QJS - Ontological Rhetoric of Neoclassical Economics & Its Relation to 2008 Financial Crisis

Banking on the Present: The OntologicalRhetoric of Neo-Classical Economics andIts Relation to the 2008 Financial CrisisJoshua S. Hanan, Indradeep Ghosh & Kaleb W. Brooks

This essay performs a rhetorical criticism of neo-classical economics, with particularattention to its methodological influence on a number of faulty mathematical modelsthat lay at the epicenter of the 2008 financial crisis. Going beyond Goodnight andGreens mimetic conception of economic rhetoric, which positions rhetoric as a site ofmediation between symbolic and material spirals, we argue that the rhetoric of neo-classicism is best understood as an apparatus that attempts to suture two ontologicallyincommensurable conceptions of time that we term intensive and extensive. We furtherargue that the hinge of this rhetorical apparatus centers on a kairotic tactic of arbitrage,which theoretically posits, at the same time that it negates, ontological market failure.We end by exploring rhetorical alternatives to neo-classical economics that take theinternally contradictory structure of arbitrage to its emergent conclusions.

Keywords: Rhetoric of Economics; 2008 Financial Crisis; Neo-Classical Economics;Arbitrage; Kairos

The difference between presecular and secular thought lies not in the eliminationof the function of God but in its transformation from an a priori consciousassumption to a retroactive unconscious presupposition.A. Kiarina Kordela

Joshua S. Hanan (Ph.D., University of Texas at Austin) is Assistant Professor of Rhetoric and CommunicationEthics at the University of Denver. Indradeep Ghosh (Ph.D., Massachusetts Institute of Technology) is AssistantProfessor of Economics at Haverford College. Kaleb W. Brooks (M.A., University of Denver) is Doctor ofJurisprudence Candidate at the Maurer School of Law, Indiana University. The authors would like to thankBarbara Biesecker, Jeremy Grossman, and Atilla Hallsby, for their very thorough and thoughtful editorialsuggestions, as well as Chris Gamble, Raymie McKerrow, Sine Nrholm Just, and David Anderson, for theircontributions to current and previous drafts of this project. Correspondence to: Joshua Hanan, Department ofCommunication Studies, Sturm Hall, Room 200, 2000 E. Asbury Ave, Denver, CO 80208, USA. E-mail: [email protected]

Quarterly Journal of SpeechVol. 100, No. 2, May 2014, pp. 139162

ISSN 0033-5630 (print)/ISSN 1479-5779 (online) 2014 National Communication Associationhttp://dx.doi.org/10.1080/00335630.2014.961529

I found a flaw in the model that I perceived is the critical functioning structurethat defines how the world works.Alan Greenspan

Introduction

For the many U.S. citizens not directly involved in the financial system, the GreatRecession of 2008 seemed to come out of nowhere.1 Although cracks began toemerge in the subprime mortgage market and financial system in 2006, FederalReserve Chairman Ben Bernanke publicly stated in mid-2007 that the subprimeproblem is likely to be limited and that total losses could be as little as $50 billion.2

Just days later, however, two hedge funds operated by Wall Street firm Bear Stearnscollapsed owing to soured bets on mortgage-backed securities.3 By the followingspring, Bear Stearns faced a company-wide liquidity crisis and was forced into a saleto JPMorgan Chase (with the help of a partial government guarantee against futurelosses) at a fire sale price.4 By October 2008, the investment bank Lehman Brothershad declared bankruptcy and insurance company AIG required a bailout, eventuallytotaling $182 billion to prevent the broader financial system from completelydisintegrating.5

Responding to this financial juggernaut, Congress passed emergency measures,including the $700 billion Troubled Asset Relief Program (TARP), which wasoriginally created to fund purchases of impaired assets from imperiled financialinstitutions and eventually used for temporary recapitalization.6 At the same time, theFederal Reserve granted hundreds of billions of dollars in additional guarantees andliquidity to commercial and investment banks, as well as other systemically importantfinancial institutions, in the form of direct loans and other cheap financing.7 Morerecently, Congress passed the 2,300-page Dodd-Frank Financial Reform Bill, theostensible purpose of which is to regulate the financial industry in order to preventanother financial crisis.8

Since this economic upheaval, there has been no shortage of literature designed tohelp lay and academic audiences better understand the economic collapse, of whichan overwhelming majority now agrees is the worst downturn since the GreatDepression.9 In the six-year interim, from the onset of the collapse to late 2014,thousands of pages of books, articles, essays, op-eds, and campaign speeches havebeen generated about the cause of the crash and what should be done.10 By now, afamiliar narrative has emerged that generally places blame on the greed of Wall Streetfirms that took on too much risk, bringing down the financial system. During the2008 presidential campaign, Republican candidate John McCain cited Wall Streetgreed as a primary reason for the meltdown.11 President Barack Obama, during hisfirst and second inaugural terms in office, referred on several occasions to arroganceand greed and fat cat bankers on Wall Street.12 More recently, an internationalsocial movement known as Occupy Wall Street surfaced, demanding accountabilityfrom financial leaders for perceived extravagances.13

While this narrative has meritinsofar as it acknowledges that, in recent years,private sector financial companies began pursuing self-interests in ways not seen

140 J. S. Hanan et al.

since before the stock market implosion of 1929it is at best incomplete because itfails to account for how neo-classical economic theory, as propounded by academiceconomists and adopted by policymakers and financial market participants, played amajor role in perpetuating several destructive asset bubbles that culminated in the2008 financial crisis. Specifically, the mainstream narrative ignores how neo-classicaleconomic theorys reliance on a mathematical deductivist method led financialregulators and private sector financial companies to develop a number ofstatistical models for determining asset prices that took investors rational behaviorfor granted and assumed that past asset performance could be used as a reasonableproxy for predicting future expectations. Mostly, this entailed the use of models basedon the Rational Expectations Hypothesis (REH) in particular, asset-pricing modelssuch as the Efficient Markets Hypothesis (EMH), and more generally, a certain classof tools known as Dynamic Stochastic General Equilibrium (DSGE) models. Theseflawed technologies of representation included models used for assessing a firmsoverall risk exposure (called Value at Risk or VaR models), and models used forcalculating the prices of illiquid synthetic securities such as collateralized debtobligations (CDOs). Such models would ultimately be found at the epicenter of thefinancial downturn.In this essay, we argue that an adequate account of the 2008 financial crisis cannot

be provided from within the confines of neo-classical economic theory, but insteadnecessitates an inquiry into the ontological rhetoricity of neo-classical thought. Thatis, as economic thought per se is irreducibly rhetorical in nature, it does not so muchrepresent a marketplace that exists a priori as it simulates or performs a world thatis imagined in its models.14 In order to make this argument, we build on previousscholarship engaging the rhetoric of economics first pioneered by ChicagoEconomist Deirdre McCloskey.15 In particular, we expand the recent insights ofG. Thomas Goodnight and Sandy Green who have articulated the materiality ofeconomic rhetoric in terms of a mimetic surplus that traverses in and throughsymbolic and material spirals.16 While Goodnight and Green illustrate the centralityof rhetoric to mediating stable structures of economic equilibrium, we argue thatrhetoric can also be understood as the very condition of possibility needed to producean ordered and stable sense of equilibrium in the first place.17 By introducing animportant conceptual distinction between extensive time and intensive time, twoforms of time perception that implicate two different modes of causality, we arguethat neo-classical economic theory in general, and REH, EMH, and DSGE models inparticular, can all be understood as attempts to fold intensive time into extensivetime.18 The materiality of economic rhetoric is to be sourced precisely in the gapbetween these two forms of time perception, and crisis phenomena may then beunderstood as the failure on behalf of neo-classical modeling to transcend itsparadoxical articulation of time as both present and absent. We are thus not claimingthat neo-classical economic theory caused the 2008 financial crisis, but rather that itgives rise to a rhetorical surplus that cannot help but presuppose economic crisis anddisequilibrium.19

Banking on the Present 141

In what follows, we lay out our conception of economic rhetoric in several steps. InSection 1, we summarize Goodnight and Greens rhetorical theory of economic crisisand intervene by arguing that their conception of bubbles is unable to theorizerhetorical mimesis outside of a more foundational economic rationality that worksin and through an a priori conception of temporal equilibrium. Sections 2 and 3substantiate this argument: In Section 2, we offer a brief history of neo-classicaleconomics, and the development of REH, EMH, and DSGE models; in Section 3, wetransition toward a rhetorical criticism of these models, illustrating how at theinoperative center of neo-classical economics is a kairotic tactic of arbitrage thatattempts to suture two ontologically interrelated but distinct conceptions of time. Weconclude by discussing the possibility of an economic rhetoric beyond neo-classicalarticulations of arbitrage.

Section 1: Goodnights and Greens Rhetorical Theory of Bubbles

Goodnight and Green provide an account of the 19922002 dot-com bubble in termsof three different trajectoriessocial, behavioral, and reflexiveof anunfolding rhetorical movement. They argue that all three registers of movementare necessary for an understanding of the dot-com bubble, and they begin byconsidering the social register as articulated by new institutional economic theory,which focuses on how economic models of valuation are institutionalized as marketpractices through imitation:

As an institutional specific cultural system for generating and measuring value,market practices are held to evolve incrementally over time. The social codes ofpractice enable communication through a complex network of signals thateconomic agents send to each other. The practices embody and are guided byinstitutional logics that standardize rules, norms, and strategies suited tocalculative knowledge, itself a state-of-the-art practice.20

The emergence of bubbles entails, according to new institutional theory, a switch toever-increasing prices, from stable configurations of market equilibrium as the resultof widespread copying of popular but bad investment decisions.21 But even thoughnew institutional theory allows us to think the before and after of such switches, itcannot explain the moment of the switch itself.Seeking closure, Goodnight and Green turn to behavioral economics and argue

that behavioral explanations rationalize such switches as departures from normalattitudes toward irrational risk taking on the part of investors:

In assessing risk under normal conditions, investors prefer to avoid loss beforemaking gain. A bubble reverses this preference. New presumptions regarding riskappear to pour across investment communities. Information cascades occur amongpeers who selectively share news. These investors ignore their private informationor preference and follow the crowd by imitating recent actions of those who haveachieved success.22

Behavioral explanations, then, rely on contagion and herd behavior that occasiona departure from normal, rational patterns of behavior toward novel, irrational


ones. This dichotomy between rational and irrational behavior, however, leavesGoodnight and Green dissatisfied, since behavioral explanations are able to identifyirrational behavior only after the fact, that is, after the bubble has burst. What isneeded instead, they argue, is an explanation of why such irrational behavior wasdeemed to be rational during the time that the bubble grew in size. Therefore, in anattempt to theorize bubbles from within normal market function, Goodnight andGreen turn to performative economics.Drawing on performance scholarship, largely generated by the disciplines of

anthropology and sociology, they posit that markets are constituted by a reflexiveproduction of imitation.23 That is, buyers and sellers perform the world imagined inthe economic model and bring into existence structures of pricing that both drivevaluation and are reflexively shaped by the trades that result from such valuation.This sets the stage for a description of bubble dynamics:

When bubbles proceed, the reflexive construction of markets is both amplified andput to the test. The language of value conditions bubbles in unpredictable waysbecause at times every strategy promotes a higher-order counter-strategy. Thus, abubble renders markets vivid as a vast macroeconomic and financial experiment.At such times, investors escape disciplined terms of risk and embrace ambiguoussymbols of fortune; thus questions of competence multiply and challenges tosustainability arise. Whether for social, psychological, or get-rich-quick reasons,investors must choose to go with or against the flowto find in bubble-like momentswhether this time things are different or if its just another Ponzi scheme.24

Thus, according to Goodnight and Green, there is an entwinement of the reflexiveor performative trajectory with the social and psychological/behavioral trajectories,and all three are implicated in a scenario in which system signals split, multiply, andrender symbolic and material connections self-confirming, unstable, or conflicted.25

This rhetorical movement generates a bubble that alters the symbolic and materialpractices of a risk culture.26

Goodnights and Greens rhetorical theory of bubbles pivots on a collapse of therational-irrational dichotomy. We contend, however, that their methodologicalinstantiation of this form of critique fails to meet its burden of theorizing crisiswithout a distinction between normal rational market performance and irrationalmarket failure. In their turn to reconstructing market phenomena through arevamped vision of McCloskeys economic criticism, Goodnight and Green arguethat bubbles can be theorized in relation to, and in differentiation from, a pre-constituted economic equilibrium. First, they maintain that the turn toward bubbleformation is different from rational market behavior, since the institutional pull ofbubbles generates contestation of legitimacy when participants question howand ifto return to recognized practices or extend novel opportunities.27 This attempt totemporalize bubbles as novel episodes of economic behavior to be distinguished fromtypical market behavior is reflected in their contention that economic bubblesappear when credit is abundant and the economy is doing well, as evident in the1990s United States,28 thereby locating bubbles as a causal departure from economicequilibrium only possible under certain structural conditions. Second, the novelty of


bubbles is directly related to the way in which Goodnight and Green positioneconomic rhetoric as a space of performative mediation between economic modelsand their materialization in practice. Rhetoric occurs in the splitting andmultiplication of system signals, moving the system in a self-confirming andunstable manner away from what would otherwise be a stable and rational marketequilibrium.29 This moment of deviation is the moment of bubble formation, butpositing such a moment of deviation ultimately preserves an a priori notion ofequilibrium from which deviation is said to occur, and therefore implicitlyreconstructs the rational/irrational dichotomy from which Goodnight and Greenseek to escape.Along this line of reasoning, their theorization of bubbles relies on strategic

moments of intervention that alter the normal function of neo-classical mimeticstructures. Despite their deployment of mimesis and performative economics,Goodnight and Green still locate economic rhetoric in instrumentalist terms. Whilethey are sensitive to the idea that economic markets are constituted in and throughsymbolic and material spirals, and therefore exceed any deterministic attempt toeffectively forecast market behavior, their advocacy of economic criticism as apractice that initially reconstructs the interlocking trajectories constituting a bubbleacross episodes of initiation, momentum, crash, and recovery re-instantiates the verylogic of economic forecasting that they want to critique.30 This position isencapsulated by Goodnights and Greens argument that [f]rom a rhetorical vantage,mimesis is strategic (contending and contesting) imitation.31

Our argument throughout this essay will be that Goodnights and Greensinstrumental conception of economic rhetoric is problematic because it assumesthat the market can be internally differentiated and marked in temporal terms.32

Put differently, Goodnights and Greens mimetic conception of economic rhetoricperpetuates what Barbara Biesecker has termed a logic-of-influence model.33 A logicof influence treats rhetoric as an autonomous agent of mediation that works inside apre-constituted situation and series of constraints. The problem with this conceptionof rhetoric, as Ronald Walter Greene points out, is that it pushes the rhetoricaltheorist in the direction of defending an essentialist theory of the subject. Anessentialist view of the subject figures the subject as possessing a substance that isalways already present no matter the contingent rhythms of political, cultural andeconomic history.34 Put differently, while at one level Goodnights and Greensnotion of mimesis is an attempt to destabilize representational theories of discourse, itsimultaneously reinstantiates such a logic by defining rhetorics materiality as theperformative mediation in between symbolic and material spirals.We attempt a different form of economic criticism that does not rely on a moment

of generation. In its place, we theorize an immanent spiral between material practicesand the core discursive postulates of neo-classical economics that affirms surplus(the bubble) as an inherent condition of economic modeling. Our rhetoricalcriticism of neo-classicism thus proceeds on very different conceptual grounds thandoes Goodnights and Greens. Rather than articulate the materiality of economicrhetoric in terms of mimesis, we show how the rhetoric of neo-classicism is better


understood as a problem of mnesis. Defined by Nathan Stormer as a probleminherent to performing the present as a figurative event,35 mnesis allows us toillustrate how neo-classical thought deploys rhetoric as an abstract machine, orapparatus, that attempts to kairotically capture the present as if it naturallyconformed to a number of internal regulatory principles.36 In our view, then, therhetoric of economics emerges not in the meditational space between symbolic andmaterial spirals but in the very recursive act of suturing together a stableequilibrium through which the idea of a timely or untimely response to the economybecomes possible.37

To explore this temporal problematic, we begin, in the next section, by laying outthe methodological assumptions of neo-classical economics, starting with the conceptof REH, which forms the bedrock of EMH and, by extension, of DSGE models thatcompose the bedrock of modern risk culture. We recount a brief history of thedevelopment of these approaches, and argue that their widespread use by economists,market participants and policymakers occasioned fundamental shifts in governmentpolicy since at least the 1980s that set the stage for the 2008 financial crisis. In Section3, we dig more deeply into the ontological presuppositions of neo-classical economicsas they relate to the kairotic treatment of time. Within this framework, time isontologically posited as occurring in a linear fashion that extends from the past, intothe present, and toward a future. This notion of time, which we label extensive,authorizes the Newtonian, equilibrium framework within which neo-classicaleconomics functions. We then explicate a notion of intensive time that this logicof equilibrium, and by extension Goodnights and Greens concept of mimesis, isunable to capture. In affirming a criticism that takes into account both registers oftime, we contend that economics is not rhetorical at the level of instrumentality but isinstead rhetorical in the very way that it imagines temporality out of a virtual andboundless present.38 In this way, we extend Goodnights and Greens thesis toexamine the rhetorical processes by which equilibrium itself is instituted.

Section 2: Neo-Classical Economics, REH, EMH, and DSGE models

Neo-classical economic theory grounds itself in a very specific construction of thehuman subject, from which flows a very specific kind of scientific praxis. First andforemost, the human subject is assumed to be atomistic, or self-contained, andtherefore not subject to any kind of structurally imposed constraints. The assumptionof atomism affords a certain kind of additive operation by which the neo-classicaleconomist may deduce the aggregate behavior of a large group of individuals bysimply adding up individual behaviors. In turn, individual behavior is assumed tobe guided by a single, positively stated normative orientation, one of instrumentalrationality, which requires that each individual employ the most efficient means toachieve her or his ends.39 Moreover, ends as preferences are given, not contingent orcontext-dependent, and are therefore assumed to be arbitrary. The above axioms setthe stage for a science that is essentially positivist in nature, admitting nothing underthe scope of analysis or by way of concepts that are not empirically measurable.


Further, a key feature of neo-classical scientific praxis is its emphasis on methodo-logical equilibration, by which a state of equilibrium is axiomatically imposed uponthe interaction of instrumentally rational individuals, and this allows an economy tobe represented in a way that is aligned with the stabilizing and positivistic principlesof modern science (particularly Newtonian physics).40 Philosophically, the founda-tions of neo-classical economic theory, as described above, may be traced back toeighteenth-century classical economics, specifically, the work of Scottish moralphilosopher Adam Smith, who believed that if each actor in an economy were tofollow his individual self-interest, then Gods divine plan for social organizationwould manifest in the form of an invisible hand that would guide society to thehighest common good.41 This providential42 articulation of internal homeostasisenvisioned by Smith was, in the nineteenth century, placed on a firm mathematicalfoundation by the first neo-classicists, notably Alfred Marshall, through the use ofNewtonian calculus.43 In the twentieth century, developments in mathematics in thefields of set theory and topology allowed for a further refinement of the equilibriumconcept, and led to a profusion of sophisticated modeling approaches.44 Most of theseapproaches sought to analyze decision-making from a dynamic perspective, acknow-ledging that economic activity unfolds alongside the passage of time and, therefore,that it becomes important to account for ways in which actors extrapolated from aknown past into an unknown future. This required the development of a generaltheory of how expectations (about the future) are formed. In 1961, John Muthproposed REH, which appeared to provide a positivistic way forward.45

According to REH, markets and the economy are described by deep structures ofrandomness and contingency that may be simulated in terms of stochastic structuresamenable to quantitative analysis using the tools of probability theory. In particular,REH assumes that the underlying stochastic structure of the economy is fundament-ally stable over timetime is said to be ergodic and representable by normaldistribution curves.46 Stability guarantees that the modeler can, by studying datacollected over long periods of time, uncover the statistical properties of theunderlying stochastic structure, such as its mean and variance. Moreover, it is alsoassumed that actors in the model can do the same, that is, they are endowed with thesame powers of calculation and judgment as the modeler himself. These assumptions,axiomatically adopted by REH, offered to neo-classical economists a mathematicallytractable way of incorporating uncertainty into their models, and soon REH began tobe used widely in dynamic economic models.Eugene Famas EMH, proposed in the 1960s, was an early exemplar of the

application of REH.47 EMH provides a theoretical framework for valuing theequilibrium price of a financial asset under the assumption that information aboutthe assets future prospects exists in an objective sense and is available for decoding,via the mathematics of REH, by all decision makers. In an essay titled RandomWalks in Stock Market Prices, published in 1965, Fama summarized EMH in thefollowing way:


An efficient market is defined as a market where there are large numbers ofrational, profit-maximizers actively competing, with each trying to predict futuremarket values of individual securities, and where important current information isalmost freely available to all participants. In an efficient market, competition amongthe many intelligent participants leads to a situation where, at any point in time,actual prices of individual securities already reflect the effects of information basedboth on events that have already occurred and on events which, as of now, themarket expects to take place in the future. In other words, in an efficient market atany point in time, the actual price of a security will be a good estimate of itsintrinsic value.48

Under this articulation of neo-classical economics, it does not have to be the case thatthe relevant information is available to all market participants at the same time. Aslong as those market participants who do have privileged access to such informationuse it to price financial assets according to the principles of EMH, then they willstand to make profits. But according to Fama, such profit-making will alert othermarket participants to the equilibrium price so that the market price of the asset neednever deviate from its equilibrium price for very long.In this picture, there is no Keynesian-style newspaper contest.49 There is, in other

words, no room for market irrationality, since an objective, stable truth, namelythe equilibrium price, is assumed to exist. In turn, the existence of an objectiveequilibrium price, and its actualization, depend on two factors. First, by assumingREH, EMH ensures that a particular financial assets future prospects may be gleanedin an objectively accurate sense from studying that assets past performance. This pastperformance constitutes the information set to which all market participants sooneror later have access. Second, the actualization of the equilibrium price as the marketprice results from the elimination of profit-making opportunities, and this mechan-ism is called arbitrage.50 Essentially, arbitrage is a financial transaction predicatedon the capitalization of other financial transactions, which allows the objectivity ofthe equilibrium price to acquire substantive theoretical content against the ontolo-gical possibility that no objective information set might exist as such. We will see laterthat our critique of REH and models based on it hinges precisely on the failure ofarbitrage to neutralize the potential for market failure. Nevertheless, EMH, asconceived by Fama, meant that Smiths invisible hand could now be represented anddynamically simulated in the ephemeral sphere of finance. Not only was thereassumed to be an a priori reality that EMH purportedly mirrored, but there was alsothe crucial implication that this a priori reality will be readily discernible from aposteriori observations over the long run.In 1972, Robert Lucas integrated REH into general equilibrium theory, but it was

not until 1982, with Finn Kydland and Edward Prescotts formulation of real businesscycle (RBC) theory, that a whole new class of models, namely DSGE models, came tooccupy center-stage in the neo-classical canon.51 DSGE models are meant to describeand explain the economy-at-large (as opposed to EMH, which focused only onthe financial sector), or the economy in a state of general equilibrium, and areconstructed via aggregation from so-called micro-foundations having to do withindividual behavior modeled along the lines of a rationality characteristic of


neo-classical economic theory. DSGE models presently represent the core ofmainstream economics, and it is extremely difficult to publish in notable economicjournals without adopting a DSGE modeling approach. Even though advances incomputing power since the 1980s have enabled present-day DSGE models to bemuch more sophisticated than their earliest counterparts, certain essential features ofneo-classical economic theory, such as methodological individualism, methodologicalinstrumentalism, and methodological equilibration, were from the very beginning,and still remain today, hallmarks of this modeling approach.An especially appealing feature of DSGE models is their applicability to a very wide

range of economic questions spanning the fields of macroeconomics, labor economics,public economics, and financial economics, to name a few. In these applications, theconceptual elements of arbitrage, REH, and EMH are all present in one form oranother, and DSGE models therefore represent the state of the art in applyingneo-classical economic theory to the practical problems of assessing policy prescrip-tions and forecasting macroeconomic and financial outcomes. Thus, not only neo-classical economic theorists but also policymakers and the private sector have, sincethe 1980s, adopted DSGE models as the standard framework for thinking aboutmacroeconomic behavior and policy. In fact, we argue that it was the articulationbetween REH, EMH, and DSGE models under the broader conceptual umbrella ofneo-classicism that in many respects informed the faulty economic policies that gaverise to the 2008 financial crisis.Referred to today in usually pejorative terms as neo-liberalism, the application of

neo-classical thought to policymaking has dominated policy discourse from the early1980s onward.52 Whether understood in terms of Reagans trickle-down economics,Margaret Thatchers monetarism, or the bipartisan Washington Consensus thatemerged during the years of Bill Clinton and George H. W. Bush, neo-liberalism hasconsistently turned to the positivistic ideals of neo-classicism to justify the reductionof government intervention in spheres as diverse as foreign policy and publicwelfare.53 It should thus come as no surprise that neo-liberalism found an easyalliance with the interests of large-scale financial firms who sought alternatives to thestrict regulatory regime of the Glass-Steagall Act that they had been operating underfor more than fifty years. Instituted in the wake of the 1929 stock market crash, theGlass-Steagall Act (1933) sought to limit commercial banks securities activities andseparate the activities of commercial banks from those of securities firms orinvestment banks. By 1999, however, the Act had been completely unraveled underthe direction of then Fed Chairman Alan Greenspan and Treasury Secretary RobertRubin, allowing commercial banks to originate and trade various kinds of newderivatives instruments, largely predicated on the neo-classical insights of REH,EMH, and DSGE modeling. Alongside government programs initiated by Bill Clintonand intensified by George H. W. Bush to encourage home ownership by Americanfamilies, the Federal Reserve Bank slashed interest rates dramatically following thecollapse of the Internet stock market bubble in 20002001. At the same time financialmarkets witnessed a wave of deregulation that began with the repeal of Glass-Steagall,and continued into the 2000s in various other forms (for example, a substantial


relaxation of the maximum leverage ratio for investment banks). All of these factorsset the stage for a massive speculative bubble to form in real estate and relatedfinancial markets (primarily, in markets for Asset-Backed Securities, such asMortgage-Backed Securities and Credit Default Swaps, whose pricing entailedwidespread adoption of EMH), which ultimately collapsed during the summer andfall of 2008.54

Section 3: A Critique of Neo-Classical Economic TheoryKairotic Time,Arbitrage, and Mnesis

Given the spectacular collapse of financial markets in 2008, whose very brief historywe have just outlined, we now inquire into the rhetorical processes by which REHand the models based on it failed to account for the buildup phase of the bubblebefore its sudden implosion. In particular, we attempt to address three interrelatedquestions that derive from our brief history. First, why can the phenomena ofspeculative bubbles not be accounted for by this kind of modeling approach? Second,what effects do these models have on the material practices of market participants?And, third, what implications do these effects have for our understanding of REHsrhetorical shortcomings?To answer these questions, we narrow in on the concept of arbitrage and the way it

attempts to kairotically capture a rhetorical ontology that Nathan Stormer termsmnesis.55 By operating as a placeholder or mark of simultaneous presence andabsence, we show how arbitrage is what enables neo-classical economics to retro-actively constitute a system of general equilibrium out of emergent market praxis.56

To develop our argument, then, it will first be necessary to understand how neo-classicism attempts to transcend irreducible market complexity through an articula-tion of time that is linear and assumes that times arrow moves from the past to thepresent and into the future in an observable way. This notion of time, or of (what wewill call) the extensive form of time, admits a notion of causality that is also linearand temporal, so that if event A causes event B, then it must be the case that event Aappears earlier in time than event B. To this conception of time as extensive, we havealready seen that neo-classical economic theory adds the epistemological assumptionthat time is ergodic, which, as described earlier, posits that the structure of theeconomy that persists through time preserves its form and so can be posited inprobabilistic terms as if it were an unchanging distribution of possible outcomes.Extensive, ergodic time is Newtonian since it is reversible. That is, each moment in

time is marked as exactly similar to any other, so that if the modeler were to goback in time and restart the clock, as it were, the same sequence of events wouldrepeat, as long as nothing else changed analytically.57 Extensive, ergodic time (and theneo-classical logic that it calls into being) can therefore be understood as whatGiorgio Agamben calls an apparatus, since it orders events in a relational sequence,allowing for a pairwise comparison of events, so that one event may be recognized ashaving occurred before, after, or simultaneously with the other, but there is nomeaning to be attached to whether these events are experienced in the past, present,


or future.58 In other words, the historicity of the two moments in which the twoevents occurred, and the lapses between those moments, are of no particularsignificance in this conception of time.Our contention is that the extensive, ergodic conception of time, epitomized by

neo-classical economics, does not offer a complete description of the real/virtual timein which economic activity unfolds, because the latter also includes a second registerof temporality, one we term intensive time.59 This form of time cannot beunderstood in representational terms, since it operates through what we call anaffective logic of causality.60 In this conception, times arrow cycles between thepresent and the expectation of a particular future, and, as this cycling continues,the present and that particular future are drawn closer in time to each other, so thatthe mode of causality is circular or self-fulfilling. These expectations alwaysmaterialize differently than initially predicted in neo-classical modeling since theyare premised more so on ethos, the perceived authority and credibility of the modelsproducing the projected future, and pathos, the hope for continuing economicstability, than logos, the logical structure of the model. In other words, affective logicalways guarantees that there will be a disjunction between the imagined expectationsof a given economic practice and its actual unfolding. Thus, we contend that affectivelogic is always in conflict with extensive time and that this conflict plays out in adifferent form of intensive time that is closed off to representation within neo-classical theory.Our critique of neo-classical economic theory thus proceeds on ontological as well

as epistemological grounds.61 Actual economic activity unfolds for an actor in bothregisters of time perception, and involves an element of chance, or what Agambenterms collateral effects, that always exceed an ergodic conception of time.62 Theontological critique, however, is primary because once intensive time becomesadmissible as an element of theoretical construction, a space naturally opens forhuman intentionality to harness the power of non-probabilistic chance. Herein liesthe genesis of novelty or hitherto unforeseen possibilities for innovation that radicallyand irreversibly alter the economic landscape. Insofar as neo-classical thought cannotaccommodate that which is at play outside the bounds of an extensive and ergodicnotion of temporality, its mimetic rhetoric functions not at the pre-given level of aninstitutional risk culture, but in the very move to render intelligible an economy inand through a stable past, present, and future.63 This collapsing of the ontological andthe epistemological into the same relational plane of symbolic meaning is therhetorical apparatus that enables neo-classical theory to cohere in terms of a singularregister of time perception. However, to fully understand how this apparatus works itis necessary now to turn our attention to the rhetorical hinge that allows neo-classicalmodeling to assume a persistent notion of equilibrium: the paradoxical discourseformation of arbitrage.As we noted in Section 2, arbitrage is a peculiar condition of thought that stems

from REH and becomes specified explicitly with EMH. Arbitrage ensures that themarket price of an asset does not deviate from that assets equilibrium price for longperiods of time. In substance, however, this is an ad hoc proposition deriving from


the assumptions of extensivity and ergodicity that are imposed on time by fiat. Theseassumptions assure us that objectively accurate information about the assets actualfuture prospects exists, by virtue of which an objectively accurate equilibrium pricemay be deduced. If, however, the intensive form of time is always already insimultaneous operation alongside the extensive form, no such assurance can be hadbecause an affective logic can realize any possible value for the equilibrium price.It would appear that by admitting the possibility of a deviation of the assets marketprice from its equilibrium price, EMH acknowledges the presence of the surplus thatarises in the disjunction between the two forms of time and so acknowledges theinverse necessity of ontological market failure. But at the same time, by invokingarbitrage, EMH attempts to systematically negate this failure. It does so by positing ageneral principle of opportune, or kairotic, timing that presents an incentive fortraders-as-arbitrageurs to respond to disequilibrium pricing through their decisionsto buy, sell and short, which in turn is thought to move the market back towardequilibrium. Arbitrage is thus the rhetorical placeholder that allows the entiresystem of neo-classical thought to cohere in equilibrium form by theoreticallypositing that market disequilibrium will be neutralized in praxis.64

In this way, arbitrage functions rhetorically by providing the conditions of (im)possibility for suturing a particular economic relationship between past, present, andfuture.65 We use Nathan Stormers recent theory of mnesis as a way of understandingthis premise. Stormer argues in his essay Recursivity: A Working Paper on Rhetoricand Mnesis that an extensive conception of past, present, and future is impossiblebecause all understandings of temporality work in and through a recursive structureof memory. As Stormer explains:

[A] lesson to be drawn is that discursivity is contingent on recursivity, or thetireless circulation between past and present. The importance of recursivity wasrecognized long ago in the canonical art of memory. Implicitly, the art was not forbuilding levies against the rising tide of forgetfulness but to direct endeavor andthought by orienting the rhetor and audience within a shifting present.66

The contingent relation between discursivity and recursivity is captured in theactivities of remembering and forgetting which are always interdependent on oneanother in the construction of discourse. The interdependency arises because thedilemma of discourse is to have some place to start from, or a now in relation to apresent that is receding into the past, and also some place at which to end up, towardwhich discourse is oriented, or a later in relation to a future that is emerging fromand renewing the present. Mnesis is Stormers name for this endless flow ofrecursivity in and through discursivity.For Stormer, the recursivity of memory is not instrumental but is instead an

underlying rhetorical condition of ontology. To be a speaking subject is to reside ina virtual field of potentiality predicated on a retroactively imposed temporalconstruction of the present. By this logic, ontology is itself contingent upon analways shifting conception of past, present, and future, whose sequential movementthrough time is a product of the rhetorical processes of remembering and forgetting.


Stormer returns to Augustines analysis of time to concretize his depiction of theseprocesses. He writes, The movement is circulatory but the metaphoric structurematches an unfolding with an exfoliation. Augustine describes memory as a vastsinus, sinus being Latin for curve, fold, bend, pocket, bay, and the like.67 Themetaphor of a fold is a particularly fruitful way to describe mnestic processes. If weimagine time as a plane that is bent over itself, a fold produces a horizon of secrecy,obscuring portions of the plane within others.68 In this way, there is always an excess;the experience of time in the present is always mnestically represented as a failedtotality, obscured by a multiplicity of secret creases that nevertheless give rise to thefantasy of a linear narrative between past, present, and future.69 Stormer concludes:Mnesis as folding sees remembering and forgetting not as copying, but as bendingone time and place into another virtually.70

By rendering mnesis intelligible as a logic of folding rather than copying, Stormerstheory highlights the difference between mnesis and mimesis. Whereas Goodnightand Greens theory of mimesis defines economic rhetoric in terms of its deviationfrom a pre-constituted structure of temporal equilibrium, Stormers theory of mnesisshows how the very move to create an origin or place of beginning in economicreasoning requires the smoothing over of numerous striations that cannot butinternally contradict the predictive success of its modeling. Copying presupposes atemporality that is extensive and ergodic, and therefore an enclosure in which onecan move back and forth between the past and the present, if only in memory, andalways encounter the same events in the same sequence each time. This reversibilityof time enables the conception of a stable equilibrium from which deviations may beexperienced as rhetorical movements in the form of mimetic spirals. Folding does notadmit the reversibility of time because the bending of one time and place into anotherinevitably obscures the perfect reconstruction of events in terms of content as well assequencing. Each fold is a new ontological moment.We argue that arbitrage can be understood as the attempt by neo-classical theory

to transcend the mnestic folding of time by positing a kairotic temporal schemewhich, consistent with John Poulakos use of the concept, seeks to capture inopportune moments that which is appropriate and attempts to suggest that which ispossible.71 To understand this homology, we must further attend to the rhetoricalprocesses by which discourse calls a particular folding into being. Stormer depicts thisprocess as implicating three distinct tasks: inflecting, positioning, and including.He writes:

A practice creates an inflection when it modulates between then and now,creating points at which the present can vary its course by virtue of re-crossing thepast just here or just there. Inflections become positions when forms of modulationbecome recurrent, performative sites of the present, from which the past canreliably be viewed as such. These become points of inclusion when, once the presenthas an established position relative to the past, the past is enveloped by the present,creating a sense of closure such that the past seems fully retrievable through thisinflection, from this position.72


In practice, arbitrage attempts to construct a mnestic present by undertaking all of thethree above-mentioned tasks. When arbitrageurs form expectations about the future,they inflect between the past and the present in search of an information set that willrationalize the past performance of the asset that they are looking to price. Differentinformation sets will yield different values of the equilibrium price in the present, andeach such equilibrium price will yield a prospective position for the arbitrageurwherein she can buy, sell, short, or otherwise profit from any deviation between theequilibrium price of the asset and its market price. Inclusion requires that thearbitrageur decide on a particular information set as the objectively accurate (ortruthful) one, whereby the arbitrageurs position in the present gets fixed in relationto a particular past out of which it derives and a particular future into which it leads.In theory, however, arbitrageurs construct a kairotic rather than a mnestic present.

This is because, under the EMHs image of inclusion, the present moment that thearbitrageur fixes stands in the flow of extensive, ergodic time. Thus, there is nodisagreement between arbitrageurs as to what the objectively, accurate (or truthful)information set is, and in theory it takes only one arbitrageur to realize the profits tobe had from such discovery for the market price to instantaneously coincide with theequilibrium price. The crucial theoretical move is the presumed nature of times flowbecause it ensures that the arbitrageur always positions herself in relation to a stablepast and future wherein her market interventions always occur at the opportunemoment of disequilibrium and yield market-correcting profits. In this sense, arbitrageis a kairotic act.The disjunction between the theory of arbitrage (as explicated in neo-classical

economics) and the practice of arbitrage arises precisely because the theory does notadequately account for the intensive form of time. In practice, because intensive timeadmits an affective logic, there can be no objectively accurate information set.Arbitrage is, therefore, always risky and profits are not assured.73 The foreclosedsurplus that secretly separates the discursive present from the now, and that rendersrecursivity immanent to the materiality of discourses,74 is not only uncaptured byarbitrage but also liable to become amplified over time. The failure of each successivecycle or loop of arbitrage is carried over to the next. The mimetic spiral betweenthe model and the world it addresses compounds the surplus, fueling the formationand maintenance of speculative bubbles.Whereas Stormers mnesis points to a rhetorical ontology that can never fully

express the virtual present that it discursively purports to actualize, the kairoticfunction of arbitrage is believed to flatten out all such virtual folds so thattemporality can be seamlessly rendered extensive and ergodic. This smooth,creaseless temporal horizon in turn renders the future of market performancerationally predictable. The problem is that such an image of inclusion is alwaysillusory because it imagines a totalizing gaze of immanent positionality which suturesthe past to the present moment. Such a positionality offers a particular anticipation ofthe future under the ideal of objective valuations, but like any mnestic process thisdiscursive act of suturing cannot be perfect. Remembering and anticipating are


inescapably selective processes. There is always a surplus between extensive time andintensive time that escapes representation within the model.For Stormer, discourse is always in the middle of itself and working toward

particular ends. There is no pre-discursive space in which the present contracts a pastbefore giving itself over to discourse.75 Thus, emergent reasoning is a characteristicfeature of Stormers mnesis.76 But there is no room in neo-classical articulations ofarbitrage for this kind of reasoning. Put differently, arbitrage is the differenceengine that fuels the broader rhetorical apparatus of neo-classicism, making possiblea certain imaginary diagram of equilibrium that makes the future predictable andgovernable.77 In the absence of this difference engine, the theory would run upagainst a deep rhetorical paradox arising from the notion of an equilibrium price thatis simultaneously preexistent in the minds of would-be arbitrageurs and onlyontologically secured through the act of arbitrage.Here, then, is where we locate the rhetoric of neo-classical economic theory as a

necessary component of the 2008 financial crisis. The rhetorical apparatus of neo-classical economics in general and the kairotic rhetoric of arbitrage in particular,blinded the subject to the surplus uncaptured within its models until it grew into aninconceivable contradiction. The idea that a bubble-type incongruency betweenthe prices and the objective values of Mortgage-Backed Securities could grow to theextent that it did without being consumed by arbitrage at every turn wasinconceivable from the position of EMH adherents and, unfortunately, continuesinto the present. In 2007, with the national meltdown in housing clearly underway,Eugene Fama, the original EMH advocate, said, The word bubble drives me nuts people are very careful when they buy houses. Its typically the biggest investmenttheyre going to make, so they look around very carefully and they compare prices.The bidding process is very detailed.78 On the high level of unemployment currentlyafflicting the U.S. labor market, John Cochrane, another University of Chicagoeconomist, offered, We should have a recession. People who spend their livespounding nails in Nevada need something else to do.79 Cochrane is suggesting, inother words, that the recession is merely a kind of market adjustment or rebalancingand therefore consistent with the corrective function of arbitrage. In the same vein,Casey Mulligan, another University of Chicago economist, went so far as to theorizethat the recent rise in unemployment reflected a voluntary choice taken by membersof the labor pool:

Employees face financial incentives that encourage them not to work decreasedlabor is explained more by reductions in the supply of labor (the willingness ofpeople to work) and less by the demand for labor (the number of workers thatemployers need to hire). 80

Only Greenspan seemed chastened. In a testimony to Congress, he admitted that hehad put too much faith in the self-correcting power of free markets and had failed toanticipate the disastrous results of under-regulated mortgage lending: Those of uswho have looked to the self-interest of lending institutions to protect shareholdersequity, myself included, are in a state of shocked disbelief, he told the House


Committee on Oversight and Government Reform. This modern risk-managementparadigm held sway for decades, he said. The whole intellectual edifice, however,collapsed . . .81

Section 4: ConclusionA Rhetoric of Economics as Emergent Kairos

Our rhetorical criticism of neo-classical economics has pointed to a number ofconceptual flaws in this ostensibly rational and positivistic discourse formation. Byillustrating how neo-classical economics is an apparatus that attempts to captureemergent market complexity through a variety of mathematical models (such as REH,EMH, and DSGE), we have shown how it fails to adequately account for theirreducible rhetoricity of its methodological undertaking. For us, this problematic isbest understood, temporally, in terms of Stormers conception of mnesis and theontological gap it establishes between what we have called extensive time andintensive time. If mnesis can be conceptualized as a recursive logic of folding thatalways already calls into question the linear relationship between past, present, andfuture, then no mimetic conception of economic modeling can capture the elidedsurplus hidden in the innumerable creases of historical becoming.Hence, rather than perpetuate the failures of neo-classicism by continuing to ask

how the rhetorical surplus might be mathematically captured, we suggest beginningwith a radically different question. If our essay has shown that any attempt to bankon the present is likely to produce a mimetic specter of crisis whose visage may beglimpsed in myriad manifestations but never adequately measured in the form ofeconomic equilibrium, then we ask, what might the practice of economics look like ifit began with ontological failure as an epistemic precondition for market positivity?To answer this question, we believe it is not necessary to turn away from the

insights of neo-classical economics, and instead emphasize the paradoxical position-ality of arbitrage that makes its entire system of thought possible. If neo-classicaleconomics can only assume market equilibrium by positing that arbitrage will actretroactively as a particular kairotic response to market disequilibrium, then itsinternal organizational logic points to a rhetorical contradiction between theory andpraxis that can never be adequately transcended. Arbitrage cannot exist in anyobjective sense of the term unless it generically abstracts itself from the veryconditions of praxis within which it proposes to operate. Put differently, it is only byfirst subtracting itself from intensive time and then repositioning itself as a secondaryresponse in extensive time that arbitrage can be understood as timely or untimely.Hence, if arbitrage is indeed a kairotic act at all, this practice must be located beyondextensive time and in the indeterminable relational space between extensive time andintensive time.In his book, The Future of Invention, John Mucklebauer offers a way of imagining

what this practice of kairos might look like in a way that is consistent with ourrhetorical criticism of neo-classical economics. He writes:

When attempting to render the responsive character of kairos, contemporaryscholars frequently have recourse to the metaphorics of harmony and rhythm.


Singular and situated responsiveness is best thought as a kind of ontologicalattunement or rhythmicity, a being in synch from which more recognizabledifference emerges.82

This sort of ontological attunement is precisely how neo-classical economicsunderstands its kairotic relationship to arbitrage. As the means through which thecomplexity and disharmony of various contradictory information sets are competi-tively put to the test and ranked against one another in a hierarchy of proximity to anobjective ideal, arbitrage provides a kairotic rhythm that allows neo-classicaleconomists to describe the present market as under- or over-valued by a measurablemargin.Against this unifying account of kairos, which we have shown to be always already

prone to failure in the context of arbitrage, Muckelbauer suggests an indeterminateaccount of kairos capable of grappling with an ontological condition of absolutediscord. He continues:

The resonance evoked through a kairotic connection is not the completion of someabstract and natural wholeness, but the very distribution of difference itself, theactualization of a nonindivdiual response through individuation. In other words,far from causing unity, kairos effects a dissolution through the connection ofsingular (non-individual) rhythms.83

Such a conceptualization of kairos does not rely upon increasing proximity to anobjective representation. Instead, it posits resonance as a product of a rising discordbetween economic actors. In such a conception, arbitrage need not be understoodwithin the context of an increasingly complete information set that prompts arbitrageursto correct the arrhythmias of a present disequilibrium and reinstate harmonic order.Rather, multiple arbitrageurs signal an ontological condition of disequilibrium, each oneacting upon a partial, often mutually contradictory, information set.Through Mucklebauers description of kairos as a logic of irreducible discord, an

image of arbitrage emerges wherein the circular law of economy is always already incrisis and, more importantly, prone to creative displacement. Put differently, if at thecenter of arbitrage is not the mimetic possibility of neo-classical equilibrium, but themnestic impossibility of economy itself, then arbitrage, as a kairotic act, points to animmanent space of rhetorical invention where something new and novel mightsurface. Such an orientation suggests an understanding of rhetorics materialitycapable of moving beyond the timely and untimely in neo-classical economics andtoward a horizon of action attuned to the relational ebbs and flows of both intensiveand extensive time. Seen from this vantage point, crisis is not an opportunemoment to be overcome or transcended but, instead, the very rhetorical conditionof kairotic movement through which the forces of assessment and calculability thatconstitute the heart of economic matter become possible. Indeed, only with a deepappreciation of the emergent nature of kairos will the rhetoric of economics projectdeliver a thoroughgoing understanding of how the materiality of rhetoric arises as aforce of social and political production in the face of radical contingency, therebyrealizing its trans-disciplinary potential.84


Notes

[1] The Great Recession has become a popular synonym for the financial crisis of 2008.Economists point to December 2007 as the start of the Great Recession. See Chris Isadore,Its Official: Recession since Dec 07, CNNMoney.com, December 1, 2008, http://money.cnn.com/2008/12/01/news/economy/recession/index.htm.

[2] Evelyn Rusli, Bernanke Believes Housing Mess Contained, Forbes.com, May 2, 2007, http://www.forbes.com/2007/05/17/bernanke-subprime-speech-markets-equity-cx_er_0516markets02.html; Trouble at HSBC Stemmed from Household Purchase, The NewYork Times Dealbook, February 23, 2007, http://dealbook.nytimes.com/2007/02/23/-trouble-at-hsbc-stemmed-from-household-purchase/?scp=2&sq=hsbc&st=nyt; RhysBlakely and Tom Bawden, Bernanke says sub-prime crisis cost could be $100bn,The Sunday Times, July 19, 2007, http://business.timesonline.co.uk/tol/business/economics/article2105558.ece.

[3] Dissecting The Bear Stearns Hedge Fund Collapse, Investopedia.com, last modified 2009,accessed December 18, 2013, http://www.investopedia.com/articles/07/bear-stearns-collapse.asp.

[4] Adam Shell, JPMorgan increases Bear Stearns bid to $10 a share, USA Today, March 29,2008, http://abcnews.go.com/Business/story?id=4516500.

[5] Lehman Brothers Files For Bankruptcy, Scrambles to Sell Key Business, CNBC.com,September 15, 2008, Bankruptcy_Scrambles_to_Sell_Key_Business; Ronald Orol, Geithner,Paulson defend $182 billion AIG bailout Marketwatch.com, January 27, 2010, geithner-paulson-defend-182-bln-aig-bailout-2010-01-27

[6] Megan Barnett, Start Bailing, Upstart Business Journal, October 3, 2008, http://upstart.bizjournals.com/news-markets/top-5/2008/10/03/House-Passes-Bailout-Bill.html.

[7] Edmund Andrews, Fed Loosens Standards on Emergency Loans, The New York Times,September 15, 2008, http://www.nytimes.com/2008/09/15/business/15fed.html?ref=business.

[8] Obama Signs Bill Overhauling Financial Rules. The New York Times Dealbook, July 21,2010, 202010&st=cse

[9] See Nouriel Roubini and Stephen Mihml, Crisis Economics: A Crash Course in the Future ofFinance (New York, NY: Penguin, 2010).

[10] For an excellent review of this literature see Philip Mirowski, Never Let a Serious Crisis Go toWaste: How Neoliberalism Survived the Financial Meltdown (New York, NY: Verso, 2013).

[11] John Bentley, McCain: Greed of Wall Street To Blame for Economic Meltdown, CBSNews.com, September 16, 2008, http://www.cbsnews.com/news/mccain-greed-of-wall-street-to-blame-for-economic-meltdown/.

[12] David Jackson, Obama: Fat-cat Bankers Owe Help to US Taxpayers, USA Today,December 18, 2009, industries/banking/2009-12-13-obama-bankers-small-business_N.htm.

[13] Sarah van Gelder, ed., This Changes Everything: Occupy Wall Street and the 99% Movement(San Francisco, CA: Berrett-Koehler, 2011).

[14] Our understanding of economic performativity is not novel and is a relatively establishedorthodoxy in the fields of anthropology and sociology. Our aim is to specify the rhetoricaldimensions of economic performativity, which, in this essay, we locate primarily at thetheoretical and methodological levels of neo-classical discourse. For an outstanding overviewof economic performativity see Donald A. MacKenzie, Fabian Muniesa, and Lucia Siu, eds.,Do Economists Make Markets?: On the Performativity of Economics (Princeton, NJ: PrincetonUniversity Press, 2007).

[15] Deirdre N. McCloskey, The Rhetoric of Economics (Madison, WI: University of WisconsinPress, 1998). It is worth noting that McCloskeys project is situated in a larger movementwithin rhetoric known as the Project on the Rhetoric of Inquiry (POROI). For a definitiveessay on POROI, see John Lyne, The Rhetoric of Inquiry, Quarterly Journal of Speech 71,no. 1 (1985): 6573.


[16] G. Thomas Goodnight and Sandy Green, Rhetoric, Risk and Markets: The Dot-ComBubble, Quarterly Journal of Speech 96, no. 1 (2010): 11540.

[17] In this respect, our project is consistent with the thesis put forward by John Bender andDavid E. Wellbery, who argue for an ontological conception of rhetoric, or generalizedrhetoric that penetrates to the deepest levels of human experience. Our aim is to situate thisgeneralized rhetoric, or what they call rhetoricality, in the material conditions of economictheory and practice. See John Bender and David E. Wellbery, Rhetoricality: On theModernist Return of Rhetoric, in The Ends of Rhetoric: History, Theory, Practice, eds. JohnBender and David E. Wellberry (Stanford, CA: Stanford University Press, 1990), 25. Ourpremise regarding the ontological rhetoricity of economic marketplaces in also touched onbriefly in Christian Lundbergs discussion of Milton Friedman. See Christian Lundberg,Lacan in Public: Psychoanalysis and the Science of Rhetoric (Tuscaloosa, AL: University ofAlabama Press, 2012), 9193.

[18] The distinction between extensive and intensive time is introduced in Indradeep Ghosh, TheForm of Time, the Logic of Affect, and a Frame of Subjectivity, Journal of ContemporaryThought 37 (Summer 2013): 3550.

[19] We understand rhetorical surplus as an affective remainder, or irreducible excess, that goesbeyond any system of representation, or totality, that would desire to contain and capture itsmeaning. For a detailed exposition of this conception of surplus see Kiarina A. Kordela,Surplus: Spinoza, Lacan (New York, NY: SUNY Press, 2008).

[20] Goodnight and Green, Rhetoric, Risk and Markets, 117.[21] Goodnight and Green, Rhetoric, Risk and Markets, 117.[22] Goodnight and Green, Rhetoric, Risk and Markets, 118.[23] Goodnight and Green, Rhetoric, Risk and Markets, 118.[24] Goodnight and Green, Rhetoric, Risk and Markets, 119.[25] Goodnight and Green, Rhetoric, Risk and Markets, 119.[26] Goodnight and Green, Rhetoric, Risk and Markets, 119, italics in original.[27] Goodnight and Green, Rhetoric, Risk and Markets, 119.[28] Goodnight and Green, Rhetoric, Risk and Markets, 122.[29] Goodnight and Green, Rhetoric, Risk and Markets, 119.[30] Goodnight and Green, Rhetoric, Risk and Markets, 119.[31] Goodnight and Green, Rhetoric, Risk and Markets, 122.[32] On the material relationship between marking, temporality, and economics see Jacques

Derrida, Given time: I. Counterfeit money, vol. 1 (Chicago, IL: University of ChicagoPress, 1992).

[33] Barbara A. Biesecker. Rethinking the Rhetorical Situation from within the Thematic ofDiffrance, Philosophy & Rhetoric 22, no. 2 (1989): 11030.

[34] Ronald Walter Greene, Another Materialist Rhetoric, Critical Studies in Mass Commun-ication 15, no. 1 (1998): 23.

[35] Nathan Stormer, Recursivity: A Working Paper on Rhetoric and Mnesis, Quarterly Journalof Speech 99, no. 1 (2013): 30.

[36] On the relationship between the apparatus of capture and abstract machine see GillesDeleuze, and Felix Guattari. A Thousand Plateaus: Capitalism and Schizophrenia, trans. BrianMassumi (Minneapolis, MN: University of Minnesota Press, 1987). On the attempt of neo-classical economics to reflect the ordering principles of the natural sciences see PhilipMirowski, More Heat than Light: Economics as Social Physics, Physics as Natures Economics(Cambridge, MA: Cambridge University Press, 1991).

[37] We understand suturing as an act of articulation that produces a provisional sense of unity,identity, and coherence out of ontological difference. On the concept of the suture inrhetorical studies see Barbara A. Biesecker, Addressing Postmodernity: Kenneth Burke,Rhetoric, and a Theory of Social Change (Tuscaloosa, AL: University of Alabama Press, 2000).


[38] On the concept of the virtual and its relation to the actual see Gilles Deleuze, Bergsonism,trans. Hugh Tomlinson and Barbara Habberjam (New York, NY: Zone, 1988).

[39] For an exemplary discussion of such assumptions see Talcott Parsons, The Structure of SocialAction (New York, NY: The Free Press, 1967).

[40] See Mirowski, More Heat than Light.[41] Adam Smith, The Theory of Moral Sentiments (London, UK: A. Millar, 1790); Adam Smith,

The Wealth of Nations (London, UK: W. Strahan and T. Cadell, 1776). See also: Paul Turpin,The Moral Rhetoric of Political Economy: Justice and Modern Economic Thought (New York,NY: Routledge Frontiers Political Economy, 2011).

[42] On the relationship between Smiths invisible hand and providence see Giorgio Agamben,The Kingdom and the Glory: For a Theological Genealogy of Economy and Government(Stanford, CA: Stanford University Press, 2011).

[43] See Alfred Marshall, Principles of Economics (London, UK: Macmillan & Co., 1890).[44] One example of the new approaches made possible by these developments in mathematics is

Dynamic Programming, see Nancy Stokey, Robert E. Lucas, and Edward C. Prescott,Recursive Methods in Economic Dynamics (Cambridge, MA: Harvard University Press, 1989).

[45] John F. Muth, Rational Expectations and the Theory of Price Movements, Econometrica 29,no. 3 (1961): 31535.

[46] For a discussion of ergodicity, see Paul Davidson, Rational Expectations: A FallaciousFoundation for Studying Crucial Decision-Making Processes, Journal of Post KeynesianEconomics 5, no. 2 (198283): 18298.

[47] Eugene F. Fama, Random Walks in Stock Market Prices, Financial Analysts Journal,September/October (1965), reprinted January/February (1995): 7580.

[48] Fama, Random Walks, 76.[49] In his General Theory of Employment, Interest and Money, Keynes likened professional

investment to those newspaper competitions in which the competitors have to pick out thesix prettiest faces from a hundred photographs, the prize being awarded to the competitorwhose choice most nearly corresponds to the average preferences of the competitors as awhole; so that each competitor has to pick, not those faces which he himself finds prettiest,but those which he thinks likeliest to catch the fancy of the other competitors, all of whomare looking at the problem from the same point of view. See John Maynard Keynes, GeneralTheory of Employment, Interest and Money (New York: Harcourt, 1936/1965), 156. On therelationship between Keynes and economic rhetoric see Davis W. Houck, Rhetoric asCurrency: Hoover, Roosevelt and the Great Depression, vol. 4 (College Station, TX: TexasA&M University Press, 2001).

[50] For a discussion of arbitrage see Donald Mackenzie, Long-Term Capital Management andthe Sociology of Arbitrage, Economy and Society 32, no. 3 (2003): 34980 and HirokazuMiyazaki, Arbitraging Japan: Dreams of Capitalism at the End of Finance (Berkley, CA:University of California Press, 2013).

[51] Robert E. Lucas, Expectations and the Neutrality of Money, Journal of Economic Theory 4,no. 2 (1972): 10324; and Finn E. Kydland and Edward C. Prescott, Time to Build andAggregate Fluctuations, Econometrica 50, no. 6 (1982): 134571.

[52] David Harvey, A Brief History of Neoliberalism (New York, NY: Oxford UniversityPress, 2005).

[53] For a general discussion of these trends and policies see Mirowski, Never Let a Serious CrisisGo to Waste. On the concept of the Washington Consensus, understood as a bipartisanorientation toward neoliberal economic reform, see M. Lane Bruner, Democracys Debt: TheHistorical Tensions between Economic and Political Liberty (Amherst, MA: PrometheusBooks, 2009).

[54] For a more detailed genealogy of these policies and practices from a communicationperspective see Joshua S. Hanan, Home is Where the Capital Is: The Culture of Real Estate


in an Era of Control Societies, Communication and Critical/Cultural Studies 7, no. 2 (2010):176201 and Megan Foley, From Infantile Citizens to Infantile Institutions: The MetaphoricTransformation of Political Economy in the 2008 Housing Market Crisis, Quarterly Journalof Speech 98, no. 4 (2012): 386410.

[55] Stormer, Recursivity.[56] On the concept of the placeholder see Annelise Riles, Collateral Knowledge: Legal

Reasoning in the Global Financial Markets (Chicago, IL: University of Chicago Press,2011). Jacques Derridas metaphor of the supplement is also a useful way to think about theparadoxical positioning of arbitrage as both inside and outside extensive time. See JacquesDerrida, Of Grammatology (Baltimore, MD: Johns Hopkins University Press, 1998).

[57] Derrida, Given Time.[58] See Giorgio Agamben, What Is an Apparatus? and Other Essays, trans. David Kishik and

Stefan Pedatella (Palo Alto, CA: Stanford University Press, 2009). In Kingdom and the Glory,Agamben develops his notion of the apparatus in significantly more detail by tracing itsetymology origins in the Greek phrase oikonomia and its translation through the latin/Ciceronian phrase dispositif. For a more extended discussion of Agambens treatment ofapparatus and dispositif, in the context of economic rhetoric, see Catherine Chaput andJoshua S. Hanan, Economic Rhetoric as Taxis: Neoliberal Governmentality and theDispositif of Freakonomics, Journal of Cultural Economy (2014, doi: 10.1080/17530350.2014.942349)

[59] There are many articulations of rhetoric today that attempt to problematize this pre-representational space of temporality that we are referring to as intensive time. These rangefrom the rhetorical uptake of Lacans Real and Symbolic, to Deleuzes virtuality, to Platoschora (read largely through Kristeva and Derrida). While this essay lacks the space tounpack the assumptions of these, at times, incommensurable pre-representational paradigms,the remainder of this essay problematizes intensive time in terms of an affective logic(see subsequent footnote). For recent books that explore rhetoric from a pre-representationalstandpoint see Diane Davis, Inessential Solidarity (Pittsburgh, PA: University of PittsburghPress, 2010); Bradford Vivian, Being Made Strange: Rhetoric beyond Representation (NewYork, NY: SUNY Press, 2004); Lundberg, Lacan in Public; John Muckelbauer, The Future ofInvention: Rhetoric, Postmodernism, and the Problem of Change (New York, NY: SUNYPress, 2009); and Thomas Rickert, Ambient Rhetoric: The Attunement of Rhetorical Being(Pittsburgh, PA: University of Pittsburgh Press, 2013).

[60] We take our notion of affective logic from Brian Massumis preemptive logic thatoperates on an affective register and inhabits a nonlinear time operating recursively betweenthe present and the future. Brian Massumi, The Future Birth of the Affective Fact: ThePolitical Ontology of Threat, in The Affect Theory Reader, eds. Melissa Gregg and Gregory J.Seigworth (Durham, NC: Duke University Press, 2010), 5657.

[61] In this respect our mode of economic criticism must be understood as a deviation from therhetoric as epistemic project inaugurated by Robert Scott and taken up in the 1980s withPOROI. Robert L. Scott, On Viewing Rhetoric as Epistemic, Communication Studies 18, no.1 (1967): 917.

[62] See Agamben, Kingdom and the Glory, 142.[63] The emergence of novelty may also be understood in terms of path dependence ( la Paul

David), which typically will render extensive time non-ergodic, reconstituting the underlyingstochastic structure of the economy in such a way that historically applicable probabilisticcalculi are no longer valid. Even worse, the underlying stochastic structure may bereconfigured to such an extent that no analytically tractable probabilistic calculus is able totruly capture its new complexity. The epistemological insistence, on the part of neo-classicaleconomic theory, that the underlying stochastic structure of the economy is not only stablebut also essentially Gaussian, or representable by the normal distribution, is then rendered


doubly suspect, as critics of EMH such as Nicholas Nassem Taleb have frequently pointedout. See Paul A. David, Clio and the Economics of QWERTY, The American EconomicReview 75, no. 2 (1985): 33237; Nicholas Nassim Taleb, The Black Swan: The Impact of theHighly Improbable Fragility (New York, NY: Random House, 2010); and Nicholas NassimTaleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets(New York, NY: Random House, 2005).

[64] Riles, Collateral Knowledge.[65] On the importance of the impossible to rethinking rhetoric in the twenty-first century see

Barbara A. Biesecker, Prospects of Rhetoric for the Twenty-First Century: Speculations onEvental Rhetoric Ending with a Note on Barack Obama and a Benediction by Jacques Lacan,Reengaging the Prospects of Rhetoric: Current Conversations and Contemporary Challenges,ed. Mark J. Porrovecchio (New York, NY: Routledge, 2010): 1636.

[66] Stormer, Recursivity, 28.[67] Stormer, Recursivity, 41, italics in original.[68] Stormer, Recursivity, 41.[69] Our use of failed totality is borrowed from Ernesto Laclau, who defines it as a

tropologically constituted place of an irretrievable fullness. See Ernesto Laclau, On PopulistReason (New York, NY: Verso, 2005), 70.

[70] Stormer, Recursivity, 42.[71] John Poulakos, Toward a sophistic definition of rhetoric, Philosophy & Rhetoric 16, no. 1

(1983): 36[72] Poulakos, Toward, 42.[73] This is why Hirokazu Miyazaki argues, for example, that the relationship between arbitrage

and speculation is untenable. See Hirokazu Miyazaki, Between Arbitrage and Speculation:an Economy of Belief and Doubt, Economy and Society 36, no. 3 (2007): 396415.

[74] Stormer, Recursivity, 43.[75] Stormer, Recursivity, 43.[76] For a discussion of emergent reasoning in financial markets see Mark C. Taylor, Confidence

Games: Money and Markets in a World without Redemption (Chicago, IL: University ofChicago Press, 2008). For a more general discussion of emergent reasoning see Diana Cooleand Samantha Frost, The New Materialisms: Ontology, Agency and Politics (Durham, NC:Duke University Press, 2010).

[77] Deleuze and Guattari, A Thousand Plateaus.[78] Paul Krugman, Paul, How Did Economists Get It So Wrong? The New York Times

Magazine, September 2, 2009, http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=all.

[79] Krugman, How.[80] Krugman, How.[81] Edmund Andrews, Greenspan Concedes Error on Regulation. The New York Times,

October 23, 2008, http://www.nytimes.com/2008/10/24/business/economy/24panel.html.[82] Muckelbauer, The Future, 117.[83] Muckelbauer, The Future, 117.[84] A rich conversation over the multi-dimensional importance of kairos for rhetorical theory

has surfaced in recent years. For an important collection of essays providing ancient andcontemporary context for that conversation, see Phillip Sipiora and James S. Baumlins editedvolume Rhetoric and Kairos: Essays in History, Theory, and Praxis (Albany, NY: SUNY Press,2002). Those essays fall largely into either an accommodation or creation model of kairos(see Carolyn R. Millers Forward, xixiii). We wish to complicate these models byemphasizing an emergent, relational, non-rational, and partly improvisational account ofkairos. In addition to Muckelbauers book, a number of other works offer excellenttheoretical treatments of kairos that are, to varying degrees, allied with our own perspective,


including Eric Charles Whites Kaironomia: On the Will-to-Invent (Ithaca, NY: CornellUniversity Press); Dale Sullivans Kairos and the Rhetoric of Belief, Quarterly Journal ofSpeech 78, no. 3 (1992): 31732; John Poulakoss Sophistical Rhetoric in Classical Greece(Columbia: University of South Carolina Press, 1995); Janet M. Atwills Rhetoric Reclaimed:Aristotle and the Liberal Arts Tradition (Ithaca, NY: Cornell University Press, 1998); ScottConsignys Gorgias: Sophist and Artist (Columbia: University of South Carolina Press, 2001);Debra Hawhees Kairotic Encounters, in Perspectives on Rhetorical Invention, ed. Janet M.Atwill and Janice M. Lauer (Knoxville: University of Tennessee Press: 1635); and RickertsAmbient Rhetoric. For an excellent and concise overview of this conversation and the basicstakes involved, see Debra Hawhees discussion in Bodily Arts: Rhetoric and Athletics inAncient Greece (Austin, TX: University of Texas Press, 2004), 6571.


AbstractIntroductionSection 1: Goodnight's and Green's Rhetorical Theory of BubblesSection 2: Neo-Classical Economics, REH, EMH, and DSGE modelsSection 3: A Critique of Neo-Classical Economic TheoryKairotic Time, Arbitrage, and MnesisSection 4: ConclusionA Rhetoric of Economics as Emergent KairosNotes

QJS - Ontological Rhetoric of Neoclassical Economics & Its Relation to 2008 Financial Crisis

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