and the Making of Electronic Markets (Cambridge University Press, 2019), Juan Pablo Pardo-Guerra, an assistant professor in sociology at the University of California, San Diego, explores the history of the finance industry to understand the role of markets and technologies in contemporary capitalism. The book offers a detailed theoretical engagement with the personalities and technological changes underpinning the modern system of automated finance. It uses the case study of the development of the London Stock Exchange, looking at the social relations embedded in financial markets, before moving to look at the global, American system. Charting the move from trading floors to trading screens, the book considers individuals and broader social systems shaping enabling and constraining behaviour in the world of finance. Overall the book offers a rethinking of the meaning of markets, and is essential reading across social science, history, and management studies. Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

Small is beautiful, right? Isn't that what we've all been taught? From Jeffersonian politics to the hallowed family farm, from craft breweries to tech start ups in the garage. Small business is the engine and the soul and the driver of the American system. That's the dominant narrative. And according to Robert Atkinson and Michael Lind, it is really wrong. In their new book, Big is Beautiful: Debunking the Myth of Small Business (MIT Press, 2018), the authors review the empirical evidence and conclude that large businesses create more, generate more intellectual capital, pay better, pollute less, are more diverse, and score higher on pretty much any measure of economic or employee well-being that you can come up with. It is a shocking conclusion, but one that everyone involved in the regulation of business should be aware of. (And, by the way and probably a surprise to many, small business has had its thumb on the regulatory scales for much of the republic's history.) Big is Beautiful goes against--way against--the prevailing narrative about business in this country.Daniel Peris is Senior Vice President at Federated Investors in Pittsburgh. Trained as a historian of modern Russia, he is the author most recently of Getting Back to Business: Why Modern Portfolio Theory Fails Investors. You can follow him on Twitter @Back2BizBook or at http://www.strategicdividendinvestor.com Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

The machines have taken over.... For many operating in investment management, it can certainly seem that way: factor investing, algorithmic investing, dynamic hedging instruments, risk management derivatives driven by changes in market prices, etc. dominate much of the investment narrative. And now and again these supposedly superior investment approaches get blamed for causing big blow ups. If portfolio insurance led to a wave of computer selling in 1987, then the chaos generated by the models in 2008-2009 was incomparably larger. So say the critics. But in Financial Models and Society: Villains or Scapegoats (Elgar, 2018), Ekaterina Svetlova begs to differ. She looks at how quantitative models are actually used by investors and finds a whole space where human judgment, intuition and non-model based factors come into play as to when and how and to what degree financial models are actually implemented. This social social of finance is well known in academia; it needs to be better known among practitioners. Listen to her interview here.Daniel Peris is Senior Vice President at Federated Investors in Pittsburgh. Trained as a historian of modern Russia, he is the author most recently of Getting Back to Business: Why Modern Portfolio Theory Fails Investors. You can follow him on Twitter @Back2BizBook or at http://www.strategicdividendinvestor.com Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

What can we learn from the financial crisis that brought Hitler to power? How did diplomatic deadlock fuel the rise of authoritarianism? Tobias Straumann shares vital insights with 1931: Debt, Crisis, and the Rise of Hitler (Oxford University Press, 2019). Through his fast-paced narrative, Straumann reveals how inflexible treaties created an inescapable debt trap that spawned Nazism. Caught between investor confidence and domestic political pressure, unrealistic agreements left decision makers little room for maneuver when crisis struck. 1931 reminds us of hard lessons relevant to designing resilient agreements today.Tobias Straumann is a Senior Lecturer at the University of Zurich and teaches economic history both to historians and economists. His research interests span numerous contributions to contemporary European business, monetary, and financial history. 1931 is his fourth book.Ryan Stackhouse is a historian of Europe specializing in modern Germany and political policing under dictatorship. His book exploring Gestapo enforcement practices toward different social groups is nearing completion under the working title A Discriminating Terror. He also cohosts the Third Reich History Podcast and can be reached at john.ryan.stackhouse@gmail.com or @Staxomatix. Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

In 1647, the French author Étienne Cleirac asserted in his book Les us, et coustumes de la mer that the credit instruments known as bills of exchange had been invented by Jews. In The Promise and Peril of Credit: What a Forgotten Legend about Jews and Finance Tells Us about the Making of European Commercial Society (Princeton University Press, 2019), Francesca Trivellato draws upon the economic, cultural, intellectual, and business history of the period to trace the origin of this myth and what its usage in early modern Europe reveals about contemporary views of both commerce and Judaism. Trivellato begins by explaining the development of bills of exchange in the Middle Ages as a means of transferring funds across long distances, ones which helped the expansion of international trade. Though used by both Christians and Jews, concerns about crypto-Judaism among converted Christians in the town of Bordeaux where Cleirac lived may have been key to his belief in their association with the bills. From Cheirac’s book the myth then spread throughout much of western and central Europe during the 18th and 19th centuries, where it was used both to support anti-Semitic views and as examples by philo-Semitic writers such as Montesquieu of the superior commercial ability of Jews. Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

If you are reading this, you have probably run into the "Chicago" model at some point or another, in terms of public policy, orthodox modern finance, macro or micro economics, or any other arena where theoretical abstractions about human behavior (generally but not exclusively about or derived from economics) have been turned into specific and often highly rigid and mechanistic policy guidelines. That's the Chicago model.  In Where Economics Went Wrong: Chicago's Abandonment of Classical Liberalism(Princeton University Press, 2018), David Colander and Craig Freedman track the transition from the great Classical economists, who went to great lengths to make clear that their abstractions had little direct relevance to policy or would-be policy, to the 20th-century giants at the University of Chicago (Friedman, Stigler, Director), who found themselves responding to aggressive claims from other economists engaged in policy and politics, as well the broader context of ideological challenges to the free market system championed in the West.  Their answer was a robust defense of the market and rejection of government involvement in almost all human affairs.Colander and Freedman stay more or less neutral on the ideology; their topic is the methodology.  Is abstract economic thought fit for specific policy application or not? John Stuart Mill thought not. David Ricardo and Adam Smith engaged the issue.  The Chicago School said sure to policy prescriptions, especially if they countered government involvement championed by economists of different leanings. Whether or not you are an admirer of the Chicago model, you will want to make sure you understand the methodological transition that brought their Ivory Tower views into your everyday affairs.Daniel Peris is Senior Vice President at Federated Investors in Pittsburgh. Trained as a historian of modern Russia, he is the author most recently of Getting Back to Business: Why Modern Portfolio Theory Fails Investors. You can follow him on Twitter @Back2BizBook or at http://www.strategicdividendinvestor.com Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

Recent economic crises have made the centrality of debt, and the instability it creates, increasingly apparent. In Beyond Debt: Islamic Experiments in Global Finance (University of Chicago Press, 2018), anthropologist Daromir Rudnyckyj illustrates how the Malaysian state, led by the central bank, is seeking to make the country’s capital Kuala Lumpur the central node of global financial activity conducted in accordance with Islam. Beyond Debt tracks efforts to re-center international finance in an emergent Islamic global city and, ultimately, to challenge the very foundations of conventional finance.Daromir Rudnyckyj is Associate Professor of anthropology at the University of Victoria.Hillary Kaell co-hosts NBIR and is Associate Professor of Religion at Concordia University in Montreal, Canada. Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance

Think that today's debates about the role of the Federal Reserve Bank, financial regulation, "too big to fail", etc. are new?  Think again. Who should control banks, who should regulate banks, what should banks even do--these questions have been debated since the founding of the Republic.  Replace CNBC's David Faber with Alexander Hamilton, and Joe Kernan with Thomas Jefferson (or James Madison) and the arguments about banking, moral hazard, and regulation would be largely the same, though the attire would be quite different.Kathleen Day's new book Broken Bargain: Bankers, Bailouts, and the Struggle to Tame Wall Street (Yale University Press, 2019) provides a detailed two-century history of the give and take between government authority and financial institutions (and the individuals caught between them).  The challenges over time have changed--the absence of a single currency in the early 19th century, insufficient credit in the late 19th century, the roaring and patently stupid 1920s, and then the whole range of financial innovations in the postwar period--but the key issues recur over and over again. Day sides in the end with the need for consistent regulation from impartial and empowered bureaucrats, but alas, the last two centuries have shown that they are hard to come by.  Not everyone will agree with her take on banks and regulation, but there can be no doubt about the underlying "capitalism is messy" theme running through our history and this book.Daniel Peris is Senior Vice President at Federated Investors in Pittsburgh. Trained as a historian of modern Russia, he is the author most recently of Getting Back to Business: Why Modern Portfolio Theory Fails Investors. You can follow him on Twitter @Back2BizBook or at http://www.strategicdividendinvestor.com Learn more about your ad choices. Visit megaphone.fm/adchoicesSupport our show by becoming a premium member! https://newbooksnetwork.supportingcast.fm/finance