The Making of Homo Probabilis
A review of Ivan Ascher’s Portfolio Society
Ascher, Ivan. 2016. Portfolio society: on the capitalist mode of prediction. New York: Zone books.
Portfolio society is such a well-written book of economic and political theory that it is hard to put down–no small feat for the genre. Ascher knows how to tell a story, and, like his model Marx, does so with remarkable wit and charm, even as he accounts for the financialization of the economies of the capitalist core and the accompanying neoliberal turn, which ultimately depend on the creation of a new subjectivity, homo probabilis. He tells this story using a brilliant homology between the creation of the labor relationship (from Capital Volume One) and that of the credit relation, now so central to our economic existence, in a way that sheds light on the 2008 global financial collapse.
The “Great Risk Shift” that started in the 1980s with the dismantling of the welfare state, after which individuals had to begin bearing the risk inherent in capitalism, Ascher does not see as merely a new division of creditor/debtor replacing capital/labor; rather, he finds a new division “that separates those who are free to run the race from those who are free to bet on its outcome,” those whose “credibility” must be “calculable,” from those with the power to calculate.
In order for this to happen, the story goes, a new “financial enclosure” forced an ever increasing number of people into financial markets just as several technologies of risk calculation simultaneously became available. The welfare state and the increased bargaining power of labor had created a post-war “social contract” between workers and employers or workers and the state. As labor’s bargaining power declined in the late 1970s and as government safety nets began to disappear, more and more individuals began to borrow either to maintain their living standards or to meet unexpected contingencies.
The new knowledges and technologies arose out of economic theory and mathematics, but required several simplifications. First, the myth of efficient markets, where perfect information is, in theory, available instantaneously, everywhere and already reflected in the asset prices of securities. Second, the portfolio asset theory posited that risk must be related to its required rate of return, but that the risk of a portfolio is decreased through diversification. Third, the Black-Scholes equation made possible the pricing of “American options,” then of complex derivatives, based on those previous assumptions. Lastly, a double reduction made individual and market risks calculable. The FICO score reduced a borrower’s credit worthiness, “credibility,” to a number, while any contingent economic event was reducible to a likelihood. Suddenly all individuals were comparable, all risks commensurable, in an objective, distant, impartial, mathematical way. Or so it seemed.
But the myth of efficient markets, the 2008 crisis taught, hides the reality of the few “market makers” and “market gamers” who seek “rents” or “arbitrage” profits to the detriment of the many. And the system that makes individual risks less significant within a larger portfolio also makes the individual matter no more than her FICO score. Moreover, the alchemy of diversification appears to work best for those “too big to fail,” if at all. And both these reductions depend on asymmetric relationships not legible in numbers calculated at a distance.
Ascher uncovers a new hidden asymmetric social relation, a new subjectivity, a new mode of violence, that alerts us to the dangers of portfolio theory and quantitative “casino capitalism.” Homo probabilis and the “financial enclosure” are original contributions that help us understand capitalism in the early 21st century. But the book seems to be missing an element, a something to be done. Without it, it ends as a gloomy zombie movie featuring infectious banks in financial meltdown. What about debt relief? What about alternative currencies? Would either of those mitigate the inequity of the violence? What are the possible forms of resistance? One is ultimately left wishing for more of the political, or at least its possibility. But economic life is neither fairy tale nor Hollywood movie, Ascher would undoubtedly reply.
Fila Sophia 