As the financial debacle unfolds, bonuses (an otherwise practically ignored black box of the conduct of financial life) come to the forefront in scholarly discussions among all sorts of lab incentivists and management behavioralists (see for an example Dan Ariely‘s recent NYT Op-Ed column and subsequent comments).

Well, maybe it’s time to advertise some sort of a sociological angle. Olivier Godechot has been having a look at how traders working in the trading rooms of big investment banks get their bonuses (“bonus”: i.e. a system to privatize profits at the trader’s level and to mutualize losses at the bank’s level). A snapshot exceptionally available in English here (or here) — that’s a paper on how the front office manages to shape the entire accounting structure of a trading room.

By the way, the key sociological enigma here is not how traders get motivated or not to do this and that but how such amazing amounts of dough are connected to the organization of the labor process. Ladies and gentlemen, that’s “good old sociology” again:

“How does the participation in an economic activity allow for a sudden and brutal access to wealth? If, from a liberal point of view, things are exchanged against their equivalent, how come a big fortune can be obtained though market exchange? Well, the exchange needs to be asymmetric at some point. It’s the question that Marx puts forward at the beginning of The Capital: how come in an M-C-M’ cycle (money-commodity-money) M’ turns to be bigger than M? Marx’s response is that what is actually exchanged is the cost of the reproduction of labor, not the cost of its productive force.” (from “Qui sont les traders?”, an interview with Olivier Godechot, Contretemps, November 2008)

Gasp.




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