Bna-443 Malik 2014 The Ontology of Finance

Malik, Suhail
Book Part — Published Version

The Ontology of Finance: Price, Power, and the
Arkhéderivative
Provided in Cooperation with:

The Bichler & Nitzan Archives
Suggested Citation: Malik, Suhail (2014) : The Ontology of Finance: Price, Power, and
the Arkhéderivative, In: MacKay, Robin (Ed.): Collapse Vol. VIII: Casino Real, Urbanomic,
Falmouth, pp. 629-811,
http://bnarchives.yorku.ca/443/
This Version is available at:

http://hdl.handle.net/10419/157987
Standard-Nutzungsbedingungen: Terms of use:
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your
Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes.
Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial
Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them
machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise
use the documents in public.
Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen
(insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open
gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you
genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated
licence.
http://creativecommons.org/licenses/by-nc-nd/4.0/
COLLAPSE
Philosophical Research and Development
VOLUME VIII
Edited by
Robin Mackay
URBANOMIC
FALMOUTH
Collapse 8.indb 3 27/11/2014 15:39

Collapse 8.indb 4 27/11/2014 15:39
COLLAPSE VIII
December 2014
E: Robin Mackay
R M
Editorial Introduction 
J-L M
Untitled 
A B
e Church e Bank e Art Gallery 
J C
From Collective to Wager 
S F
e Ultimate Cooler (Interview) 
U A
Angel Deck with Linework 
N D S
Engineering Chance 
J J-L
A Guide to the Casino Architecture of Wedding 
D W
From Blackjack to Monanism (Interview) 
A K M
Dice-Like and Distributed 
N L
Transcendental Risk 
Collapse 8.indb 1 27/11/2014 15:39

COLLAPSE VIII
M Ć°
e Greatest Gamble in History 
J M. C, M G, Z S
From Molecule to Market 
N S  A W
On Cunning Automata 
S L
Notes from New Jersey 
E A
e Writing of the Market (Interview) 
J R
From a Restricted to a General Pricing Surface 
S M
e Ontology of Finance 
Q M
e Materialist Divinization of the Hypothesis 
S A ½ N C
Mr. Heggarty Goes Down 
GSK
CAUTION 
F Z
Peirce’s Tychism 
M B
Quantum Mechanics as Generalised
eory of Probabilities ÀÁÂ
E A
A Formal Deduction of the Market 
Notes on Contributors and Acknowledgements 
Collapse 8.indb 2 27/11/2014 15:39

COLLAPSE VIII
The Ontology of Finance:

Price, Power, and the Arkhéderivative
Suhail Malik
.  
e financial crisis presented two overt lessons:

Lesson One is that the derivatives markets presents
a systemic risk to national and world economies; Les-
son Two is that the relative size of these markets is a
fundamental risk to geopolitical as well as economic
security. e numbers are indeed remarkable: the
notional total value of the derivatives market at the
end of was $. trillion. Compare this to the
$.tn global market value of the ‘real economy’ of
goods and services, Gross Domestic Product (),
for —just over one-tenth of the face value of the
1. Bank of International Settlements (BIS), ‘Table 23A: Derivative

financial instruments traded on organised exchanges’, June 2013 [www.bis.
org/statistics/extderiv.htm] and ‘Table 19: Amounts outstanding of over-the-
counter (OTC) derivatives’, May 2013, www.bis.org/statistics/dt1920a.pdf.
629
Collapse 8.indb 629 27/11/2014 15:40

COLLAPSE VIII
derivatives market, give or take a couple of trillion

dollars.§ e notional value of directly-traded off-
exchange derivative markets—Over-the-Counter ()
trading—alone amounted to $.tn, a sum about
seven times greater than global .¬ While impres-
sive, these headline figures need to be qualified: they
represent the sum total of claims traded on the market,
not how much would have to be paid were everyone in
the market to immediately cash-out. is latter ‘gross
market value’ at end- is estimated at $.tn,° just
under four percent of the notional value of the market
or just under a third of global ; or, for further
comparison, slightly more than the combined 
of the two largest national economies that year, the
 ($´.tn) and China ($.tn). Furthermore, since
contracts on the derivatives markets o¶en cancel each
other out, for reasons presented later, the net credit
exposure of the  derivatives market and its ‘cash’
value is estimated to be $·.tn at end-—about .
2. e World Bank, ‘World Development Indicators: Gross domestic

product 2012’, databank.worldbank.org/data/download/GDP.pdf.
3. International Swaps and Derivatives Association (ISDA), OTC
Derivatives Market Analysis Year-End 2012, June 2013 (Updated 9 August
2013), www2.isda.org/functional-areas/research/studies/. Removing
foreign exchange (FX) contracts and accounting for double reporting, ISDA
reports that the net face value of the global OTC derivatives market at end-
2012 was $417.4tn. e notional value for options and futures exchanges for
2012 are estimated to be $35.8tn and $26tn respectively.
4. BIS, ‘Table 19’.
630
Collapse 8.indb 630 27/11/2014 15:40

Malik—Ontology of Finance
percent of the notional value; a sum comparable with

Germany’s $·.tn , the fourth largest in the world.¿
ese figures and comparisons are striking. What
they index is a key feature of the derivatives market:
that the notional value of traded contracts amplifies
their credit exposure by two orders of magnitude. is
multiplication is in part explained by the trade being
one of contracts of ownership claims rather than direct
ownership at full cost: similar to buying a lottery ticket
for a multi-million jackpot at the price of a couple of
local currency units, the claimed or notional worth of
a derivatives contract can be any multiple of its cost.À
Yet, even at this latter amount of net ‘exposure’, the
political issue brought into relief by these figures is that
the pecuniary magnitude of derivatives markets in total
is on a par with all but the most economically power-
ful national jurisdictions in which they are nominally
located and which, assuming the power supremacy of
state sovereignty, legislate over them.
To return to Lesson One, however, that final author-
ity is precisely what is weakened—if it is not in fact
5. O. Kaya, ‘Reforming OTC derivatives markets’, Deutsche Bank

Research, 7 August 2013, 14, www.dbresearch.com/PROD/DBR_
INTERNET_EN-PROD/PROD0000000000318054.pdf.
6. e analogy follows Stephen Figlewski’s popularising explanation:
‘Saying there’s $668 trillion in derivatives floating out there [in 2008] is like
saying every lottery ticket sold is worth the full value of the jackpot. If the
jackpot is $100 million and lottery organizers sell 2 million tickets, “that’s
$200 trillion worth of lottery wealth that’s circulating!” jokes Figlewski’
(B. Sheridan, ‘600,000,000,000,000?’, Newsweek, 17 Oct 2008, www.newsweek.
com/600-trillion-derivatives-market-92275.
631
Collapse 8.indb 631 27/11/2014 15:40

COLLAPSE VIII
upended (as this article will demonstrate)—by these

markets’ systemic risk. Two moments of the
financial crisis exemplify the systemic reach of that
risk. Firstly, according to the now-standard narrative
of the causes of that crisis, the complexity of derivative
instruments distributing the risk of interest-bearing
loans across the international financial architecture led
to systemic and uncontained uncertainty in the credit-
worthiness of such instruments as well as the guarantees
against their defaulting.Ì Because financial instruments
and their risk could not be securely priced across the
sector or even per firm, financial institutions withdrew
credit and liquidity from interfinancial trading from
, culminating in the collapse of major financial
corporations in . Credit also shrunk back in the
wider economy of production, services, and consump-
tion from ; sectors which, in the Euro-American
economies from the s onward, had themselves been
increasingly sustained by a growing debt-dependency
rather than by revenue.Í Consequently, the uncertainty
7. M. Hudson, e Bubble and Beyond (Dresden: ISLET, 2012); J. C. Hull,

‘e Credit Crunch of 2007: What Went Wrong? Why? What Lessons Can
Be Learned?’, Journal of Credit Risk, 5.2, 2009, 3–18; C. Lapavitsas, Profiting
Without Producing: How Finance Exploits Us All (London: Verso, 2013), 277-81;
N. Roubini & S. Mihm, Crisis Economics (New York: Penguin, 2010), Ch.3; E.
Stockhammer, ‘Neoliberalism, Income Distribution and the Causes of the
Crisis’, investigación económica, LXXI.279, enero-marzo, esp. 42–5, eprints.
kingston.ac.uk/23226/1/Stockhammer-E-23226.pdf.
8. About 80 percent of the global derivatives market is in the jurisdictions
of the US and the EU (Kaya, ‘Reforming’, 4). On increasing household and
corporate debt see M. Hudson, ‘Government Debt and Deficits Are Not
the Problem. Private Debt Is’, Remarks at e Atlantic’s Economy Summit,
632
Collapse 8.indb 632 27/11/2014 15:40

as to the creditworthiness of all financial institu-

tions led in to a rapid contraction not only of
that sector but of the overall economy. e resulting
severe economic downturn, exacerbated by ‘austerity’
measures in several regions, exposed the systemic
centrality of modern financial arrangements to the
nonfinancial economy.
e second demonstration of the systemic integra-
tion of financial markets is provided by the transna-
tional response by states to the financial crisis. e
pecuniary amounts involved pushed the crisis outside
of the conventional scales and terms of operation of
state financial institutions.Ò e transnational state
13 March 2013, Washington DC [michael-hudson.com/2013/03/government-

debt-and-deficits-are-not-the-problem-private-debt-is/]; S. Keen, Debunking
Economics, Second Edition (London: Zed, 2011), Ch.13; Stockhammer,
‘Neoliberalism’, 59–63.
9. Namely, Quantitative Easing (QE) in the US and UK, and
the combination of the European Stability Mechanism (ESM) and
Securities Market Programme (SMP) for the Eurozone. ese policies
are unconventional in terms of both magnitude and policy. With regard
to magnitude, QE has resulted in a 450 percent increase in ‘the Federal
Reserve’s balance sheet […] rising from $920bn at the end of December
2007 to over $4.2tn at the end of February 2014’—continuing with $65bn
per month rolling forward indefinitely from September 2013 (quoting
from T.I. Palley, ‘Monetary policy a¶er quantitative easing: e case for
asset based reserve requirements (ABRR)’, PERI Working Paper Series
350, May 2014, www.peri.umass.edu/fileadmin/pdf/working_papers/
working_papers_301-350/WP350.pdf). e ESM has facilitated a reserve
of €500bn (about five percent of Eurozone GDP) since October 2012 for
bond buy-outs and loan-provision by the EU (‘Gearing up for business’,
e Economist, 12 October 2013). In addition the SMP established by the
European Central Bank (ECB) in May 2010 provides unlimited purchases
of government bonds via secondary markets. While both measures seem to
contravene the prohibition against any form of central monetary financing
of governments stipulated by the 1992 Maastricht treaty founding the EU,
633
Collapse 8.indb 633 27/11/2014 15:40

COLLAPSE VIII
the SMP circumvents this core injunction by providing a guarantee for

markets of government debt (and their concomitant fiscal policies) such
that the ECB’s monetary provision does not directly underwrite any state’s
fiscal policy. Similarly, the EMS constructs a Eurowide monetary provision
by centrally formalising a set of bilateral loan guarantees channeled through
the EU and IMF via a dedicated Luxembourg-based finance institution. On
the EMS, see C. Panico and F. Purificato, ‘e Debt Crisis and the European
Central Bank’s Role of Lender of Last Resort’, January 2013, PERI Working
Papers Series 306, www.peri.umass.edu/fileadmin/pdf/working_papers/
working_papers_301-350/WP306.pdf. For the SMP, see D. Gros and T.
Mayer, ‘Liquidity in times of crisis: Even the ESM needs it’, CEPS Policy
Brief 265 (March 2012), www.dbresearch.com/PROD/DBR_INTERNET_
DE-PROD/PROD0000000000287245/Liquidity+in+times+of+crisis%3A+Ev
en+the+ESM+needs+it.PDF; a detailed analysis of the ‘bounded rationality’
(250) of institutional constraints and mobility in the transnational state
construction of these unprecedented provisions is given in L. Gocaj and
S. Meunier, ‘Ùme Will Tell: e EFSF, the ESM, and the Euro Crisis’,
European Integration, 35.3 (2013), 239–253.
Unconstrained by the Eurozone’s institutional distinction between
monetary authority and fiscal policy, QE in the US and UK follows the model
set by the Bank of Japan in the early 2000s, which faced similar conditions
to those confronting the central banks of major Euro-American economies
a¶er 2008: shrinking demand lowers prices, and that deflation itself leads to
an effective increase in the price of debt (because deflation means the cost
of pecuniary assets including debts increases in real terms, as then does the
size of debt-servicing as a proportion of the overall economy, in turn further
reducing demand and exacerbating the initial problem). With interest rates
at close to zero in order to reduce bank liabilities (effectively a state subsidy
for commercial banks [Lapavitsas, Profiting, 282]), central banks cannot
further encourage lending via this mechanism and so look to stimulate
the economy by direct purchasing of highly-graded financial assets such as
sovereign debt bonds (also issued by the state) in order to reduce their yield
and shi¶ private credit and liquidity to elsewhere in the economy, such as
equities in firms thereby providing investment. Alongside this intervention
the US Fed reduced federal funds rate for borrowing by commercial banks
from over five percent in mid-2007 to near-zero in December 2008 in order
to stimulate market liquidity. However, because commercial banks were
cautious about further downturns and credit exposure risks a¶er the 2008
crisis, their reserves at the Fed increased from a 2001–07 level of around
$19bn to $860bn in 2007–08 to $1.6tn by 2011, or ‘more than 10 percent
of US annual GDP’ for that year compared to reserve levels of less that
two percent of GDP in previous crises since the 1970s (R. Pollin, ‘e
Great U.S. Liquidity Trap of 2009–11: Are We Stuck Pushing on Strings?’,
Review of Keynesian Economics 1.0 (2012), 55–76, www.peri.umass.edu/
fileadmin/pdf/working_papers/working_papers_251-300/WP284.pdf]).
634
Collapse 8.indb 634 27/11/2014 15:40

directives formulated by the G in sought to

systematise transparency and reduce scalar risk by
requiring greater capital reserves for financial institu-
tions or, equally, capping market exposure for firms
dealing with  contracts. Ú But these stipulations only
serve to capture and organize better the operational
framework of the derivatives markets’ ‘efficient’ alloca-
tion of capital without proscribing or fundamentally
inhibiting their operations. And the reason is clear: with
credit rather than revenues providing the conditions
for economic expansion, finance markets are now a
condition of national . While the official sanction
for the growth of finance markets is framed in terms
While that reserve reduced the Fed’s balance sheet at the time of its own rapid
expenditure thanks to QE, the 0.25 percent interest rate on such deposits
it offered for the first time on such reserves meant that these accounts
provided a direct annual subsidy of $400bn annually for commercial
banks borrowing Fed funds on the one hand and parking it back in the
Fed with the other. e channeling of state-generated funds to the financial
sector extends beyond banking institutions: because QE mainly supports
the prices of financial assets while keeping interest rates at near-zero and
relying on banks to provide liquidity to business in a contracted economy
with small if any increases in wages, employment levels, and savings, the
net effect is a relative increase in income to those holding financial assets—
preponderantly the wealthiest five percent of the population, and more
emphatically so for riskier asset portfolios than for conservative ones. QE
thereby sustained the primary dynamic of neoliberalism since the late-1990s
of increasing concentration of income-share towards the very wealthiest
via financialization (Bank of England, ‘e Distributional Effects of
Asset Purchases’, 12 July 2012, www.bankofengland.co.uk/publications/
Documents/news/2012/nr073.pdf; M.A. Gayed, ‘What Wealth Effect?
QE Has Helped the Rich More an the Poor’, 21 October 2013, www.
minyanville.com/articles/print.php?a=52334).
10. Financial Stability Board (FSB), OTC Derivatives Market Reforms: Fi¶h
Progress Report on Implementation, 15 April 2013, www.financialstabilityboard.
org/publications/r_130415.pdf. Cf. also Kaya, ‘Reforming’, 4–6.
635
Collapse 8.indb 635 27/11/2014 15:40

COLLAPSE VIII
of risk-management and the provision of liquidity to

all markets, what the crisis itself made palpable was
that it is financial markets themselves that impose the
systemic entrenchment and expansion of uncontained
financial risk—contagion, as it is called—and in the
service of that systemic requirement the reduction
of liquidity within those markets in the crisis
required significant intervention by state agencies in
order to maintain their general economic functioning.
For example, Euro-American state support for banks
in the year – alone amounted to $tn (about ´
percent of global ). Furthermore, these quantitative
factors have a categorial corollary: whereas sovereign
monarchs presented the greatest threat to banks in the
early capitalist banking system (that of defaulting on
war loans), ‘today, perhaps the biggest risk to the sov-
ereign comes from the banks. Causality has reversed’. §
States are now subject to the distinct power of finance
in a way they are to no other terrestrial entity (apart
from other states, and climate change).
Even as finance and the state system constitute a
nexus of power, it is nonetheless internally riven by
the threat presented by the power of finance against
state sovereignty.
11. FSB, Implementing OTC Derivatives Market Reforms, 25 October 2010, 8,

www.financialstabilityboard.org/publications/r_101025.pdf.
12. A. Haldane and P. Alessandri, ‘Banking on the state’, first presented
at e International Financial Crisis: Have the Rules of Finance Changed?,
Federal Reserve Bank of Chicago twel¶h annual International Banking
Conference, Chicago, 25 September 2009, www.bis.org/review/r091111e.pdf.
636
Collapse 8.indb 636 27/11/2014 15:40

If finance (represented by banking or derivatives mar-

kets) presents a threat to states, the leading questions
are: Why? What is finance power distinct from modern
state sovereignty? Since ‘finance’ here is a euphemism
for a systemic market-led dynamic organization of capi-
tal accumulation, these questions cannot be taken up
in terms of the motivations, gains, and losses of those
individuals who effectuate financial power and its vicis-
situdes. Such accounts render opaque the structural
and consistent operations of capital accumulation via
financial markets by personifying and pathologising
the logic and imperatives of capital accumulation,
looking past the particular technical and juridical
innovations in structure and operation that advance
market capitalization. What is required is instead a
power theory of finance that must take its lead from the
operational complexity of financial markets. Most of
the following article is devoted to constructing such
a theory by synthesising several heterodox theories of
pricing, modifying each to fabricate a nonstandard
general theory of price and of the political economy
of finance. e primary matrix of the argument is
Jonathan Nitzan and Shimshom Bichler’s identifica-
tion of capital as power, the outline of which is followed
by a mainly descriptive summary of basic derivatives
construction and operations sufficient to explain how
derivatives structures led to the financial crisis
and, specifically, to the two Lessons elaborated above.
637
Collapse 8.indb 637 27/11/2014 15:40

COLLAPSE VIII
at overview also presents the primary features of

derivatives operations in general, leading to the pri-
mary contention here, which is the identification of
the schematic logic of derivative pricing as a variant
of Jacques Derrida’s quasiconcept of différance. e
theory of derivative pricing thereby formulated is then
contrasted to a series of other accounts which serve
to elaborate and give specificity to the historical and
operational institutionalization of derivatives markets
which mobilise a différantial logic, not least via the
praxis of capitalization they inaugurate by constructing
time and price relations through one another. Most
significant here is the reorganization of the relation
to the future via price in general—not just within
the circumscribed arena of derivatives markets, but
across the entire social order. e comparative analysis
also serves to modify the Derridean determination of
différance, the theorization mutating with the increas-
ingly specific elaboration of derivative operation. In
particular, derivatives are shown to systemically opera-
tionalise an unprecedented modality of the wager that
is intrinsic to the standard notion of betting but is
theoretically and practically unavailable upon the basis
of that standard notion. e specific determination of
the financial condition of price returns to the initial
power theory of price as instance of capitalization,
therewith providing a comprehensive theory of the
real of price determined not in relation to subjective or
638
Collapse 8.indb 638 27/11/2014 15:40

sectorial terms but according to the universalising yet

différantiating logic of capital-order’s construction and
operation of power—finance-power. e general theory
of price requires the theoretical articulation of the
arkhéderivative, on which basis the basic categories of
modern political economy are then reverse-engineered
as manifestations of finance-power, concluding with
the redetermination of the state-finance nexus and of
political futurity in terms of price magnitudes.
In the identification of the complex practices, mech-
anisms, and institutions of contemporary capitalism in
order to revector them purposefully out of it, the argu-
ment is broadly sympathetic to Le¶ Accelerationism. ¬
at said, the general theory of price developed here is
largely dedicated to the identification of capital-power’s
complex constitution and organization, formulating its
predication on finance, and to what that entails. e
revectoring required to provide the requisite political
tasks is le¶ to another occasion. Moreover, in addition
to providing the comprehensive theory of capital-power
necessary for any adequate formulation of a politics
of Le¶ Accelerationism (or, indeed, any politics at
all adequate to capital-power now), the following
argument stipulates two significant reservations as to
its current formulation that together serve to retrieve
13. See R. Mackay and A. Avanessian (eds.), #Accelerate: e Accelerationist

Reader (Falmouth and Berlin: Urbanomic and Merve, 2014). e premises
and ambitions of Le¶ Accelerationism are proposed by Alex Williams and
Nick Srnicek in ‘#Accelerate: Manifesto for Accelerationist Politics’ (347–62).
639
Collapse 8.indb 639 27/11/2014 15:40

COLLAPSE VIII
Le¶ Accelerationism from its neohumanist tendencies:

firstly, that Le¶ Accelerationism must abandon its
(admittedly ambivalent) attachment to Marxian and
labour-based determinations of capitalism and political
economy, because these are not the prerequisites of
capital-power in general but tendentious misapprehen-
sions of it (if such positions are not wholly incorrect
with regard to the anthropological concerns they serve
to articulate, nevertheless they are only incidental and
partial consequences of capitalization, and not at all
its operative or theoretical truth). ° e proposition
advanced here is rather that the routes to postcapital-
ism, and what that condition and its political economy
can be, need to be instead determined in relation to
‘the most advanced theoretical tools available today’.
In practical terms, this now means finance in general,
and derivatives in particular—not Marxism. ¿
Secondly, though more ambivalently, the follow-
ing theorization of the extirpation of social norms by
capital-power (a normativity that does not entail the
destruction of social order but the chronic reinstitution-
alisation of a risk order) casts significant doubt upon
the political and theoretical adequacy of a ‘neorational-
ist’ programme to the ambitions of Le¶ Accelerationism.
at is, if neorationalism contends that social and
14. Accelerationism’s ambivalence towards Marx(ism) is clearly presented

in Mackay and Avanessian’s ‘Introduction’ to #Accelerate (37–42).
15. Quote from Williams and Srnicek, ‘Manifesto’, #Accelerate, 353, in
reference to Marx.
640
Collapse 8.indb 640 27/11/2014 15:40

subjective norms can be progressively transformed

by the pragmatic universalism of self-revising rational
norms, that contention supposes both the authority
of reason not only over conceptual thought but also
over social norms, and also the revisability of social
norms. À Yet, for reasons deduced below under the
name of the risk-order as capitalization, both of these
neorationalist prerequisites are at best questionable:
for capital-power, though certainly not directed by
theoretical reason, revises social norms to the point at
which social norms lose efficacy altogether; authority
of any kind is not a prevalent power-modality in the
risk-order; and risk itself proscribes any tendential
organization or universalist determination, however
rationally determined and revisable, other than that of
greater capitalization (whose rationality is not that of
theoretical reason). In other words, without an accu-
rate and complex enough account of the transform-
ability of social norms on the side of the social itself,
neorationalism is le¶ propounding a doctrine without
traction. is is not to dismiss the neorationalist propo-
sition altogether, but it does effect an injunction: that
neorationalism substantiate the relation between the
construction and implementation of rational norms
on the one side, and the vitiation of normativity on
16. e neorationalist position is espoused notably by R. Brassier,

‘Prometheanism and Its Critics’ (#Accelerate, 467–87) and R. Negarestani,
‘e Labor of the Inhuman’ (ibid., 425–66) and, elsewhere, by Peter
Wolfendale. See n.89 and 133 below.
641
Collapse 8.indb 641 27/11/2014 15:40

COLLAPSE VIII
the other side—the side of the social order constituted

by capital-power. If that articulation can be made, the
argument here provides a basis for it.
.     
e power determination of finance sought here is

theorized by Jonathan Nitzan and Shimshom Bichler.
In broad terms, Nitzan and Bichler propose that capital
is directly power because it is ‘neither a material entity,
nor a productive process, but rather the very ability
of absentee owners to control, shape, and restructure
society more broadly’—a control of productivity that
involves the ‘entire spectrum of power institutions’,
not least because the absentee ownership at its core
requires complex and enforceable institutional struc-
tures across a society. Ì Capital accumulation is at once
and necessarily a political fact. However, crucially for
Nitzan and Bichler, the ‘spectrum of power institutions’
controlling productivity are not a well-organized and
unified capitalist class, as a caricatural notion of a
bourgeoisie might propose. On the contrary, the main
conflict and power struggle in capitalism is between
those accumulating capital, each of whom looks to
do better than the other owners of capital. Capitalists
do not just seek to accumulate capital nor (as liberal
17. J. Nitzan and S. Bichler, e Global Political Economy of Israel (London:

Pluto, 2002), 10.
642
Collapse 8.indb 642 27/11/2014 15:40

business dogma has it) to maximize profits, but rather

to ‘beat the average’ represented by the normal rate
of return. Í at rate is set not just by the standard
instruments such as interest rates, but also by the rate
of accumulation of every company and absentee owner,
who are therefore competitors for capital. Nitzan and
Bichler’s shorthand for accumulation by intracapitalist
rivalry is differential accumulation, which also posits
that accumulation for any one firm is locked into
the spectrum of institutional arrangements at local,
sectorial, or global scales. Ò e normal rate of return
represents the last-mentioned global benchmark for
differential accumulation, the index against which
any capitalist can measure whether they are ‘beating
the average’ or not. And, to return to its necessarily
political dimension, it also indexes how the ‘economic’
activity of capital accumulation requires broad social
cohesion: a normal rate of return supposes that ‘the
underlying power institutions […] remain stable; the
more stable these institutions, the more normal the
rate of return, and vice versa’.§Ú
Differential accumulation is a deceptively minimal
axiom for what capitalism is extensively—as a system
and method of capital accumulation, how it operates
18. Ibid., 11.

19. For a summary of differential accumulation, see S. Bichler and J. Nitzan,
‘Differential Accumulation’, in Dissident Voice, 28 December 2011 [bnarchives.
yorku.ca/324/02/20111228_bn_da_¶_lexicon_dv.htm].
20. Nitzan and Bichler, Israel, 13.
643
Collapse 8.indb 643 27/11/2014 15:40

COLLAPSE VIII
systemically and in its aggregate or micro tenden-

cies—as well as intensively, per transaction and in
the sectorial and individual (corporate or personal)
instantiations of intracapitalist conflict. e general
explanatory theory and logic it provides for capitaliza-
tion is however mostly based on geospatially organized
and historical industrial-corporate capital accumula-
tion and power agglomeration, formations to which
Nitzan and Bichler’s analyses are mostly dedicated.
e question of the types and magnitudes of power
combinations between financially-formulated capital
and state sovereignty requires that this analysis and
its terms be extended to the current operations and
structures of finance markets. Nitzan and Bichler’s
framework accommodates such an extension because,
as noted above, for them capital is determined through
absentee ownership, and this institutionally organized
claim underpins not only bonds and corporate stock
but also the derivatives contract. However, a more
exact determination of the power theory of finance
requires specification of the operational conditions of
the logic of intracapitalist conflict on the basis of the
two primary aspects of its systemic ordering: price and
sabotage. Taking these in turn:
Price. Following orstein Veblen, Nitzan and
Bichler propose that capitalists’ primary grasp of capi-
tal is only in relation to anticipated business earnings,
644
Collapse 8.indb 644 27/11/2014 15:40

‘the discounted value of future earnings capacity’.§

Future earnings capacity is the expected flow of future
revenues; the price paid now for that future income
against the normal rate of return ‘discount[s] this
flow into present value’. As already noted, the normal
rate of return is set by ‘the entire spectrum of power
institutions’, while future earnings capacity is ‘the
consequence not of productivity as such, but of the
control [emphasis added] of productivity’, which in
turn relies upon the particular historical and legal
configuration of that power spectrum. e discount
price formula thus reformulates differential accumula-
tion as a specific magnitude, given as a price. Irving
Fisher’s () generalisation of discounting formulas
provides this last identification: price is the ‘abstract
financial magnitude’ of a ‘pecuniary asset’, the latter
being ‘merely a claim on earnings’. In short, price
‘tells us how much a capitalist would be prepared to
pay now to receive a flow of money later’.§§
Price, then, is core to the capitalist cosmology
as an organising index of differential accumulation.
It is ‘merely the unit with which capitalism is ordered’,
capitalization being the pattern of that order. is
cosmology is not just ordered but moreover constituted
21. is and two following quotations are from Nitzan and Bichler, Israel, 10–
11. e outline of Veblen’s argument from the early 1900s is from Israel, 31–34.
22. is quotation and those following in this subsection are from J. Nitzan
and S. Bichler, Capital as Power: A Study of Order and Creorder (London:
Routledge, 2009), 151–6.
645
Collapse 8.indb 645 27/11/2014 15:40

COLLAPSE VIII
by price and pricing rather than being the substantial

source of the revenue that is priced: ‘bonds, corporate
shares, preferred stocks, mortgages, bank accounts,
personal loans, or the registered ownership of an apart-
ment block are simply different incarnations of the same
thing: they are all income-generating entities’, as is
production capacity, fixed or variable capital, corporate
structures, and other material terms. Capital accumula-
tion is on each occasion organized only by and for its
final cause: anticipated earnings. (‘Final cause’ is not
Nitzan and Bichler’s formulation.) All conditions for
those earnings are primarily apprehended as pecuniary
assets. e fungibility of the pecuniary asset as condi-
tion for capitalization will be taken up below in the
elaboration of derivatives contracts. More immediately,
Nitzan and Bichler’s theory of price explains three
primary characteristics of capitalization central to the
political economy of derivatives and their markets:
(i) Indexing the power of ownership indifferently to

the specifics of what is owned, prices qua abstract
financial magnitudes are ‘uniform across space and
time’: prices from one region at one time can be
compared and translated to prices from another time
and place. anks to the fungibility of what is thereby
priced, price provides a universal and transhistorical
equivalence; and, in thereby presenting a ‘single
646
Collapse 8.indb 646 27/11/2014 15:40

quantitative architecture that cuts across time and

space’, capitalization is world-historical.
(ii) As the measure of an ownership claim on future

revenues, price is an exact index of differential accu-
mulation, which is to say: of social power. rough
price, capitalists understand their exact place in the
order of power, which is thereby quantitatively organ-
ized: price is the ordering element of capitalization.
Such ordering should not, however, be confused with
stasis or structural fixity. To the contrary: because
what matters in capitalization is not what is priced
but rather increasing the magnitude of price qua
financial abstraction, for all its ordering and uni-
versality price structures the dynamic reordering
of power, countermanding traditional (notions of)
social order:
Prices enable entirely new ways of reordering soci-

ety. What previously required military conquest can
now be done through currency devaluation[…].
[T]he highly malleable nature of prices—i.e., their
remarkable ability to go up and down—makes
capitalism by far the most dynamic of all histori-
cal orders. In fact, in capitalism change itself has
become the key moment of order.§¬
23. Nitzan and Bichler, Power, 153.
647
Collapse 8.indb 647 27/11/2014 15:40

COLLAPSE VIII
(iii) Price is then the medium of power in capitalism.

Capitalism is, in short, a dynamic power-ordering
organized through price as its measure/medium of
order and reordering (a doubling that Nitzan and
Bichler call capitalism’s creative order or ‘creorder’).
Put otherwise, price is the index and medium of
a transformative power-rationality whose specific
historical organization is a result of intracapitalist
conflict. at always sociohistorically specific strug-
gle is fought through the abstracting universality of
price as much as through given and sought-for social
arrangements, all of which are therefore transitional.
In every instance, the delocalising and dematerialising

abstraction wrought by capitalization is the condition
for, and the effect of, the universal and dynamic social
reordering of power qua differential accumulation. On
this account, ‘all that is solid’ does not ‘melt into air’,
but is ordered via abstract financial magnitudes in
and as a power-rationality that is the political real of
capitalization.§° All political mobilisation consequently
24. ‘All that is solid’ refers to the characterization of capitalism’s abstracting

and deracinating effects in e Communist Manifesto, Ch.1. Capitalism’s
abstraction of material conditions is characterized as the spiritualization or
ghost dance of fetishism in the commodity analysis presented in Capital 1,
Ch.1 §4. While both instances exemplify at source a general Marxist
tendency, explicitly articulated in this section of Capital 1, to accuse
capitalism of mystifying the labour theory of value that is its concrete truth,
such theories are in fact themselves obfuscations of capitalization qua
pricing. e tendentiously spectral-literary characterization of capitalism
has been revived in relation to Marx by Jacques Derrida’s Specters of Marx,
tr. P. Kamuf (New York: Routledge, 1994 [1993]), and in relation to finance
648
Collapse 8.indb 648 27/11/2014 15:40

has to determine its real and its own capacity with

regard to the quantification of power as price—an
initial indication of how the power theory of capitali-
zation adapted here takes leave of Marxian doctrine,
a divergence that will become more emphatic as the
analysis proceeds through the specifics of derivative
structures and operations.
Sabotage. Differential accumulation names the logic
and dynamic of intracapitalist conflicts, more colloqui-
ally formulated as ‘beating the average’. ere are two
effectively equivalent ways to meet this imperative:
increasing ownership over future earnings—which is
what pricing does—and/or ensuring that other firms
do not accumulate as much as they otherwise could.
e latter operation happens in two ways: sectorially,
by J. Vogl, Specter of Capital, tr. J. Reder and R. Savage (Stanford: Stanford

University Press, 2015 [2010]).
Alfred Sohn-Rethel proposes that capitalism is a ‘real abstraction’ or
‘real subsumption’ constituting a material-social-cognitive real that it also
indifferently deracinates. See Intellectual and Manual Labour, tr. M. Sohn-
Rethel (Atlantic Highlands, NJ: Humanities Press, 1979), a thesis extended
by Maurizio Lazzarato in the mid-1990s to affect (‘Immaterial Labor’, tr. P.
Colilli and E. Emory, in P. Virno and M. Hardt [eds.], Radical ought in
Italy [Minneapolis: University of Minnesota Press, 1996]), and influentially
taken up by Michael Hardt and Antonio Negri in Empire (Cambridge, MA:
Harvard University Press, 2001), 254ff. A variant of the formal abstraction
thesis—in which capitalism transforms a preexisting reality that is more
authentically constituted in other, more immediate terms—is upheld by
Nitzan and Bichler themselves in their affirmation of Cornelius Castoriadis’s
notion of the ‘magma’ of human creativity irreducible to capitalization as
the condition for a political counterpower to the latter (Power, 20ff.). at
said, it is however also Castoriadis’s theorization of the nomos as the
semantically organized institutional order of a society that provides the
basis for identifying capitalization axiomatically rather than by material
particularities, labour, or consumption (Power, 148–50).
649
Collapse 8.indb 649 27/11/2014 15:40

COLLAPSE VIII
competing firms’ capital accumulation has to be dimin-

ished compared to one’s own; globally, it requires
‘limiting the average rate of growth of profit’ in order
to secure a differentially greater accumulation per firm
against the average rate. Nitzan and Bichler identify this
intrinsic and necessary diminution of overall growth
as the sabotage wrought by business, the latter term
meaning ownership of capital accumulation.§¿
Sabotage is the socioindustrial correlate to pricing,
a systemic characteristic of capitalization, which now
has to be understood as the diminishing of aggregate
social productivity (that Veblen calls ‘industry’): for
example, taking out competitors or limiting technical
or institutional capacities with patent restrictions. is
holds for interfirm rivalry per sector as it does in the
global and sectorial dimensions, which are all thereby
interlinked: sabotage is a determinant of the normal
rate of return, which indexes the systemic organiza-
tion of the spectrum of power. Extending sabotage to
encompass broader social organization and pricing:
the very existence of this ‘normal’ [rate of return]

enables even the most insignificant actors to exercise
their ‘natural right’ for universal sabotage. Since indi-
vidual capitalists, however small, can always earn the
normal rate of return by simply owning a diversified
portfolio, they have no reason to produce at less than
25. Nitzan and Bichler, Power, 246–7.
650
Collapse 8.indb 650 27/11/2014 15:40

that rate. […] In accepting the normal rate of return

as a minimum yardstick below which production
should not be extended, they effectively propagate
sabotage—even when they themselves do not have the
differential power to back it up. Sabotage becomes
invisible, ‘business as usual’ as they say.§À
As a systemic condition, differential sabotage mani-

fests itself in diverse social arrangements including
unemployment, inflation, wage restraint, social fragil-
ity, education policy, immigration regulation, etc. In
general terms, the normal rate of return indexes the
fact that, contra Marxist and Neoclassical accounts,
capitalists do not accumulate capital by seeking to
maximize profits by increasing production, innovation,
and consumption, but that differential accumulation
requires compromising production as such. Business
is then not just unproductive but, moreover, necessar-
ily counterproductive—as are capitalist societies overall
and in general.§Ì
Price and sabotage, then, are respectively the finan-
cial and industrial operators of differential accumulation.
It is core to Nitzan and Bichler’s theorization that these
aspects are not held apart as distinct dimensions of
the social totality, with the first being treated by eco-
nomics and the second under the banner of a politics
26. Nitzan and Bichler, Israel, 38.

651
Collapse 8.indb 651 27/11/2014 15:40

COLLAPSE VIII
incommensurate with the former. Rather, price and

sabotage are coeval and mutually determining, directly
constituting the organization of power across society at
every scale as a necessarily integrated political economy.§Í
is point will prove to be a primary determinant of the
ontology of finance and so requires further attention.
Nitzan and Bichler establish that price directly
indexes the political economy of capitalization by
generalising Gardiner Means’s observations of how
businesses fared in the Great Depression.§Ò Means
demonstrated that concentrated industries, which
are inflexible and set ‘administered prices’ relatively
unresponsive to market conditions, increase their share
of differential accumulation against competitive firms,
whose ‘market prices’ are more responsive to changing
market conditions. is because the prices and profits
of the former ’respond[ed] only partly or not at all to
market conditions’, instead fixing a ‘long-term target
rate of profit and then back-calculat[ing] the mark-up
necessary to realize this rate of return over the long
haul’. Consequently, prices and profit for such firms
during the Great Depression resulted in relatively small
declines in prices correlated to sharp drops in produc-
tivity and employment. In contrast, firms setting ‘mar-
ket prices’ had smaller relative drops in employment
28. Distinct in this to both Neoclassical liberalism and Marxism: cf. Nitzan
and Bichler, Power, 13 and Ch.8.
29. is paragraph paraphrases Nitzan and Bichler, Power, 241–2.
652
Collapse 8.indb 652 27/11/2014 15:40

and productivity, but took a larger hit on profits. For

Nitzan and Bichler, this demonstration of differential
accumulation via price-setting strategies makes explicit
that the administering price according to mark-ups
‘already embodies the power to incapacitate’ the social
order. at power of fiat pricing can be identified with
Michal Kalecki’s notion of a ‘degree of monopoly’,
which ‘measures the consequence for relative profit
margins of monopolistic institutions and forces’, that is,
the degree of power concentrated in a firm relative to
the entire spectrum of social institutions.¬Ú e mark-up
of ‘administered prices’ is then not only directly the
power to incapacitate by competition and the ability or
not to own at a given price; it is also the direct measure
of the firm’s concentration of power in the entire social
spectrum. e key theoretical consequence is that if
price-setting advances differential accumulation via
both accumulation and the concentration of social
power, then prices set the market.
.     
Administered prices make explicit that price is the

medium of capital accumulation qua power-ordering.
Accumulation/sabotage is organized by the absen-
tee ownership of assets, which is not ownership of
production but of price-setting. is is what power
30. See too Nitzan and Bichler, Israel, 39n.11
653
Collapse 8.indb 653 27/11/2014 15:40

COLLAPSE VIII
is in capitalism. By definition, such power is held by

capitalists; more salient than this sociological truism
is the fact that finance is the structural and constitu-
tive condition for that power. Determined initially as
the absentee ownership and pricing of assets, finance
is also the basis for capitalism’s durable yet dynamic
revision of ownership and pricing of assets, as well as
the broader institutional structures of capitalization,
at three levels simultaneously:
at the most basic level, it allows owners to lever tech-

nical change […] as a tool of power. At a higher level
it lets them use the monetary symbols of prices and
inflation to restructure power. And at a still higher
level, and perhaps most importantly, it permits them
to reorganize power directly, by buying and selling
vendible ownership claims.¬
In contrast to other manifestations of social power, the

market of vendible ownership claims—financial mar-
kets, whether or not they are explicitly characterized as
such—structure institutions according to the primary
‘generative order’ of capitalization, a ‘formula [that] is
special in that it doesn’t specify what [capital-power]
should look like’. Indifferent to the specifics and quali-
tative particularities of how power is organized, mar-
kets and pricing predicated on finance enable social
31. Quotes in this paragraph are from Nitzan and Bichler, Power, 306–7.
654
Collapse 8.indb 654 27/11/2014 15:40

reshaping and reformatting ‘in innumerable ways’ that

‘no other ruling class has ever been able’ to undertake.
It is thanks to finance that the market is the condition,
instantiation, and medium of the indefinitely variable,
anonymising, and fungible capital-power. Or: finance
is the condition and means of capital-power, and capi-
tal ‘is finance, and only finance’.¬§
As the structural condition of capitalization, finance
logically precedes it; and capitalization itself precedes
(and exceeds) economics as the constitutive and neces-
sary politics of that restricted regime. Or, inversely:
economic practice is a restricted theoretical and practi-
cal rendition of capitalization, and capitalism is only
a particular order of financialisation, meaning that it
is not the only possible one. e analysis and politics of
capitalization advanced here requires that it is finance
that is the a priori of all historical and theoretical
determinations of ‘industrial capital’. Contrary to
how Marxian and Neoclassical doctrines determine
prices to be set by interfirm rivalry given exogenous
conditions (such as supply-demand, labour and capital
costs, consumption, etc.),¬¬ such that the supposed
priority of the latter casts finance capital as parasitical,
supplementary, or ‘fictitious’,¬° according to the power
32. Nitzan and Bichler, Power, 262; see too Israel, 36.
34. Marx adopted the common if ill-defined mid-nineteenth century term
‘fictitious capital’ in his notes from the 1860s–80s, edited by Engels as Capital
3 (M. Perelman, Marx’s Crises eory: Scarcity, Labor, and Finance [New York:
655
Collapse 8.indb 655 27/11/2014 15:40

COLLAPSE VIII
theory of price, financially-set prices are the primary

elements for the dynamic organization of capital-power.
Praeger, 1987], Ch.6). Introduced in Chapter 25 of Capital 3 to designate

bills of exchange contrasted against trade or exchange, fictitious capital
is distinguished in kind from real capital via the paradigmatic example of
interest-bearing capital (Ch.21). e owner of an interest-bearing loan does
not transform the lent money into productive capital via commoditization
or trade, nor is ownership of the money transferred to the borrower who
makes use of it. Without commodity or monetary ‘metamorphosis’ in the
M–C–M’ concatenation, or the promulgation of social reproduction (that
is, channeled through labour), for Marx the initial sum ‘ceases to function
as capital’ in its ‘reflux’ back to its original owner with interest. As such,
even if the borrowed money is real capital because it is transformed via
commoditization, the initial loaned money is but a fictitious capital (which
is also why money itself is not necessarily capital but only when it is in
the process of social reproduction). Marx generalises the distinction to all
prognostications of future income that do not proceed via the commodity
form under the name ‘capitalization’, which is the ‘formation of fictional
capital’ (Ch.29). e danger of capitalization for Marx is that the money-
owner does not recognize that income is accrued from social processes
but takes it wholly formally, ‘something with automatic self-expansion
properties’. Accordingly, Lapavitsas follows Marx in differentiating
between interest-bearing loanable capital, which is ‘a hard reality of the
capitalist economy’, and fictitious capital, by which he takes Marx to
mean capitalization via the discount price formula (Profiting, 28–9, 161),
but he also thereby discards that either route is an equally valid modality
of capitalization for the money-owner seeking returns primarily with a view
to where greater returns can be made—a process that, pace Marx, is not
desocialised but, precisely, sociohistorically immersed in differential
accumulation. Loren Goldner, for whom capitalization is the current value
of future income, argues that fictitious capital is the primary determination
of capitalism since the 1970s because of the effective marginalization of
labour in dominant economies over the period. Consequently, overcoming
capitalism requires not a labour-based struggle but the abolition of
fictitious capital and the value-form, a proposal shared with Endnotes’
call for communization (n.129 below) despite Goldner’s other theoretical
disagreements with them (‘Fictitious Capital and the Transition Out of
Capitalism’, 2005, home.earthlink.net/~lrgoldner/ and ‘Once Again, On
Fictitious Capital’, 2003, home.earthlink.net/~lrgoldner/onceagain.html).
While not a Marxist, Hudson deploys the notion of fictitious capital mainly
to describe the growth of ‘paper wealth’ over the interests of the capitalism
of industrial production (‘From Marx to Goldman Sachs: e Fictions of
Fictitious Capital’, 30 July 2010, michael-hudson.com/2010/07/from-marx-
to-goldman-sachs-the-fictions-of-fictitious-capital1/).
656
Collapse 8.indb 656 27/11/2014 15:40

at this renders untenable any distinction between

finance capital and a putative ‘real capital’ ostensibly
predicated on conditions exogenous to finance does
not prevent analysis of how the financial sector impacts
the nonfinancial sector. Quite the opposite, in fact:
finance necessarily promulgates sabotage in general,
meaning that it is an inherently counterproductive
power. e capitalization of business earnings ‘rep-
resents nothing but incapacitation’; or, contrasted to
price as an abstract financial magnitude, ‘capital is a
negative industrial magnitude’.¬¿ To extend Nitzan
and Bichler’s formulation, the positive determination
of price qua ‘abstract financial magnitude’ is on the
other hand that it directly indexes capital-power’s
ordering and reordering.
Taking  to be a proxy of the aggregate repre-
sentation of earnings at a state scale, the comparisons
presented in the introduction above indicate that the
power magnitude of derivatives markets as a whole
have now exceeded that of most nation-states. States
have of course been the principal matrix of politi-
cal modernity since the establishment of the power
supremacy of state sovereignty with the Treaty
of Westphalia. If derivatives markets and states are
now of the same order of magnitude of capital-power,
this signals that sovereignty is no longer the supreme
power in the quantitative regime of capitalization, but
657
Collapse 8.indb 657 27/11/2014 15:40

COLLAPSE VIII
must contend with finance power on a more or less

equal footing—and states are increasingly outpriced.
As Haldane and Allessandri recognise, at this histori-
cal juncture dominant power consists in the power of
finance-markets as much as (if not more than) in state
sovereignty (the ‘as much as’ here is meant literally:
their respective capital-powers can be gauged by the
magnitude of each as aggregate ‘pecuniary assets’).
at combination forms an organizational and opera-
tional nexus of dominant power that can, for ease of
recognition, be called neoliberal governmentality. Such
governmentality is a quasi-statist power formation
which, while it is in part constituted by the established
configuration of modern statehood, at the same time
corrodes its primacy, as exemplified by two interrelated
transformations in its primary structures: firstly, the
size of contemporary finance capital, as well as its
‘interconnectedness’, require a transnational organiza-
tion of legislative and regulatory conditions for finance.
Consequently, territory as the spatial extension of
state power is not an adequate basis upon which to
contend with finance-power today. Put otherwise, the
jurisdictional powers of nation-states are interlocked
with the transnationality of contemporary finance
power, corroding the boundedness and autonomy of
their sovereignty (hence the importance of interstate
organizations such as the Bank of International Set-
tlements and the Financial Stability Board, which are
658
Collapse 8.indb 658 27/11/2014 15:40

at the forefront of these transformations). Secondly,

the power supremacy of sovereignty in authority, up
to and including military and police powers, is now
subject to the reordering wrought by capital-power
and conditioned by finance. e magnitudes of this
latter power are now large enough to substantially
supervene on sovereignty as the final term of statehood
and regulatory institutions.
e state-capital nexus transforming modern
statehood is but one consequence of the dynamic
power-rationality wrought by capitalization. Finance,
to repeat, is the structural and operational a priori of
capital-power’s reordering—an aprioricity here called
capitalization’s financiality, operationally tantamount
to prices being set only as a mark-up against other
prices. e trading of contracts for future exchange of
the ‘absentee ownership of assets’ in financial deriva-
tives markets explicitly demonstrates this condition.
While it therefore seems that the operations of finance
markets concretely instantiate the a priori financiality
of capital-power, now transactionally liberated from
the alibi or convention of the commodity, service, or
income stream as exogenous condition for pricing, any
such identification has to be cautiously made. While
the a priori financiality of capital-power is the systemic
condition for capitalization, the finance markets are
practical and institutional operating mechanisms and
facts of capital accumulation. at is, though finance
659
Collapse 8.indb 659 27/11/2014 15:40

COLLAPSE VIII
markets are certainly constituted by the financiality

that conditions capitalization and its power-rationality
(its transcendental condition, in critical philosophical
terminology), finance markets cannot be directly identi-
fied with financiality in general without category error
or subreption, because the former are an institutionally
specific sector of capitalization. However, maintain-
ing the distinction between financiality as condition
of capitalization and financial operations presents a
problem for the argument regarding the redistribution
of power between finance markets and states: the cat-
egorical distinction between financiality and financial
operations advanced here means that the shi¶s in the
relative power magnitudes between the finance markets
and states do not necessarily index transformations in
what power is, in power types. Consequently, the state-
finance nexus could be deemed to be wholly coherent
and to mark no significant change in power: just more
of the same in another guise. But the caution here is
not a proscription: the task of this essay is to articulate
and integrate the two dimensions of finance—as a priori
condition and as a historical fact—without directly
identifying them. Yet it also seeks to demonstrate that
finance markets and derivatives in particular are the
truth of capital-power as endogenous capitalization
made explicit in practice. And it is on this basis that
the typological mutations of dominant power between
finance markets and states can be explicitly identified.
660
Collapse 8.indb 660 27/11/2014 15:40

In order to do that, more detailed elaboration of the

operations, logic, and structure of derivatives markets
is required.
.. : 
e myriad derivatives structures prevalent in finance

markets are of course only constructed and deployed
in the service of accumulation by trading. Apprehend-
ing the principal strategies of trading provides an
operational basis for understanding their construction,
outlined in the next section, leading in turn to the
determination of the specific logic that has reordered
political economy and power ontology in the wake of
the growth of finance markets since the early s. But
in advance of that, some basic structure and terminol-
ogy need to be elaborated.
In their simplest standard (Neoclassical) formula-
tion, derivatives are contracts between two parties
whereby one side pays out a mutually agreed amount
(the ‘delivery price’) if circumstances specified in
the contract take place at a designated termination
date (‘maturity’ or ‘expiration’).¬À e eventualities
may be those of prices (of a commodity, company
stock, interest rates) at some determined point in the
36. e technical account in this section paraphrases elements of the

leading derivatives textbook in English: J. C. Hull, Options, Futures, and
Other Derivatives: Seventh Edition (Upper Saddle River, NJ: Pearson Prentice
Hall, 2009), Ch.1.
661
Collapse 8.indb 661 27/11/2014 15:40

COLLAPSE VIII
future, of cash flows or payment defaults, or other

non-monetary eventualities—for example, the weather
(snowfall determining skiing conditions and therefore
revenue for a resort, a month of rain for agricultural
production), livestock populations and disease, tech-
nological innovations, and so on. e contracted claim
is contingent in a double sense: firstly, it depends upon
an eventuality independent from and external to the
contracted price, which is known as the underlying
asset (sometimes reduced to ‘the underlying’); secondly,
in the prevalent sense in which the term is understood
in derivatives markets, the eventuality upon which the
payout depends may or may not be occasioned, mean-
ing that the contract will lead to a gain or a loss by one
party or another, but without certainty as to who will
be the gaining/losing party. Gains or losses are made
dependent on whether the price agreed in the contract,
the delivery price, is higher or lower than the market
price of the underlying (the ‘spot price’) at maturity.
ere are three principal distinct strategies of deriva-
tives trading: arbitrage, hedging, and speculating.
Arbitrage is trading across markets in order to secure
riskless gains. For example, buying an asset in one coun-
try to sell in another to take advantage of the price dif-
ferentials and exchange rate across the markets. ere
are no costs for the arbitrageur other than transaction
costs. Such trading, however, quickly eliminates the
662
Collapse 8.indb 662 27/11/2014 15:40

COLLAPSE VIII
differentials from which gains can be made, meaning

that arbitrage opportunities are self-limiting.
Hedging reduces risks on a given investment either
by locking down prices of assets on a future transac-
tion with a ‘forward contract’, or by offsetting risks of
price movement of owned assets in one direction by
making gains from counter-movements of price. Hedg-
ing insures against variations in fluctuating financial
rates and contingencies in supply-demand levels (crop
yields, fuel prices, interest rates, monetary instability,
etc.) and stabilizes contract prices.¬Ì Hedging also
introduces a risk, because the delivery price set by the
forward contract may not be equal to the spot price at
maturity, to the cost of one of the signatories.
Speculation, by contrast, is accumulation by trading
on market-generated price movements. e speculator
buys or sells derivatives contracts in view of the gains
to be made on the interplay of the current prices of
the underlying, a corresponding derivative, and the
difference between the delivery price and the spot price
at expiration (the ‘strike price’), doing so sometimes to
acquire assets at less than market price. e latter strat-
egy gives the speculator much greater leverage than
the investor or shareholder who trades in the under-
lying asset or security at market price. Furthermore,
because speculators make gains by market trading,
37. For hedging as a market-based insurance mechanism see R.L. McDonald,

Fundamentals of Derivative Markets (Boston: Pearson Addison Wesley, 2009), §2.5.
664
Collapse 8.indb 664 27/11/2014 15:40

COLLAPSE VIII
their primary interest is in the prices of the assets and

financial instruments rather than the underlying assets,
the latter being immediately resold in order to realize
them as only ‘pecuniary assets’.
As speculation demonstrates especially clearly,
derivatives markets in general are not markets for
vending underlying assets external to them at their ‘live’
price, nor for investment, which looks to make gains
by taking a share of profits or revenues made by the
underlying asset as an element of industry, agriculture,
and production (in short, in the ‘real economy’). is is
o¶en the basis for criticism of speculation, along with
its maximising market leverage of financial instruments
over the non-financial sector, leading to distortions in
pricing across all markets as well as a disregard for the
fate of the underlying asset and ‘the real economy’ it
represents. Defenses of speculation are based on its
‘absorption of risk’ since (i) the vending of financial
instruments is based on anticipating higher returns,
and (ii) speculation is the other side of hedging: the
hedge that anticipates and insures against prices move-
ment presumes a speculator who accepts the risk of the
differential between spot and delivery prices as worth
bearing. Moreover, since speculation exploits the price
differentials (spreads) over time as well as between
buyers and sellers prices, speculation ‘bridges’ these
differentials, providing liquidity to markets where
exchange and trade would otherwise diminish.
666
Collapse 8.indb 666 27/11/2014 15:40

COLLAPSE VIII
What is important here is that the derivative contract

and therefore its market is dependent on the underly-
ing in one regard only: whether or not the conditions
stipulated in the contract are met. While the prices of
the shares or equities of a company—and therefore
investment in it—depend on the history and pathway
of its profitability, productivity, growth, energy and
resource costs, and so on, the payout of a derivative
is determined solely by the terms set up by the con-
tract. Unlike in investment, in speculation gains can
be made from decreasing profits, a market crash, or a
food shortage, if that is what the contract stipulates
and regardless of any other consequences. Moreover,
the underlying is but an occasion for drawing up
derivatives contracts, their anonymous material. e
historical, material, or qualitative particularity of the
underlying is irrelevant beyond the price conditions set
in the contract, as is its fate once the contract expires.
By virtue of this endogeneity of accumulation by pric-
ing contracts, and despite the frequent use of the
terms ‘investor’ or ‘hedge fund’ to designate activity
on derivatives markets, ultimately it is speculation that
is the defining category for all derivatives contracts
and their markets.
668
Collapse 8.indb 668 27/11/2014 15:40

.. : 
Trading in derivatives markets relies on the opera-

tionalisation of financial instruments that practically
compose them. is section presents a rudimentary
elaboration of the primary mechanisms of derivative
contracts, from which the general operational logic of
finance markets can be extracted. It is this latter logic
that will permit the institutional operation of finance
markets to be articulated with financiality as the a
priori condition for capitalization, in turn allowing the
transformation of power wrought by these markets to
be grasped. Four basic structures are presented here
in order of increasing complexity: forward contracts,
futures, options, and swaps. ough swaps were key
instruments in the systemic dynamics leading to the
financial crisis, for reasons given below, the specu-
lative logic of finance is most evidently demonstrated
by forward contracts and options, which will therefore
be the main analytical focus.
A forward contract is the most straightforward finan-
cial derivative mechanism: the agreement to buy or sell
an asset at a certain price in the future.¬Í e contract
itself is traded off-exchange and costs are borne at
maturity. Agreeing to buy the asset is called the long
position, while agreeing to sell it is the short position.
e agreed price is called the delivery price (denoted K);
38. Hull, Options, Ch.2.
669
Collapse 8.indb 669 27/11/2014 15:40

COLLAPSE VIII
the actual price of the asset at maturity, when it will be

traded, is the forward price (denoted S). In its standard
account, the contract is made in view of the likely dif-
ference between delivery and forward prices yielding
a profit or loss for one of the parties. In general, if
the spot price is more than the delivery price then the
long position makes a gain and the short position a
loss. e gains and losses are reversed if the spot price
is less than the delivery price. Put schematically, if the
spot price of the asset at time t is St, then:
—the long position (having agreed to buy the asset)
at time t is worth St – K
—the short position (having agreed to sell the asset)
at time t is worth K – St
Illustration
Imagine the cover price of C is set in response to demand.
A forward contract is made at time tÚ for delivery of §¿ copies
of C with a delivery price of ¿ÚÚ Local Currency Units
(lcu), anticipating a market price of §Úlcu on its long-awaited
publication.
Over time t the spot price St of C increases from §Úlcu
to §°lcu because that issue of C will include a new essay
by Quentin Meillassoux.
At maturity, the long position immediately sells all §¿ copies at
the market price at time t, making a gain of §¿ × (§°−§Ú) = ÚÚlcu,
a profit of §Ú percent (excluding transaction costs for setting up
the contract).
670
Collapse 8.indb 670 27/11/2014 15:40

Equally, at maturity the short position sells an asset then priced

at ÀÚÚlcus for the forward price of ¿ÚÚlcus, bearing a loss of ÚÚlcu
at the current market rate.
is straightforward illustration demonstrates that

derivatives are so-called because they stipulate a price
in relation to the spot price which is itself set by the
market in the underlying (here, the impending issue of
C). What the relative simplicity of the forward
contract also exposes is the exogeneity of the underly-
ing to speculative accumulation: while the cover price
of C in the illustration is set by content-related
demand, the speculator taking the long position has no
interest in Meillassoux’s essay itself, as demonstrated
by her immediately selling the acquired copies of C-
 at the market rate at maturity. is is a necessity
of speculative accumulation: there is no pecuniary gain
unless the acquired asset is converted into revenue
(taking an interest in the content of the publication by
holding a copy of C back from the market to
read it reduces the overall income). at is, while in this
case it is Meillassoux’s reputation that drives up the
price of the underlying of the forward contract in the
imagined competitive market, the speculator is inter-
ested only in the increase in price for whatever reason.
For example, increases in printing costs could lead to
the same gains for the speculator even if they mean a
reduced net income for Urbanomic. e derivative is
671
Collapse 8.indb 671 27/11/2014 15:40

COLLAPSE VIII
exogenous to the causes for price movements of the

underlying other than how they shape the pricing of
the underlying. Speculation by derivatives is in gen-
eral content-indifferent, which, again, is why it is not
investment. It depends only on the spread between the
forward price and the spot price at maturity, the latter
being set by the market for the underlying.
Futures contracts are forward contracts whose trade
is guaranteed not by the counterparties but by the
exchange on which the contract is made, as is delivery
date (to the month). Traded on an exchange, prices of
futures contracts vary according to ‘market forces’:¬Ò
the delivery price of an asset (K) goes up if more
traders take a long position (that is, agree to buy an
asset at a future date at delivery price) than short
positions on it. e contract is then less profitable for
the long position in relation to an anticipated increase
in the spot price (St −K decreases or is negative), but
more profitable for the short position (K−St increases).
Equally, the preponderance of short over long positions
(i.e., more selling than buying of contracts at a given
delivery price in expectation that K is too high) drives
the delivery price down.
In other words, futures markets price forward
contracts according to the derivative markets’ price
movements as well as those of the underlying in its own
market. Because of this ‘self-correction’, the futures
39. Hull, Options, §2.3.
672
Collapse 8.indb 672 27/11/2014 15:40

market is speculative in the sense that it ‘rewards’

risk-taking on contingent claims: greater gains are to
be made betting on a delivery price before there is a
preponderant view that it is set too low and before the
price of the underlying asset rises to meet it. In the
standard account (which will be usurped below), both
long and short positions are taken in their respective
expectations of making a gain by advantage of this
spread. As for forward contracts, these anticipations
are obviously contradictory (they cannot both be right),
but their common condition is that the eventuality
upon which a gain or loss is occasioned depends upon
the strike price which is necessarily and constitutively
unknown at the time the contract is made. Insofar as
that unknown comes to be determined by the pricing
of the underlying in its primary market, the derivative’s
exogenous relation to that price is that of a traditionally-
conceived wager: the throw of the dice does not depend
on the bet made upon it, nor does the speed of the
raindrop dripping down a window. By this account,
derivatives are then but wagers on a price differential
over time, an interpersonal and subjectively-constituted
reckoning on circumstances external to the wager itself,
predicated upon the non-knowledge of the future.°Ú
40. See J.M. Keynes, A Treatise on Probability (London: Macmillan, 1921),

Ch.2, for probability as a determination of the degree of rationality of
a subjective ‘belief’ in an as-yet-uncertain proposition given known
propositions (evidence). Following the early analytical philosophy of his
immediate milieu, probability for Keynes is however the degree of rational
belief between propositions (as ‘objects of knowledge and belief’) and not,
673
Collapse 8.indb 673 27/11/2014 15:40

COLLAPSE VIII
e endogenous price movement of the futures mar-

kets is akin to odds on a bet getting shorter or longer
depending on what other bets are placed.
As will be seen below, whether derivatives are
wagers and, if so, what kind of wagers they are, is a pri-
mary determinant of the power ontology concomitant
to capitalization’s financiality. By way of previewing
that extended discussion, it need only be noted that
condemnation of derivatives markets as nothing but
‘wagers on the movement of prices’, prevalent a¶er the
crisis, was common enough at the time of the
establishment of the Chicago Mercantile Exchange
() and its institutionalisation of futures trading in
· (elaborated further below).° Gambling—legally
defined as a contract settled in cash only—was however
proscribed in Illinois at the time, a restriction circum-
vented with paradigmatic consequences by specifying
that any futures contract must be able to be settled
by physical delivery of the underlying itself, even if
in practice ‘delivery was seldom demanded’.°§ at is,
derivatives were legally sanctioned by securing them
as with the wager on future contingencies proposes, between propositions

and events.
41. D. MacKenzie, An Engine Not a Camera: How Financial Models Shape
Markets (Cambridge, MA: MIT Press, 2006), 14–15, 144–5, and 252 for the
quoted characterisation.
42. MacKenzie, Engine, 145. e vicissitudes of establishing institutional
derivatives market in the United States and the struggles of its proponents—
notably, founder of the CME Leo Melamed—to differentiate it from
gambling is presented in MacKenzie, Engine, Ch.6.
674
Collapse 8.indb 674 27/11/2014 15:40

as an attenuated mode of trade in the underlying to

which they refer, thereby recusing the exogeneity of the
derivatives contract to the trade in the underlying. is
inhibition to the development of derivatives markets
was removed in the  with a Senate ruling that
it was precisely the cash settlement of derivatives trad-
ing that demarcated futures contracts from trading on
stock indices such as the Dow Jones, a distinction cor-
relative to their regulation by the Commodity Futures
Commission rather than the Securities and Exchange
Commission (), which itself cleared the way for the
regulatory variances between derivatives markets and
stock markets.°¬
Options are contracts for the right to buy (call) or
sell (put) underlying assets without necessarily hav-
ing to trade the underlying asset at the agreed price
(now called the ‘exercise price’ or ‘strike price’) by
the agreed date (the ‘exercise date’ or expiration).°°
Unlike forward contracts, there is a contract fee for
making an option which is lost if the option is not
taken. Options are primarily instruments for hedging.
e call option (the right to buy) on the underlying is
purchased (long position) in anticipation of the price
of the underlying asset increasing from the strike price.
If it does not, the trader has to make the calculation
as to whether the loss from taking the long position is
43. MacKenzie, Engine, 172.

44. Hull, Options, Ch.1.
675
Collapse 8.indb 675 27/11/2014 15:40

COLLAPSE VIII
greater or less than the loss made from the difference

between the spot price and the strike price. e put
option (the right to sell) is purchased anticipating a
fall in price. To take the short position—to sell either
call or put option at a later date—is to write the option:
cash is taken upfront in exchange for the counterparty’s
right to buy/sell the option, taking the consequence of
losing out on the gains (or not taking what would be
losses) of the underlying at the option’s expiration. For
the trader writing the option, it is more profitable to
sell the option for a gain then hold on to the security
and sell it at a lower price. However, it may be that if
the increase in the price of the security is less than that
in making the initial option trade, the option is not
exercised and the trader writing the option holds both
the initial contract fee and the asset at an increased
price, which they can then immediately sell.
Illustration
Anticipating C will publish a new essay by Quentin
Meillassoux in three months and generate an upward surge in
Urbanomic’s share prices (listed as URB), a trader takes a long
position on ÚÚ call options (that is, purchases the right to buy)
for URB shares at a strike price of ¿Úlcu a share. e exercise date
is four months from taking the position.
676
Collapse 8.indb 676 27/11/2014 15:40

URB’s current share price is °¿lcu and the option price is

§lcu. e notional value of the option is ¿ÚÚÚlcu but the actual
credit exposure of the derivative contract—the price of the option
itself—is §ÚÚlcu.
Four months later: Meillassoux’s article proves to be of great
importance and URB’s equity price rises to ¿¿lcu per share at the
option’s expiration date.
Exercising the right to buy URB shares at the exercise date
(and immediately selling them on the market on which it is
listed) results in a gain of ¿ÚÚlcu (the gain per share is ¿¿−¿Ú =
¿lcu × ÚÚ shares). Subtracting the option price of §ÚÚlcu and
excluding transaction costs, the net gain for the trader taking
the long position on the call option on URB is ¬ÚÚlcu. at is,
the trader makes a ¿Ú percent profit on the option a¶er
four months.
e counter scenario is that if, say, Meillassoux’s article is
superannuated before the option’s expiration by the publication
of a devastating pre-critique of his long-anticipated L’Inexistence
Divine, URB’s equity price drops to °¬lcu per share.
Having taken the long position on the call option with a strike
price of ¿Úlcu per share, the trader faces the prospect of then
making °¬−¿Ú = −Ìlcu per share.
With the option having been taken for ÚÚ shares, this would
lead to a net loss of ÌÚÚlcu. At that point, it is a smaller loss for
the trader to not exercise the call option and just lose the initial
outlay of §ÚÚlcu.
677
Collapse 8.indb 677 27/11/2014 15:40

COLLAPSE VIII
If the loss from exercising the call option is less than the
loss from not doing so, then it is still worth exercising the
call option:
Even though Meillassoux’s article is theoretically redundant,
continuing interest in it and other material in C leads to
URB’s share price climbing to ¿ .§¿lcu by the expiration date.
e trader then makes §¿lcu (¿ .§¿−¿Ú = .§¿ per share × ÚÚ
shares) if the call option is exercised.
ough this is less than the §ÚÚlcu to take the long position
on the call option, the net loss of Ì¿lcu ( §¿lcu from exercising
the call option at a market price of ¿ .§¿lcu less the §ÚÚlcu for
taking the long position) is still a smaller loss than not exercising
the call option (§ÚÚlcu).
is illustration is formulated with the trader taking

the long position on the right to buy the security (the
call option), but there are four basic combinations for
option positions: long or short positions on call or put
options on the underlying.
ough fully established as financial instruments
since the inauguration of derivatives exchange trad-
ing in mid-seventeenth century Amsterdam and in
London half a century later, option pricing was the key
instrument for sanctioning the institutionalization of
derivatives markets with the establishment of the Chi-
cago Board Options Exchange in · and the stand-
ardisation of pricing with the Black-Scholes-Merton
678
Collapse 8.indb 678 27/11/2014 15:40

model (elaborated in §´ below). at institutional

consolidation overcame the ‘close correspondence
between option contracts and gambling’, wherein
legislation on the latter, dating as far back as the
Romans, set precedent for legislation on the former.°¿
e multiple routes for payout on the option are initial
indications of the multiplying paths constructible with
this class of derivative, the fabrication of which broadly
constitutes the field of financial engineering. Options
with straightforward payoff schedules are designated
‘plain vanilla’; ‘exotic options’ have more complex
payoff structures structured by more or less elaborate
composite of sequenced expiration dates, conditional
45. G. Poitras, ‘e Early History of Options Contracts’, in W. Hafner

and H. Zimmermann (eds.), Vinzenz Bronzin’s Option Pricing Models (Berlin:
Springer, 2009); see also MacKenzie, Engine, Ch. 5. e first modern
legislation on options was passed in 1697 to address various manipulations
of price-setting on exchanges in London, and to distinguish it as a regulated
market against its Amsterdam rival. e history of these derivatives can
however be tracked back to before these modern mercantile institutions to
ales of Miletus who, in Aristotle’s account (Politics 1259a), demonstrated
that rational philosophy at its origin could generate wealth if the
philosopher so chose. ales reserved olive presses in the winter ahead of
what he predicted by the rational calculation of astronomy would be a large
harvest, renting them in the subsequent harvest ‘on what terms he liked’
thanks to the indeed bounteous yield of olives. For ales, the purpose
of this early demonstration of speculative hedging was that philosophers
have other interests than wealth generation, a lesson that continues to be
observed in the hostility to instrumental rationality; for Aristotle, precursor
here to Kalecki, it serves as an example of ‘taking an opportunity to secure
a monopoly [that] is a universal principle of business’, a determination that
gives priority to the political economic result of ales’s demonstration
and overlooks his primary lesson that reason is posits a contingent
relation to the future qua financialisation in the service of capital-power,
exposing at the origin of philosophy the latter’s identity with instrumental
reason from which philosophy is then only contingently and not
necessarily distinguished.
679
Collapse 8.indb 679 27/11/2014 15:40

COLLAPSE VIII
expirations, linkages between different assets, options,

and criteria, the locking in and out of exit routes from
the option, and so on.°À
Swaps are highly complex off-exchange ()
futures contracts whose underlying is not asset prices
but cashflows.°Ì Invented in the early s, swaps
exchange advantageous rates in different markets
to hedge income streams by each party effectively
paying for the other’s cashflow via an intermediary
financial institution. Example: a firm able to obtain
preferential terms in fixed interest rate markets wants
to borrow funds at a variable rate or for a shorter term
than is available in the fixed-rate market. Swapping
the preferential loan in the fixed-rate market for a
loan obtained by another agency in the variable-rate
market advantages not only the first company but also
a counterparty seeking what, for it, is a preferable rate
on the fixed-rate market. Because both comparative
advantages are compounded in a swap, the net cost of
the swap is less than that of the total notional amount;
in the example above, both parties pay a lower rate
of interest than that on the loans each has originated,
46. e vanilla/exotic terminology is attributed to Marc Rubinstein and

Eric Reiner’s 1992 detailed inventory of complexly structured options.
See Exotic Options, Research Program in Finance Working Papers RPF-220
(Stanford: University of California at Berkeley), www.haas.berkeley.edu/
groups/finance/WP/rpf220.pdf.
47. Hull, Options, Ch.5. See also M. Greenberger ‘e Role of Derivatives in
the Financial Crisis’, Testimony to the Financial Crisis Inquiry Commission
Hearing, US Senate, 30 June 2010, fcic-static.law.stanford.edu/cdn_media/
fcic-testimony/2010-0630-Greenberger.pdf.
680
Collapse 8.indb 680 27/11/2014 15:40

resulting in an effective saving or income equal to

the difference between the preswap cashflow and the
swapped cashflows. is gain is split between the
swap’s counterparties. Currency swaps similarly take
advantage of varying terms in different currencies, and
swap contracts extend also to commodity markets,
exchanging variable spot prices over a duration with
a stable fixed price.
Calculated only in terms of their notional amount,
swaps are detached from any relation to nonfinan-
cial assets. Swaps make explicit qua market instru-
ments the abstraction and exogeneity of derivatives
from the nonfinancial dimension of the underlying,
a structural condition of the financial crisis.
Exchanging repayments across financial markets, swaps
interconnect those markets at the point of their pri-
mary revenue: a credit-based income stream into the
future. Unlike forward contracts or options, the loan
generating the cashflow of one party of the swap has
to be in place before the swap is made. A position in a
swap can be ‘warehoused’ by the intermediary financial
institution until a suitable counterparty is secured as
its second ‘leg’. A default on that initial loan by one of
the counterparties transfers liability of the credit risk
to the financial intermediary. e intermediary institu-
tion, which takes on a structural role, also composes
the swap, thereby providing an ersatz insurance to
either party in case of a default in the cashflow of the
681
Collapse 8.indb 681 27/11/2014 15:40

COLLAPSE VIII
counterparty, and taking a systemic role in the emer-

gence and consolidation of the swaps market.
Despite the exchange-like properties of the swaps
markets, their insurance-like operation, and the
‘financial calamities’ generated by unregulated swaps
markets, including the default of California’s Orange
County in and the collapse of the Long-Term
Capital Management hedge fund in ,°Í extensive
political pressure in the  leading to the Commodities
Futures Modernization Act of exempted swaps
48. Orange County, California, declared bankruptcy in 1994 a¶er suffering

losses to its various funds from large, unhedged positions in interest rate
derivatives (Mackenzie, Engine, 223; the following account paraphrases
Ch.8 of Mackenzie’s book). Long Term Capital management (LTCM)
was the poster-child of financial trading in the mid-90s, boasting Scholes
and Merton on its Board and generating annualized returns of up to 40
percent (a¶er fees) via arbitrage of small differentials between fixed-income
long-term bonds such as government debt. e Russian financial crisis of
Summer 1998 caused a market-wide ‘flight to safety’, to ‘safe’ long-term
government and corporate bonds that formed the backbone of LTCM’s
trading strategy. Its positions were pressured both by extant widespread
mimicry of its strategies across the financial sector, reducing its trading
advantage, and by self-replicating divestments across the market in response
to the crisis. Despite advanced hedging and risk-diversification strategies,
the combination of these factors led to highly correlated losses across
its portfolio. Providing liquidity to cover those losses from a leveraged
position—that is, borrowing money to make trades and returning it (with
interest) upon their completion—of about 27:1 (which, while large, was
typical of large investment banks at the time) required it to divest from other
positions at the wrong moment in the structured portfolio. Counterparty
trading and divestment by LTCM’s clients (which included most of the
large investment banks) led to yet further losses. By late-September 1998,
LTCM’s capitalization was unsustainable, with liabilities of $100bn on an
equity dropping from $2.3bn to $400m over that month. Because immediate
liquidation of LTCM’s securities would have led to a significant and
systemic drop in market prices, the New York Fed orchestrated a $3.6bn
recapitalization and buy-out of LTCM by the major American investment
banks in September 1998.
682
Collapse 8.indb 682 27/11/2014 15:40

from being traded on exchanges, proscribed their

standardisation by statute in favour of regulation by
trade bodies, and even excluded the statute itself as
a basis for legal challenges to swaps.°Ò Consequently,
swaps did not have meet any of the requirements of
more formal insurance (a sector regulated by statutory
bodies)—in particular, the requirement that the seller
have adequate capital to service the default payment.
e result of this sectorial activism was threefold: the
increasing systemic centrality and interconnectedness
of financial intermediary institutions in providing
credit in general, the lowering of the price of credit
swap arrangements which reduced its net cost, and the
expansion of credit beyond any limitations imposed
by reserve requirements.
e mid-s financial crisis was a direct conse-
quence of the expanded role and systematicity of the
intermediary-led systematisation of credit in which
the role of Credit Default Swaps () was crucial.
Invented by JP Morgan in , a  is a form of
insurance against default on a loan and the consequent
loss of income for the lender.¿Ú e buyer of a  pays
a premium to a seller to take on an underlying loan
49. Greenberger, ‘Derivatives’, 5–6.

50. Details of JP Morgan’s invention of the CDS are given in G. Tett, Fool’s
Gold (New York: Free Press, 2009), Ch.3. Tett notes how, by 1996, JP Morgan
had persuaded the leading US Federal Reserves to reduce the credit reserve
requirements of major financial institutions on the basis that the derivatives
dispersed risk, making any one institution less susceptible to credit default (49).
683
Collapse 8.indb 683 27/11/2014 15:40

COLLAPSE VIII
in case a ‘credit event’ (such as default) leaves the

lender carrying the credit exposure. at is, the buyer
displaces the costs of the default of some designated
credit to another party, and removes the loan as a
liability from the buyer’s balance book. If there is a
default, the seller of the  takes possession of that
credit and the buyer receives compensation equal to
its stated cost. In this eventuality, the buyer of the 
gets reimbursed for the underlying loan—the insur-
ance against default—and the seller pays to take the
credit off the buyer’s hands, leaving the seller with a
double cost: the unpaid debt itself and the payout to
the buyer. In case of no credit event, the seller receives
the premium payments to maturity. In short, the credit
risk is hedged. e  is similar to insurance in case
of loan defaults, except that (i) the seller of the 
holds the risk of credit default without holding the
credit itself; (ii) the seller can sell the protection without
capital reserves to compensate the buyer; and (iii) the
buyer need not have any ownership claims over the
underlying loan nor any direct insurable interest in it.
ese latter positions are ‘naked’ s, the buyer and
seller constructing the swap around a ‘reference bond’
that is owned by neither party of the swap, doing so
in order to speculate on the reference bond’s financial
viability. Without any ownership requirements, one
underlying can be the reference bond for multiple
naked s. Despite the evident credit risks of such
684
Collapse 8.indb 684 27/11/2014 15:40

structures, financial establishments and regulators

supported the development of the naked  market,
again in the interest of increasing liquidity for the
reference bonds: the increased number of sellers and
insurance-like structures against credit defaults enabled
a greater number of credit event risks to be bought,
and also greater flexibility (and therefore efficiency)
in the market for risk, increasing the overall size—now
meaning the credit exposure—of the market.
To return to the introductory comments above,
then, the financial crisis was generated by the
‘credit event’ of defaults on s, the underlying of
which consisted of interlocked mortgages, the latter
being by far the largest credit market in the  and .
e amplification of this latter credit default by naked
 derivatives which themselves could not be set-
tled—the financial intermediaries not having to provide
capital reserves to do so—explains in part the size of the
crisis;¿ its systemic nature is a result of the interlocking
of credit by financial intermediaries via swaps, exposing
51. Greenberger notes that though only three percent of the notional
amount of a swaps transaction is at risk as credit exposure, ‘a credit default
swap’s insurance-like aspects mean that if a default is triggered, the entire
amount of the sum guaranteed is at risk’ (‘Derivatives’, 11)—which is why
the diminishing of the size of the derivatives markets from its ‘face value’ to
its credit exposure, as in the introductory comments above, is not always
warranted. Combining the lower estimate of $35tn of outstanding CDSs
in September 2008 with three percent of the rest of the remaining swaps
market ($565tn), Greenberger arrives at a total sum for the credit exposure
of the swaps market alone at the time of the financial crisis, wryly adding
that ‘even using the most conservative figures for the sake of argument,
$52tn is a very large figure’—equal to world GDP that year.
685
Collapse 8.indb 685 27/11/2014 15:40

COLLAPSE VIII
the credit risk thereby built into the financial system as

distributed, uncontained, and without adequate capital
backing. e result: systemic default. Furthermore, the
deregulation of the  sector in stripped out
its supervisory containment and capacity to prosecute,
making it, in the words of the chair of the  in ,
a ‘regulatory black hole’.¿§
. . :  
is rudimentary exposition of the derivative mecha-

nisms leading to the financial crisis provides some
operational explanation of its causes and outlines the
material conditions for the two Lessons identified in
the introduction. Yet this is not sufficient in itself to
address the questions posed by the analysis of capital-
power: What mutation in modern power-rationality, if
any, is instituted by finance-power? And to what extent
is capital-power’s constitutive financiality instantiated
by these facts of financial operation, whose magnitude
and global systemicity became explicit only in as
an incontrovertible problem of power determination
for the modern state settlement? To address these ques-
tions a formulation of the logic of finance is required
that at once schematises its variety of practices and
instruments in relation to the constitutive financiality
of capital-power, and also delineates their common
52. Christopher Cox, cited in Greenberger, ‘Derivatives’, 10.
686
Collapse 8.indb 686 27/11/2014 15:40

power ontology with respect to state formation. As

will be seen, that determination is directly instantiated
as pricing.
e distinctive feature of all derivative structures, a
feature explicitly demonstrated by forward and futures
contracts, is that they are constructed and traded on
the basis of a price differential. Trading strategies also
exploit price differentials—across markets in arbitrage,
but also in time across one market for hedging. At the
simplest level of derivative construction, the delivery
price of the forward contract (K) anticipates the future
price of the underlying asset (St); more complex deriva-
tive structures take other factors into account (option
cost, cashflow dynamics, etc.). e primary question
for derivative pricing, then, is how the delivery prices
K are set for derivatives, given that they can only
be anticipations of future eventualities that must be
unknown at the time the price is set but which, per
the doctrine of market rationality, are nonetheless
supposed to determine the asset price. e answer is
straightforward but wholly counterconventional. It
is not that markets set the delivery/exercise price but,
as with Means’s administered prices, that the contract
constitutes the price differential between delivery and
strike prices at a specified future moment in time.
Or, in another, equivalent formulation: the contract
defers the trade of the underlying in order to insti-
tute the price differential and, conversely, the price
687
Collapse 8.indb 687 27/11/2014 15:40

COLLAPSE VIII
differential specified by the forward contract is simul-

taneously a deferral of the exchange of the underlying
asset. Put schematically: the forward contract defers
exchange to constitute a price differential for an under-
lying asset in time or across markets, just as its positing
of that differential defers immediate vending of the
asset. A deferred differential, a differentiating deferral:
différance, in Jacques Derrida’s terminology.
Taken out of its native philosophical element, Der-
rida’s term and its logic serve here only to crystallize
the operational constitution of derivative pricing. In
formal terms, this logic is as follows: as noted, dif-
férance combines difference and deferral. Each term
is constituted by the other: difference here is not a
difference between already established positive terms
(A and B) that assumes their presence, which is, for
Derrida, the metaphysical mistake of Western thought.
Rather, différance emphasises ‘one of the two themes
of the Latin differre’ in a way that the more conven-
tional ‘difference’ does not: namely, ‘the action of
putting off until later, of taking into account, of taking
account of time and of the forces of an operation that
implies an economic calculation, a detour, a delay, a
reserve, a representation—[in short]: temporization
[temporisation]’.¿¬ Constituted by their différantiation,
53. J. Derrida, ‘Différance’, in Margins—of Philosophy, tr. A. Bass (Chicago:

University of Chicago Press 1982 [first delivered 1968]), 8, for this and the
next two quotes. Translations here and elsewhere are slightly modified.
Temporization looks to capture the sense of delaying or time-passing rather
688
Collapse 8.indb 688 27/11/2014 15:40

differentiated terms ‘detour’ through one another to

establish their quasi-positive but necessarily incomplete
determination, a deferral of their self-identification that
is a delaying or spacing (espacement) of any alleged
selfpresence to itself, an ‘itself’ that therefore never
arrives as such. e differentiated terms are only ever
quasiestablished because of the constitutive deferment
of their distinct identities (qua plenitudinous presence).
‘e a [of différance] comes more immediately from
the present participle (différant) and brings us closer
to the action of “differing” that is in progress [emphasis
added], even before it has produced an effect that
is constituted as different or as difference’. Deriva-
tives constitute price differentials precisely according
to this différantial logic of temporization, which is
no less their operation: the delivery or exercise price
is not the price as and when the contract is drawn up,
and without the noncoincidence of the delivery price
with the strike price there could be no derivative but
only spontaneous vending. Addressing the différantial
constitution of the present, Derrida remarks that ‘an
interval must separate the present from what it is not
for it to be itself, but that interval which constitutes it
as present must also in the same blow divide the present
than the general order of time (temporality). e ‘economic calculation’

Derrida mentions in this quotation is in the general sense of the term of
a dynamic configuration of interdependent diverse and varied elements,
not any specific determination of monetary or fiscal economy such as, here,
finance capitalism.
689
Collapse 8.indb 689 27/11/2014 15:40

COLLAPSE VIII
in itself’.¿° Substituting ‘price’ for ‘the present’, the

identical scheme holds for the derivative: an interval
must separate the price of the underlying from what it
is not (that is, the delivery price) for the derivative to
be itself, but that interval constituting the derivative
(as distinct from exchange of the underlying) divides/
defers/detours the present of the derivative between/
across its signing and maturity. Consequently,
différance is what makes the movement of the deriva-

tive market [Derrida has ‘signification’] possible only
if each element that is said to be ‘priced’ [Derrida:
present], appearing on the stage of price [presence],
is related to something other than itself but retains
the mark of a past element and already lets itself be
hollowed out by the mark of its relation to a future
element. is trace relates no less to what is called
the future than to what is called the past, and it
constitutes what is called the present by this very
relation to what it is not.
For Derrida, that trace of différance is the necessar-

ily ineffable temporising constitution of the present;
here, in the dimension of finance, it is the derivative
contract. e identification of its logic takes a further
step with the substitution of price for ‘space’ in the
elaboration of the temporising trace: ‘constituting
54. is and the next two quotes: Derrida, ‘Différance’, 13.
690
Collapse 8.indb 690 27/11/2014 15:40

itself, dynamically dividing itself, this interval is what

could be called pricing [Derrida: spacing]; the becom-
ing-price of time or the becoming-time of price’. at
is, the ‘interval itself’ is the derivative qua pricing
contract: the becoming-price of time or the becoming-
time of price. In short, derivative pricing is différantial;
or, derivatives are a différantial pricing.¿¿ It is not that
55. Samuel Weber proposes a religiohistorical deconstruction of

money as credit-implement in the view of the 2008 crisis in Geld ist Zeit:
Gedanken zu Kredit und Krise (Zurich-Berlin: Diaphanes, 2009; English version
available at www.complit.u-szeged.hu/images/weber_-_money_is_time.
pdf). Weber’s hybridisation of money, temporization, and modern finance
as inheritor of a (Max) Weberian Protestant ethic in order to spiritualise
the determination of finance (as a secularized perpetuation of Protestant
Christianity, per Walter Benjamin’s half-thesis on capitalism) is discarded here
for reasons stated in n.24 above. More salient is Brian Rotman’s identification
of the deconstructive conditions of finance in the proliferation of ‘xenomoney’
of offshore American currency—Eurodollars—that precipitated the exit from
the Bretton Woods monetary regime in August 1971 when the US took
the dollar of the goldpeg that had anchored the post-war Euro-American
settlement (Signifying Nothing: e Semiotics of Zero [New York: St Martin’s
Press, 1987]). For Rotman, the inconvertibility of money to anything outside
of itself leaves it ‘signifying’ only in relation to future states of itself, including
the ‘purely financial dynamics’ of futures currency markets (93–96). Rotman
identifies such endogenously constituted signification with Derrida’s excision
of a ‘transcendental signified’ as condition for the sign opening the space of
language qua world of floating signification. e identification is however
at best only analogical for Rotman, a ‘structural morphism’ (103). e
contention of the present essay, however, is that while the size, growth, and
intensity of modern derivatives markets were monetarily facilitated by the
removal of the gold barrier (as recognized by Milton Friedman in his 1971
paper sponsored by the founders of the Chicago futures market and dedicated
to legitimating its establishment [MacKenzie, Engine, 145–48]), the Derridean
logic is directly that of the derivative contract and its market operationalisation;
and then is it the truth of money qua creditory relation (see §11.3 below).
e latter truth is espoused by Modern Money eory, for which the
common establishment of creditory basis of money, as its ‘unit of account’,
is uniquely a state operation, its fiscal sovereignty: see É. Tymoigne and L.
R. Wray, ‘Money: An Alternative Story’, in P. Arestis and M.C. Sawyer (eds.),
A Handbook of Alternative Monetary Economics (Cheltenham: Edward Elgar, 2006).
691
Collapse 8.indb 691 27/11/2014 15:40

COLLAPSE VIII
the derivative records a price movement against a

calibrating price—a theorization which, as will be seen,
dominates their institutional practice maintaining as
it does the supposed secondariness of derivatives to
pricing in the ‘real economy’—but that it instantiates/
implements the intervallic differentiation characteristic
of différance in terms of pricing. Here temporization
is the condition for speculative accumulation.
e proposed identification is not, however, total.
Derrida follows Levinas in extending the past of the
trace into an absolute past, an alterity that is constitu-
tive of the present, but irrecuperable to any self-present
and hence irremediably anterior to it. Such a past is a
necessity because the différantial constitution of the
present is a logically anterior condition to presence
and therefore temporally precedes it. e trace qua
derivative contract is, by contrast, only the finite and
instituted différantial organization of pricing, organ-
ized and utilized for capital accumulation without the
sacrality guaranteed by the absolute past. Furthermore,
while presence-constituting différance is a general
metaphysical condition corroding any paradigm privi-
leging or presupposing presence as its condition—for
example, in the Western tradition, (phenomenological
and psychoanalytical) consciousness, semiotics, ideal-
ism, empiricism, etc.—derivatives are but regional
manifestations of différantial price-constitution. In par-
ticular, if ontology in the Western tradition presumes
692
Collapse 8.indb 692 27/11/2014 15:40

presence as its condition and term, derivatives are not

preontological (that anteriority being one of Derrida’s
primary claims for différance); rather, their ontology
consists of a binding and enforceable contract that
is constituted by statute. at is, the institution of
derivatives is the constitution of price différantiation.
..   
e logic of derivatives qua différantial pricing is that

of their institutional construction. e schematic form
of différantial pricing just presented consequently
facilitates several praxical implementions of capital
accumulation. ough some of these configurations
may affirm the différantial organization of pricing as
such, others effectively delimit it by coding it in abne-
gating formats. ese various historical-institutional
determinations of derivative pricing are advantageous
to the present analysis because they give a specific
shape to the schematic account of the constitutive
logic of derivatives just outlined, thereby enabling both
that logic and those particular configurations to be
analytically and politically situated rather than taken
for granted. In turn, the power-ordering of capitaliza-
tion as constructed (which is not yet to say constituted)
by finance will then be able to be similarly situated.
ere are four stages in the demonstration of the pol-
itics of différantial pricing: . Its standard account, in
693
Collapse 8.indb 693 27/11/2014 15:40

COLLAPSE VIII
which derivatives are but speculative tracking descrip-

tions of the price-development of a referent external
to the derivative—an anticipatory constative model of
exogenous pricing that commences from the present;
. Its constitution of complex modes of intrinsically
temporal and social binding of the present in which
the necessary uncertainty and ignorance of the future
takes priority, instituting a sociorational ordering of
risk in which all price determinations are continually
revised; ·. As a wholly endogenous pricing and opera-
tionalisation of an unprecedented mode of betting, in
which derivative pricing refers only to its own market
in a counterperformative act that makes explicit the
occasional condition of its exogenous reference and of
the ‘real economy’ for price and capital-power; . As
absolute, when the endogeneity of différantial pricing is
extended to exogenous pricing processes external and
putatively ‘primary’ in relation to derivative markets. It
is with this last step that the derivatives pricing opera-
tions of financial markets are articulated with the a
priori financiality of capitalization. With that final step,
the identification of the specificity of capital-power’s
reordering of power is made explicit—not only in the
conceptual-philosophical determination of price tem-
porization, but also in two praxical renditions: firstly,
that derivatives are a new kind of wager; and, secondly,
that the key technical term ‘price volatility’ indexes the
ontology of derivatives pricing within and beyond its
694
Collapse 8.indb 694 27/11/2014 15:40

institutional operations. As will be seen, each of these

coextensive determinants of pricing—temporization,
the wager, volatility—undergo substantial modification
in the course of the analysis, because modern financial
institutions inaugurate unprecedented modalities and
practices of each, not just reordering power in the
state-finance nexus as they do so, but actually recon-
stituting it.
.  :
 -- 
Markets for financial rather than commodity derivatives

have been massively operationalised since their institu-
tionalization with the Chicago Mercantile Exchange
() and Chicago Board Options Exchange ()
in –·, almost contemporary with Derrida’s theo-
retico-philosophical identification of the logic of diffé-
rance. As mentioned, the  could only be sanctioned
by the Illinois regulatory bodies if futures trading was
not a form of gambling, a stipulation which required
settlement by delivery of the underlying rather than
cash.¿À CME executives obviated the injunction with
a three-pronged response: firstly, the underlying could
be delivered if it was anyway a financial object such as
foreign money in currency trading (Deutschmarks to a
56. e institutional history in this section paraphrases MacKenzie, Engine,

Ch.6.
695
Collapse 8.indb 695 27/11/2014 15:40

COLLAPSE VIII
trader’s German bank, for example), as advocated by

the  (a market that was historically inaugurated
precisely by the flexible exchange rates consequent
upon the decline of the fixed-rate Bretton Woods
system), or a market in stock options, the certificates
of which could in principle be delivered to the trader,
a route preferred by the . Secondly, legitimating
the proposals through personal and political-academic
validation, eagerly provided by Milton Friedman at
the University of Chicago; and, thirdly, formalising
the pricing process in order to remove the guesswork,
characteristic of gambling, as to what unknown future
prices will be. is formalisation was developed by
Fisher Black and Myron Scholes from the late s,
and mathematically extended by Robert C. Merton in
the early s. Even though it is highly restricted in its
assumptions and applicability, the Black-Scholes-Mer-
ton () equation has been the orthodox, integrally
acknowledged, and massively operationalised pricing
model of derivatives markets since the inauguration
of the modern derivatives exchanges.¿Ì at institu-
tional consolidation has been warranted specifically
by the formalisation’s determination of derivatives
as constative predictions of price movements exog-
enous to the derivative, for which the price that the
57. MacKenzie, Engine, Ch.5 presents a nuanced appreciation of BSM’s

theoretical development of precedents formulated by Louis Bachelier in
1900 and Edward O. orp in the 1960s, as well as the contingencies leading
to its institutional innovation and ramifications.
696
Collapse 8.indb 696 27/11/2014 15:40

derivative is written is an initial boundary condition.

e putative predictability of options price move-
ment—that is, as ahead of but secondary to the ‘real’
movement of prices happening elsewhere—was thus
key to obviating the statutory objections to the politi-
cal institution of derivative exchanges. e follow-
ing schematic overview of the  equation not only
serves to explicate the standard options pricing model,
allowing its countertheorization to be better located; it
also directly exposes the praxical instantiation of the
standard economic doctrine of modern capital-power
in its ordering of différantial pricing and temporization.
Each aspect of the exposition informs the other: the
countertheory of price being established here proposes
that the standard ratio of pricing is in fact vitiated by
the very financial operations that are supposed to be
constituted by it, doing so, as will be demonstrated,
even beyond the confines of institutionalised deriva-
tives markets—that is, at every instance of pricing,
e assumption of  is that price is a variable
measure of what wares are worth to their users.¿Í
58. In the technical terms of marginal utility theory, value is derived from
‘the utility that an individual derives from the consumption of a quantity
of a particular good […] determined by his or her subjective assessment
of the pleasure, or satisfaction, derived from consumption’, its price being
given by the monetization of that exchange (J.E. King and M. McLure,
‘History of the Concept of Value’, preprint from International Encyclopedia
of the Social and Behavioural Sciences [Amsterdam: Elsevier, forthcoming], 6,
www.business.uwa.edu.au/__data/assets/pdf_file/0004/2478883/14-06-
History-of-the-Concept-of-Value.pdf). Inaugurated by Jevons, Walras, and
Menger in the early 1870s, and institutionalized in Western Europe and
697
Collapse 8.indb 697 27/11/2014 15:40

COLLAPSE VIII
Meaning that prices are measures—that is, descriptors—

of changing conditions external to prices themselves
over time (what Means called ‘market prices’). How-
ever, derivatives prices explicitly factor the uncertainty
of future prices into the pricing calculation as their
precondition—no gains or losses could be made with
a derivative if the delivery price could be guaranteed.
According to this account, future prices are at best
calculated guesses constructed from the known price
at the time the derivative contract is made. ey are a
constative anticipation of the price development of the
underlying (exogenous to the derivative’s pricing) in
the US a generation later by Pareto, Marshall, Böhm-Bawerk, and others,

marginal utility theory forms the basic premises of Neoclassical doctrine by
formulating price setting as a dynamically constituted equilibrium through
exchanges made by a subjectively-constituted referent whose ‘desires’ are
exogenous to the market (namely, the utility of the good to the consumer
who is maximising their utility outside of the market itself). e utility of
a particular item qua subjective demand for it tapers out with increasingly
ready availability while, on the supply side, artificially high prices on readily
available wares can always be undercut by rival suppliers. Equally, scarce
goods are highly priced because their scarcity makes them more desirable
to a consumer wanting to maximise her or his utility qua consumption,
and so each such good requires the consumer to exchange her or his other
wares having less marginal utility in order to acquire the good with greater
marginal utility (the bartering of many ubiquitous goods for a small number
of precious items is a basic example of this exchange). e market is then
dynamic and flexible, changing according to the interests of the consumers
and quantitative provision of wares until equilibrium is reached as prices
meet demand. Adaptable as the theory is to changing situations and needs
of consumers and provision to determine price-setting, its presumptions—
the utility-maximising consumer for whom exchange is but barter in
however attenuated a fashion—contrast starkly with Nitzan and Bichler’s
formulation for which the luxury good is a luxury only because it is highly
priced, irrespective of its use-value, production costs, or—as will be seen in
§10 below—even its exchange ‘value’.
698
Collapse 8.indb 698 27/11/2014 15:40

the period up to expiration.¿Ò e insurmountable yet

structuring difficulty of this formulation is that such
anticipatory pricing is in each instance only a reckoning
with the ‘next step’ of a price development that is in
fact unknown. e problem is resolved by formulating
différantial pricing as a stochastic process, for which
the fluctuations of a particular element of the system
cannot be predicted (in this case, the ‘next’ price of the
underlying; in physics, paradigmatically, the position or
velocity of an individual particle in a gas). e account
of aggregate systems-development given the ‘random
walk’ of its elementary units places two stipulations on
its formalisation: that succeeding states of elements in
the system are discontinuous from preceding condi-
tions, and that the future states of the system cannot
be exactly predicted but only described probabilistically,
meaning a statistical determination of the path devel-
opment of the system both in its individual elements
and in aggregate. Such processes require a calculative
model distinct from Laplacian systems, for which the
59. Although the BSM formula is the paradigmatic model for this regime
of pricing, the operationally equivalent Cox-Ross-Rubinstein (CRR)
binomial tree is the more widely-used formalisation (J.C. Cox, S. Ross, and
M. Rubenstein, ‘Option pricing: A simplified approach’, Journal of Financial
Economics, 7.3, 1979, 229–63). Option price movements in this model are
calculated by a discrete-time branching (a ‘lattice’) of probabilities of
prices increasing or decreasing at a certain time increment. Each resulting
probability is a new node for the further calculation of price movements.
Consequently, a¶er a few iterations, several branches in the probability tree
can lead to a given price. While the paths actually taken by the option can
only be specified upon expiration, the increasing or decreasing probability
of price movement gives the trader a predictive range of routes.
699
Collapse 8.indb 699 27/11/2014 15:40

COLLAPSE VIII
path development of every element in the system can

be directly predicted if the initial conditions are known,
as in Newtonian mechanics.
e first stipulation of ‘memoryless’ path develop-
ment is known as the system’s Markov property, which
means broadly that the system’s past does not influence
the operations and dynamics of its current state;ÀÚ the
second stipulation is characteristic of Wiener processes
(a¶er Norbert Wiener, cybernetic pioneer), the best
known of which is Brownian motion of particles. Tak-
ing market pricing as a Wiener process, the uncertainty
of the actual movement of a price in the future is
rendered as a probability—a bounded and calculated
anticipation—which, by necessity of its mathematical
modeling, can only go up or down by a certain bounded
percentage at ‘the next step’ given the initial price.
us the trader exchanges contracts on the basis of
probabilities that say nothing about the past or future
in fact or in principle. e anticipation of price move-
ment, the measure of changing ‘market forces’, is both
memoryless and, given its unpredictability, futureless.
60. For example: the boiling point of water remains the same under constant
external conditions irrespective of whether it has previously boiled or been
frozen or neither; similarly for the next coin toss, dice throw, or spin of the
roulette wheel, if they are not loaded. Or, in the standard caveat of financial
funds, ‘past performance is no indication of future results’. Put otherwise,
knowledge of any state of a Markov process is adequate for knowledge of
its history because that history presents no further information than the
present provides. As Hull notes, the Markov property is then a weak form
of market efficiency in that for the latter the present price of an equity or
stock captures all the information contained in the record of past prices and
the market (Options, §12.1).
700
Collapse 8.indb 700 27/11/2014 15:40

It is only the present probability of what the future

might be, a calculated ‘perhaps’ which bears all the
information of the system’s history. is then is the
reduction of différantial pricing that was necessary
in order to operationally distinguish options pricing
from gambling, the latter being explicitly predicated
on the present ignorance of the future.
e salient feature of Wiener processes for the
construction of the  model is that the system equa-
tion is composed of two parts, one representing the
linear development of the system in time, a dri¶ rate
that in finance is the normal rate of return, the second
containing a random term indexing the stochastic
yet bounded ‘memoryless’ condition of the system’s
development. In its standard formation, this second
term is provided by a random coefficient drawn from
within the standard deviation of a regular probability
distribution (a limitation that is not considered overly
restrictive because, even if the next step of the random
variable is unknown, it is nonetheless bounded). is
random term is called the variance of the system, and
indexes its ‘noise’ against the standard growth rate.
Expressing the random walk of the variable more use-
fully as a function of a continuous time variable (in
which the dri¶ rate of the system is expressed) requires
the index of its constrained randomness to be given by
its volatility.À Volatility is, for example, the measure of
61. Following the mathematical derivation, the variance of the standard
701
Collapse 8.indb 701 27/11/2014 15:40

COLLAPSE VIII
the uncertainty of returns from investment in a given

stock. It is nontrivial in magnitude, since the effect of
volatility upon price can sometimes far exceed that of
the dri¶ rate over a given time. And it is nontrivial in
the formulation of : securing an acceptable level
of return requires the reduction, if not the elimina-
tion, of the volatility intrinsic to the very formula-
tion of the price development as a Markov process.
Given that the derivative price is determined to be
strictly exogenous to the price of the underlying, the
 formula structures a portfolio that cancels out
volatility by combining a long/short position on the
price of the underlying (usually equity stock) with a
position on an option on that underlying such that the
volatility of one offsets that of the other.À§ at is, the
formula engineers a return on the portfolio at its dri¶
rate, which is the risk-free rate of return of the market,
by hedging the price of the underlying against the
price of a derivative based on it, a process called ‘delta
hedging’.À¬ e linking of the two prices and respective
deviation of the probabilistic determination is the square of volatility. See

Hull, Options, §13.4 for mathematical account of volatility.
62. For a mathematical derivation of BSM see Hull, Options, §13.6
63. e Efficient Market Hypothesis, summarised in Eugene Fama’s 1970
formulation that ‘prices always “fully reflect” available information’ (cited
in Mackenzie, Engine, 65), follows directly from marginal utility theory:
all market-makers use the available information to trade with one another
leading to a unique market price. Price thereby reflects an equilibrium that
is a ‘rational’ settlement and disrupted only by further new information. e
risk-free rate of return is a result of the Capital Asset Pricing Model (CAPM)
developed in the 1960s, in which risks on items of a stock portfolio arriving
702
Collapse 8.indb 702 27/11/2014 15:40

volatilities is not entirely arbitrary, in that each price

is ‘affected by the same source of uncertainty: stock
price movements’.À°
It is intrinsic to the Wiener process that the solu-
tions to the equation change with time and also with
the initial conditions of the primary variable, in this
case the spot price of the underlying. Consequently,
(i) the solution for the price process of the derivative
changes with the price development of the underly-
ing, and (ii) the delta hedge portfolio is only valid for
theoretically infinitesimal (but in practice very short)
durations; furthermore, (iii) the  model can only be
constructed if idealized stable background conditions
and parameters are assumed, though these are infeasi-
ble in practice.À¿ But given these severe constraints, the
at their respective equilibrium prices are counteracted by diversifying the

scope of the portfolio (Mackenzie, Engine, Ch.2). e ‘risk-free’ portfolio
is therefore the stock portfolio with the greatest diversity: the market itself
(excepting disruptions to the market as a whole). It follows that higher
returns than the market average require portfolios with greater risk—at the
limit, the price movement of just one stock. In Mackenzie’s words, CAPM
is ‘finance theory’s canonical account of the way stock prices reflect a
tradeoff between expected [emphasis added] return and risk (in the sense of
sensitivity to overall market fluctuations)’ (Engine, 28).
64. Hull, Options, §13.5
65. Including: stable borrowing costs (i.e., constant background interest
rates), no transaction costs, no dividends during the lifetime of the security
(which payout will have repercussive effects on returns on the option), no
trading of the securities, no arbitrage opportunities (no external advantage
or pressure for monetary reasons), and that trading is continuous (Hull,
Options, §13.5)—none of which in fact hold. Later developments of the
BSM equation allow several of these constraints to be relaxed. For a broad,
technically informed dismissal of BSM as institutionally and theoretically
underdetermining more practically viable precursors (such as orp and
Bachelier) thanks to its misguided Neoclassical and therefore idealised
703
Collapse 8.indb 703 27/11/2014 15:40

COLLAPSE VIII
‘equal and opposite’ construction of the portfolio in

the  model means that the position of the portfolio
at the end of a short enough time period can suppos-
edly be known with certainty: it is the expected rate
of return of the combined positions in the underlying
and the option. And given the expected rate of return,
the model and its stipulations can be manipulated to
find the right price for options so as to secure a risk-
free return over short-enough periods irrespective of
the risk class of the underlying. By excising volatility,
the  portfolio generates returns at the market rate
independently of what the underlying is, i.e., inde-
pendently of the risk preferences of the trader; so it
lowers the barrier to riskier underlying assets, thus
diversifying and consolidating the market in these asset
classes. Such ‘risk neutrality’ is a strategic articulation
of the anticipatory model of pricing in the  regime.
anks to the probabilistic standardization of pricing
in options markets—quite distinct, then, from betting
and its ineliminable risk—the institutional effect of 
has been to operationally legitimate the establishment
of the  and to increase the size of the options
markets. Furthermore, in its risk-neutral coupling
of options market with those of their underlying, it
also enabled an increase in the size of the underlying
financial markets too.
determination of pricing, see E.G. Haug and N.N. Taleb, ‘Option traders
use (very) sophisticated heuristics, never the Black–Scholes–Merton
formula’, in Journal of Economic Behavior and Organization 77 (2011), 97–106.
704
Collapse 8.indb 704 27/11/2014 15:40

Ineliminable Volatility
e  anticipatory pricing equation and its con-
comitant risk neutrality presume the stability of the
background conditions—an idealization which is not
only operationally false but which in any case is theo-
retically constrained to the vanishingly small timespans
for which the delta hedge portfolio is valid (i.e., until
the ‘next step’ in the random walk of the spot price).
Over any ‘extended’ time in which the spot price
changes ‘unpredictably’, as it must do according to
the initial assumption of the model, different solutions
to the  equations are required. Consequently, the
proportion of derivative securities to the underlying
in the portfolio needs to continually change in order
to maintain risk-neutrality. at continued recompo-
sition of the portfolio, known as ‘dynamic replica-
tion’, follows the price development of the underlying
in order to maintain both the risk-neutrality of the
portfolio and also the removal of volatility from its
return. Yet the development of the portfolio through
dynamic replication, which also prices the option com-
ponent on each iteration, conveys the quasi-random
price movement of the underlying—the very volatility
that the  portfolio is constructed to excise. Two
methods make volatility apparent a¶er its theoretical
elimination in the  model: the historical record of
the asset price and the method of implied volatility.ÀÀ
705
Collapse 8.indb 705 27/11/2014 15:40

COLLAPSE VIII
Aggregate implied volatility represents asset price vola-

tility as it is manifest through the price development
of different options based on a single underlying; a
method that permits the price of one option to be used
to calculate the price of another option based in the same
underlying asset.
e simultaneous occlusion and manifestation of
volatility from the  regime does not necessarily
present a problem in practice: priced in time rather
than as a punctual theoretical formulation, the price
volatilities of the underlying and the attendant option
are indexed by the dynamic replication of the  port-
folio. But the theoretical quandary is insurmountable:
even though volatility is the very condition for the
recomposition of the  portfolio, its formulating
equation proscribes any explicit determination of price
volatility, rendering it unobservable within the terms
of that formula and preventing the causes of volatility
from being established within the limited determina-
tion of those solutions.ÀÌ In fact, implied volatility is
of primary significance in determining derivatives in
terms of différantial pricing, as can be drawn out by
reformulating the preceding result: the requirement
for constant iteration of the  equation implies
that volatility is generated not by factors external to
the financial market, but rather by the trading itself.ÀÍ
67. Ibid., §13.13

68. With regard to stock prices, see K. R. French and R. Roll, ‘Stock return
706
Collapse 8.indb 706 27/11/2014 15:40

But if, in this model, the price volatility of the underly-

ing informs the corresponding option’s volatility, and
if the  portfolio is constructed in order to remove
volatility effects, then, contrary to the primary assump-
tion that  relies only upon the constative (because
exogenous) pricing of the underlying, the volatility
of the price of the underlying is in fact endogenous to
its market, as then is the option pricing. Furthermore,
since the delta hedge portfolio is composed of both
the underlying and the option, volatility in the option
price requires trading in the underlying, generating
volatility.
Options pricing in the  model does not then in
fact refer to an exogenous price. Rather, pricing is con-
stituted endogenously to both the derivatives market
and that of the underlying, which are now interlinked.ÀÒ
Options pricing Is itself also a market ‘force’, as is pric-
ing of the underlying in its own market. e  regime
of option pricing as constative or merely anticipatory
variances: e arrival of information and the reaction of traders’, Journal of

Financial Economics, 17:1 (September 1986), 5–26. With regard to volatility of
stock prices, systemically observed to ‘be negatively correlated with lagged
[unexpected] returns’, see D. Avramov, T. Chordia, A. Goyal, ‘e Impact of
Trades on Daily Volatility’, Review of Financial Studies, 19:4 (2006), 1241–77.
Avramov et al’s thesis that such asymmetric volatility is ‘governed by the
trading dynamics of informed traders and uninformed traders’ is extended
to the futures market and confirmed in J. Kittiakarasakun, Y. Tse, G.H.K.
Wang, ‘e impact of trades by traders on asymmetric volatility for Nasdaq
100 index futures’, Managerial Finance, 38.8 (2012), 752–67.
69. As confirmed and compounded by indices of implied volatility such
as the CBOE VIX that then enables the pricing of volatility as itself an
underlying for derivative construction.
707
Collapse 8.indb 707 27/11/2014 15:40

COLLAPSE VIII
of exogenous price movements starting from the initial

price and hence calculable qua probability cannot then
be maintained other than by its static and therefore
highly constrained determination. at anticipatory
model provides only the instantaneous composition
of the delta-hedge portfolio, a falsification of the pric-
ing process of both options and the underlying that
is consequent upon that regime’s presentism. Evidence
that the  model is wrong is empirically provided
by ‘volatility smiles’ and skews: within the modeling
parameters of , the price of a vanilla option only
increases linearly with its volatility, and the implied
volatility should be independent of expiration and
strike price; yet, since the October stock market
crash, prices have taken nonlinear paths in all three
regards.ÌÚ at such curves are manifest a¶er the
70. Specifically, charting implied volatility against strike price yields a valley-
like curve whose turning point is the at-the-money option (that is, options
whose delivery price is the spot price of the underlying), a curve known as
the volatility smile. More systemically, the implied volatility of at-the-money
options is also observed to be slightly lower than options in- or out-of-the-
money (those with delivery prices respectively above or below that of the spot
price, netting a gain or loss). Furthermore, implied volatility of an option
changes not just with the strike price but also with expiration, meaning that it
is better charted as a volatility surface with a horizontal reference plane having
the axes of expiration and strike price. Different markets have different typical
curves. Mark Rubinstein was among of the first to model the volatility surface
using the CRR formalism he codeveloped (‘Implied Binomial Trees’, e
Journal of Finance, 49:3 (July 1994), 771–818) while Bruno Dupire formalized
the volatility smile in terms of BSM in the same year (‘Pricing with a smile’,
Risk 7 (1994), 18–20), but such ‘one factor’ models have since been shown to
have severe limitations. A multifactor formalism for the development of the
volatility surface in conditions where arbitrage across markets is not possible
is developed in T. Daglish, J.C. Hull, and W. Suo, ‘Volatility surfaces: eory,
rules of thumb, and empirical evidence’, Quantitative Finance, 7.5 (2007), 507–24.
708
Collapse 8.indb 708 27/11/2014 15:40

crash but not before indicates that the pricing process

is not memoryless: a past event structures all subsequent
processes in the system. Bearing a constituting past,
options pricing does not observe the Markov property,
which is not only the condition for the probabilistic
determination of anticipatory pricing, but also for the
 model tout court. Furthermore, nonlinear implied
volatility paths again suggest that volatility is gener-
ated by conditions endogenous to markets, including
derivative markets—a result leading to the argument,
elaborated further below, that if volatility arises from
within the price process itself, then derivatives pricing
has to be distinguished from traditional determinations
of betting, in which gains or losses depend on a referent
external to the wager itself.
For now, however, the minimal result is that options
pricing is neither anticipatory nor merely constative.
More emphatically—and this is what will move the
analysis from the dimension of derivatives as insti-
tutional financial operators to the dimension of the
power-rationality of capitalization’s financiality—
implied volatility manifests the différantial logic of
derivative pricing, which is exorbitant to the presentist
determinations of the  regime. Instantiating dif-
férantial pricing and its temporization in fact, the
institutional praxes of  misidentify and constrain
that logic within the stasis of the calculable ‘maybe’
of anticipation: price development as probabilistic.
709
Collapse 8.indb 709 27/11/2014 15:40

COLLAPSE VIII
Standard financial praxes thereby proscribe the com-

plete account of their own operation as both logically
predicated on and operationally constituting the vola-
tility (and its pricing) that they institutionalise—that
is, an account of price as more than merely constative
of conditions and ‘forces’ acting elsewhere. Given
the dominance (in theory and pecuniary magnitude)
of these standard financial praxes, what is theoretico-
politically exigent is a countertheorization of différan-
tial pricing that does not presume either the present
price as the basis or inauguration of the pricing process,
nor the constitution of price as exogenous to its own
institutional process.
.  
Key elements of the required countertheory are pro-

vided by the sociological accounts of finance markets
given by Donald MacKenzie and Elena Esposito.Ì
Both propose that derivatives markets are not consta-
tive but performative—in MacKenzie’s words, ‘an
engine not a camera’—because derivatives pricing
is shaped by the fact and method of pricing itself,
rather than exogenous factors such as the vicissi-
tudes of the underlying prior to pricing. MacKenzie’s
mainly historical-institutional account identifies two
71. MacKenzie, Engine, and E. Esposito, e Future of Futures: e £me of

Money in Financing and Society (Cheltenham: Edward Elgar, 2011 [Italian:
2009]).
710
Collapse 8.indb 710 27/11/2014 15:40

salient regimes of performativity for options markets.

e first is ‘Barnesian perfomativity’ (a¶er Barry
Barnes’s sociology of science) in which economic
processes and outcomes transform to better fit the
theoretical model, in a ‘self-validating feedback loop’:Ì§
consequent on the establishment of the  and wide-
spread use of , ‘the financial markets changed in a
way that made the [] model’s assumptions, which
at first were grossly at variance with market conditions,
more realistic’.Ì¬ at ‘realism’ was undone (most
intensely in the ) by the October crash, a¶er
which the persistence of regular volatility skews meant
that ‘no analysis now finds the [] model to fit the
observed pattern of prices of options well’.Ì° Such is
the second regime of performativity for which ‘the
practical use of finance theory sometimes undermines
the market conditions, processes, and patterns of prices
that are posited by the theory’.Ì¿ e ‘undermining’ of
72. MacKenzie, Engine, 19.

73. Ibid., 256.
74. Ibid., 202.
75. Ibid., 24. More specifically, while options markets still deploy offshoots
of the BSM model for pricing, the risk-management of option pricing now
accommodate the ‘wild randomness’ of discontinuous jumps in pricing
and volatility that such models gave rise to but can not theorise. Risk-
management in this second regime of performative pricing requires an
increase the ‘margin requirements’—the initial price of the option deposited
with the exchange—so that ‘catastrophic events’ do not force further selling
of options and exacerbate price volatility. It also requires a shi¶ from the
assumed normal distribution of the BSM model, in which outlier ‘extreme’
events in the tails of the distribution are unlikely, toward the Lévy family
of variable distributions with thicker tails, developed in relation to finance
711
Collapse 8.indb 711 27/11/2014 15:40

COLLAPSE VIII
the conditions and results occasioned by and for the

very theory that constitutes them more exactly marks
out its ‘practical’ use in this second regime as being
counterperformative: pricing takes place against the con-
stative determination of pricing. For Esposito, distinct
from MacKenzie in her adoption of a Luhmannian
systems-theoretical approach, such counterperforma-
tivity is not an episodic occurrence of financial pricing
but rather, and in fact, the primary characteristic of
such markets: derivatives markets are necessarily and
intrinsically set to run against their theoretical models
because volatility is endogenous to pricing itself.ÌÀ In
Esposito’s terms, the volatility of derivatives markets
indicates how the future stipulated by the derivatives
contract ‘is unpredictable because it is produced by
the very present that tries to predict it’.ÌÌ As implied
volatility indicates, the probabilistic anticipation of
price development is vitiated in its very instantiation
because derivative pricing shi¶s the price away from
the magnitude it putatively predicts as an exogenous
referent. In short, derivatives markets constitute prices.
To understand how and why requires a more detailed
exposition of Esposito’s argument, which has the
by Benoit Mandelbrot, for which the standard requirements of statistics

such as standard deviation and variance can be infinite, meaning that while
the techniques developed on the basis of such models are probabilistic
nonetheless ‘standard statistical techniques evaporat[e]’ (Ibid, 108ff.).
76. For the ‘wild variation’ of the market destroying its regular statistical
distribution see Esposito, Future, 148–51.
77. Esposito, Future, 128, emphasis added.
712
Collapse 8.indb 712 27/11/2014 15:40

advantage of leading back to the articulation of the

institutional financial operations of derivative markets
in terms of pricing qua temporization, which will in
turn be the basis upon which the particular determina-
tion of finance-power can be made.
Ùme is the leading category in Esposito’s theory
of derivatives pricing because for her derivatives are
complex time relations fabricated by institutional
methods of social organization. Specifically, derivatives
mobilise the distinction between the present future,
which is ‘our current anticipation of the future’, and
the future present, or the ‘present that will become
actual in the future’.ÌÍ What is traded on derivative
exchanges is not the future given (the then unknown
strike price of the underlying) but the present risk of
that price against the delivery price.ÌÒ Derivative pricing
consequently refers ‘to the present way of seeing the
future, not to the unknowable future that will come
about later’.ÍÚ It is constituted in the ‘management’ of
the price movement between present future and the
future present. What is managed qua pricing is the
78. Esposito, Future, 23–4. ere is similarly a past present that is the
present as it was in the past but is now passed and inactual.
79. Terminological caution is needed here: what Esposito identifies as
‘risk’ is called ‘uncertainty’ in finance markets; see Esposito, Future, 36n.26.
Standard finance theory follows Frank Knight’s 1921 distinction between
futures that are measurable/containable (risk) and those that are not
(uncertainty). See Knight’s Risk, Uncertainty, and Profit (Mineola, NY: Dover,
2006 [1921]).
80. Esposito, Future, 151; emphasis added.
713
Collapse 8.indb 713 27/11/2014 15:40

COLLAPSE VIII
convolution of the uncertainty of the strike price in the

future present anticipated as a present future. And what
is priced as volatility in derivatives markets is not then
the variability of price at expiration stemming from
the present—as proposed in the  model—but the
uncertainty of price given the present inactuality of the
future present. at is, derivative pricing makes explicit
in the present the relation to an inactual and necessarily
uncertain future present—as a present future. As such,
it indexes the core characteristic of time in Esposito’s
systems-theoretical method, namely that because they
are never (the) present, the ‘past and future are never
given, but become actualized as horizons of inactual-
ity for a present that does not last’.Í In the general
pragmatic terms of systems theory, a relation such
as the management of price movements between the
present and the future constitute ‘the unity of actuality
and inactuality’ which is time. Ùme, on this account, is
always system-specific, in that the maintenance within
the present of past and future presents depends entirely
on the structure, organization, and capacities of any
given system.Í§ Derivative pricing and its volatility are,
in short, constructions of time.
81. Ibid., 21.

82. e outline of time presented here condenses and quotes from the
salient argument in Esposito, Future, Ch.2, especially 21–8.
714
Collapse 8.indb 714 27/11/2014 15:40

e specifics of this broad determination can be deter-

mined against the general systems theory of time-
relation presented by Esposito. Summarily:
—Ùme is specific to a system, ‘produced in order to

organize its operations and make them more complex’
by incorporating the inactual past and future presents
into its present actuality. As this paradoxical unity, the
present is the primary manifestation of time.
—Because the ‘time binding’ that is the relation
between the actual and the inactual depends entirely
on the system in question, there is no absolute,
‘objective’ time.
—Rather, the pragmatic incorporation of inactuality
into the present enables the system ‘to structure its
present operations’ in view of that inactuality. Ùme
therefore permits the complexification of a system to
a degree greater than its actuality allows (as with debt
in regard to fiscal conditions, for example).
—anks to time, the actual and the inactual inform
one another, albeit asymmetrically; through anticipa-
tion of the inactual and unknown future in the pre-
sent, and by organising the actual present in view of
the future.
—Generally, ‘time allows the system to separate itself
from its own operations and its situation, linking it
with other (past and future) situations in a complex
framework of connections’ that attest to and acknowl-
edge its contingency amongst other possibilities.
715
Collapse 8.indb 715 27/11/2014 15:40

COLLAPSE VIII
e ‘possibilities’ of a system—its unactualised

states—are only theoretically and practically available
to it because of its time qua relation to the inactual.
—In particular, the revision of plans for the future and
reconsideration of the (once future) present is the
‘internal reflexivity of time’. Operators in a system
with time know that they can make decisions for
an anticipated future which, while itself unknown,
permits ‘the freedom to decide differently once that
future has become present (a present they will have
contributed to and where they know how to inter-
vene)’. Such is the ‘flexibility and freedom’ granted
by time. Emancipation is a time relation.
—e freedom of time for an operator in a system is
the freedom to choose ‘in a non-random way’, and to
re-choose in view of the consequences of the preced-
ing choices. Similarly, the past offers a selectivity of
remembrance: ‘everything could be possible, but only
some possibilities come about, and these condition
the possibilities that are made available for the future’.
—Ùme’s unity is asymmetric: the past present can
only be understood for what it was and wasn’t (qua
condition and projection to the future that is now
present) in its future, while the future present con-
tinues to be strictly unknown but can be anticipated
and prepared-for. Furthermore, operations in the
future condition the future but do not determine it;
past operations do determine their future, which is
the present.
716
Collapse 8.indb 716 27/11/2014 15:40

In these terms, systems have freedom qua possibilities

constructed via their relations to inactualities of its
present state.
Esposito’s theory of derivatives pricing as counter-
performative exemplifies this general theory of systems
time and freedom of future revision. As options in
particular demonstrate, derivatives build in revis-
ability of trading the underlying at expiration into
their contract. Trading of the options contract on
derivatives markets ‘allows one to make decisions
today that affect the way the future will be, while
preserving the freedom to decide one way or the other
when this future will be present’.Í¬ As opposed to
the  model, in this case derivative pricing is not
constative with regard to an exogenous referent of that
process. Rather, it refers to the ‘contingency of future
events’ not only as regards the strike price, which is
ostensible (exogenous) content, but primarily as a
reflexive (endogenous) consequence pricing itself as
a mode of time engineering. at is, the reflexivity or
revisability of derivative pricing means ‘that future-
oriented expectations and decisions [on price] affect
what will become present in the future’.Í° Taking the
modality of the ‘maybe’ up to their expiration, deriva-
tives ‘leave the indeterminacy of the future open, and,
83. Esposito, Future, 105.

84. Ibid., 127.
717
Collapse 8.indb 717 27/11/2014 15:40

COLLAPSE VIII
at the same time, produce it with their decisions’.Í¿

Generating indeterminacies upon which they sub-
sequently act, derivatives are counterperformative.
Consequently, these indeterminacies are not random
(within the parameter of the standard deviation of
a normal distribution, as the  model stipulates);
rather, they are structured by the ‘minimal continu-
ity’ of derivatives pricing in the present, a pricing
which is predicated on the contingency of revision.
Derivatives are in general thereby devices of arbi-
trage in time.ÍÀ As an endogenous process, the reflex-
ive measure of the necessary uncertainty of pricing
movement in the present is given within the terms of
that pricing system itself: it is volatility, the index of
the presence of inactuality in present actualities. And
it is priced. What volatility measures in its pricing is
the uncertainty of price given pricing as a time relation.
’s presentist and therefore static and anticipatory
determination of derivatives pricing proscribes the
time relation qua unity of actuality and inactuality
that is derivatives pricing from explicitly entering price
determinations. It instead reproduces the time relations
that derivatives are (vectored qua pricing) only as an
implicit a¶ereffect of its probabilistic formulation.
85. Ibid., 105.

86. Ibid., 117.
718
Collapse 8.indb 718 27/11/2014 15:40

Risk Order
is partial result marks the way to the political-eco-
nomic determination of derivatives in terms of différan-
tial pricing. However, the logic of différance imposes
important modifications upon the theorization of such
pricing as counterperformative. Crucial to this rede-
termination is the irreducible sociological dimension
of the time relation in Esposito’s account, in which it
is a corollary of her determination of risk: ‘all forms of
time binding have social costs, because they […] also
bind the opportunities and perspectives of all other
operators’.ÍÌ at is, since the agents bound in and
by the system’s time relations can avail themselves of
the systemic contingency of revision, the possibilities
inherent to a system with time are not only those of its
capacity in toto but are distributed differentially across
elements of that system, in this case the market consti-
tuted of participants in the pricing system. Ùme bind-
ing thereby constitutes possibility and limitation with
regard to others, which is to say that it constitutes social
binding as such, which is in each instance organized
and comprehended as the norms of a given social order.
Contrary to traditionally-ordered societies, for which
norms are determined according to the constraints
that have determined and stabilise the present on
the basis of the selectivity of the past, social binding
87. is section mainly paraphrases Esposito, Future, 30–35 from which all
quotations are taken unless otherwise noted.
719
Collapse 8.indb 719 27/11/2014 15:40

COLLAPSE VIII
constituted in view of the inactuality of the future

stipulates a reflexive and revisable relation between
the actual (present) and inactual (past and future).
at is, social binding qua time binding requires the
revision of social norms. Esposito illustrates by way of
an example: ‘the reflexivity of time introduces a future
contingency into the present that cannot be bound […].
How can one accept the production of s (even if it
is legal) if one cannot dismiss the possibility that […]
they produce unpredictable genetic damages?’ Such
damages are a future uncertainty, necessarily indeter-
minate in the present yet indexed in it as a risk—now
meaning the uncertainty of the future in the present.
Consequently, the necessarily social dimension of
time binding complexifies the actuality and rationale
of social organization—the available justifications of
social norms—because the latter are subject to the
revisability of the present in view of the future. Ùme
is not a background through which revision of social
norms is undertaken; it is that which imposes the neces-
sity of the revision of norms in societies constituted
with a view to ordering for future uncertainties. It
constrains social orders to effectuate their norms in
their contingent and future-facing contemporaneity.
As such, societies of reflexive time-binding are defi-
nitionally modern. What is characteristic of them is
that ‘the current constraint, which should [qua norm]
neutralize future uncertainties […] comes to depend
720
Collapse 8.indb 720 27/11/2014 15:40

on these same uncertainties’, making the ordering itself

uncertain in its binding and ‘depriving the [social order
of the] very meaning of normativity’.
e coeval constitution of social and temporal
uncertainties that is modernity is, then, ‘a general-
ized condition of uncontrolled exposure to future
contingency’. Given that its norms are contingent
and are apprehended as such, any such ‘society at risk
(Risikogesellscha¤)’ has weak social bonds; it is flexible
and adaptable, risk-rich.ÍÍ To be modern means having
no stable and binding criteria to guide actions, either
now or in the future. Apparently stable solutions (for
example, savings as a secure reserve for money) may
lose out on gains elsewhere (the growth of equities
markets), but the latter make the gains they do because
they present a greater risk than the former. A stable
judgement on what to do in the present could only
be made in the future, not the historically organized
actuality of the present. But the future is inactual and
itself unknown, which is why all judgements now
are themselves only risks. at judgements are made
on condition of a necessarily inactual and unknown
future and suppose their revision, such that there is
no certainty as to what may come to be a gain or a
loss, security or damage, is what Esposito calls ‘the
rationality of risk’—a rationality constituted by the
88. Risikogesellscha¤ is better known in translation through the influential

work of Ulrich Beck as ‘risk society’.
721
Collapse 8.indb 721 27/11/2014 15:40

COLLAPSE VIII
double necessity of an ignorance of the future and the

insufficiency of the past to guide judgements made in
the present.ÍÒ
e rationality of risk does not however disable all
criteria for judgement. Even though norms as such
are deprived of any final authority and legitimating
sanction, the rationality of risk nonetheless generates
a ‘recursive, circular and revisable’ quasi-order of
89. Esposito, Future, 105 for ‘rationality of risk’. is dynamic construction
of reason is homologous to Robert Brandom’s ‘strong semantic inferentialism’
(SSI) that provides the basic schema of neorationalism. With Brandom, SSI
is a sufficient condition of conceptual contentfulness because inferential
relations ‘alte[r] our commitments and entitlements in ways that depend on
what is a reason for what’, meaning that the basic operation of reason is the
revision of extant propositional content (Reason in Philosophy [Cambridge,
MA: Harvard University Press, 2009], 13 for the quote; all emphases are
added, Brandom’s own emphases being removed throughout.) Moreover,
for Brandom reason is primarily deontological because ‘judging and
acting—endorsing claims and maxims, committing ourselves as to what is
or shall be true— […] mak[es] ourselves subject to assessment according
to rules that articulate the contents of those commitments’ (33). Kant calls
these rules ‘concepts’ but Brandom identifies their more general discursive
applicability as being primarily the norms to and for which those making
inferences are responsible. at responsibility distinguishes the ‘exercise of a
distinctive kind of consciousness’ that is ‘sapient, rather than merely sentient,
consciousness[,] or awareness’ (9). Moreover, concept formation qua
normative rationality is not sui generis to the thinking subject as rational self
(Kant) but also social (Hegel), involving extant histories and nonratiocinative
languages (Ch.3). Like SSI, then, risk rationality is a necessary and chronic
socially constituted revision of norms ‘consisting in practically knowing one’s
way about in the inferentially articulated space of reasons and concepts’ (9)
according to the ‘bindingness’ (33) of the norms actively and provisionally
established by the reasons intrinsic to that recursive process rather than past
or future conventions. In the risk-order, the ‘inferentially articulated space of
reasons’ is specifically determined as calculative yet open-ended time-binding.
Consequently, neither reason nor (anthropological) sentience nor then
price are established epistemological terms but come to be known and have
traction on social norms thanks only to their respective rational revisions.
However, for reasons presented taken up in n.133 below, such an alignment is
only hypothetical or formal but is in fact incompatible.
722
Collapse 8.indb 722 27/11/2014 15:40

binding uncertainties. at quasi-order is the ‘mini-

mal continuity’ of sociotemporal binding, a binding
‘between the contingency of time and the contingency
of observers’ that is enough to form decisions and give
the capacity for control, revision, and correction ‘in a
non-random way’. Control not over what the future will
be as such (per planning), but control as the construc-
tion of possibilities for the future ‘without knowing or
having to know’ whether those possibilities will come
to pass. Disestablishing social norms while constructing
a binding social reality predicated on uncertainty and
constitutive ignorance, the rationality of risk requires
and fabricates increasingly ‘complex forms of time
management’. Derivatives markets epitomise such
complexity by ‘allow[ing] one to make decisions today
that affect the way the future will be, while preserving
the freedom to decide one way or the other when this
future will be present’.ÒÚ Specifically, by constructing
a deferral of the vending of the underlying in view of
taking advantage of changes in price once that contract
is made and others react to it, the derivatives trader
‘buys contingency (i.e., the freedom to decide otherwise
starting from the decision taken today)’. Derivative
prices are set not primarily in relation to the underly-
ing or to other market-exogenous conditions, but by
expectations and indexes of price movement.
723
Collapse 8.indb 723 27/11/2014 15:40

COLLAPSE VIII
For Esposito, whatever quasi-order persists in the

rationality of risk is ‘governed by reference to the
uncertainty of the behaviour of others’, given that
their uncertainty is also attributable to the horizon of
a future that is inactual to them. Not only do judge-
ments and actions take place within the constitutive
ignorance of reflexive time-binding but, for that reason,
‘observers do very well in observing each other because
the world is not a primary given […], but comes into
play when one observes what and how other observers
observe’.Ò In Esposito’s systems-theoretical account,
such ‘second-order observation’ is the primary char-
acteristic of modernity: it is ‘the only form of reality
still viable’ in modernity, in which ‘descriptions of the
world change the world described’.Ò§ e ‘minimal
continuity’ of reflexive time-binding and counternor-
mative social binding resolves for Esposito into the
constructivism of reality constituted by and as the
integrated sociology of second-order observation that
is antithetical to conventionalism. is broad construc-
tivist determination of the quasi-order of societies at
risk—of the risk order (the term is not Esposito’s)—is
the general sense in which all judgements and observa-
tions in the risk order are necessarily counterperfoma-
tive. As modern practices of complex time-binding,
derivatives markets are counterperformative per se, and
91. Ibid., 104.

92. Ibid., 93.
724
Collapse 8.indb 724 27/11/2014 15:40

not only when those markets lurch into crises (as Mac-
Kenzie holds); and they are systems of second-order
observation.Ò¬ Consequently, financial markets are not
directed to or organized for the ‘satisfaction of needs’
insofar as these are external to market determinations.
Rather, they require
the abandonment of any reference to a given external

world, even in the form of the discourses about the
difference between investment (which should operate
in the real economy) and speculation (which should
be a mere financial transaction), where the second
should refer sooner or later to the first. Otherwise
we have to deal with a pathological development,
93. e account of second-order observation paraphrases and quotes from

Esposito, Future, 102–4, unless otherwise noted. As Esposito notes (Future,
Ch.5, n.28) second-order observation is a variant of John Maynard Keynes’s
beauty contest model in which contestants in a newspaper prize choose the
six publicly selected ‘prettiest’ faces out of a hundred. Rational agents do not
select according to their own preferences but according to those that they
think popular opinion would select (e General eory of Employment, Interest
and Money [New York: Harcourt Bruce, 1964 (1936)], Ch.12, §5). Keynes
characterised the professional investor of his time as having reached ‘the
third degree where we devote our intelligences to anticipating what average
opinion expects the average opinion to be’ in a ‘battle of wits to anticipate
the basis of conventional valuation a few months hence’. In this, financial
interests in markets are distinct from the medium-long term investment
characteristic of enterprise, the ‘social object’ of which ‘should be to defeat
the dark forces of time and ignorance which envelop our future’. Against
this injunction, second-order observation as Esposito derives it complexifies
Keynes’s recursive rational-model further because (i) the observer includes
the knowledge that she or he is observed by others as well as observing them,
and (ii) the second-order observer is also attentive to the risks and volatility
of price movement, thereby including counterconventional combinations in
their time-binding calculation (Future, 11).
725
Collapse 8.indb 725 27/11/2014 15:40

COLLAPSE VIII
with a crazy economy, with gambling and a total

lack of control.
Supposing that investment is badly (if at all) served

by speculative finance would lead to the criticism of
the latter as a ‘casino capitalism’; a gambling without
constraint or external reference that is destructive
of the production that should be its true purpose.
is is a commonplace criticism of financial markets,
o¶en accompanied by the complaint that risk ration-
ality is distinct from calculative-predictive rationality.
e former has no clear results or direct and known
consequences; nor does it have any rational or social
normative core, only the construction of possibilities
that countermand the actuality in which they are con-
ceived. Systems-theory constructivism obviates such
criticisms of finance in favour of comprehending the
ways in which ‘the financial economy binds itself and
its operations, not to a correspondence with an alleged
given world’. On this basis, the risk-rationality of finan-
cial markets is not that of production or of ‘the real
economy’ (exogenous referents for those markets) but
rather and only that of risk—that is, the possibilities
fabricated by the system for its own counterperforma-
tive development via emancipation from extant norms.
And such risk has two dimensions to it: generally, what
are instantiated in the present are the uncertainties of
the unknown future, a making-ignorant of the present
726
Collapse 8.indb 726 27/11/2014 15:40

and its constative determinations; and specifically, per

instance of pricing, counterperformative pricing gener-
ates profits from ‘bucking the trend’ of the market as
a system of second-order observation.
Such countermanding possibilities cannot be con-
ceived on the basis of the actuality of the present alone,
vitiating the very condition for the probabilistic account
of price development in the anticipatory model of .
Consequently, to reiterate the argument of endog-
enous counterperformative pricing from another angle,
derivative pricing is constitutive of price movement,
and instantiates its own ‘ignorance’:
[P]rice movements always produce surprises that

would not arise if there had been no speculation
about the future in financial markets. e future
projections to which operators are oriented are cor-
rect and incorrect at the same time. If done well,
they anticipate the way the future would have come
about if there had been no attempt to foresee it. In
this sense, they sabotage themselves.Ò°
Prices necessarily go in unexpected directions because

their anticipations (in the future present) are necessar-
ily wrong—and only by virtue of the anticipatory price
(in the present future). at is, as well as factors exog-
enous to the pricing system and trade in the underlying,
727
Collapse 8.indb 727 27/11/2014 15:40

COLLAPSE VIII
pricing as such generates volatility. Implied volatility

is for Esposito an effect and measure of the reflexivity
of the risk-order itself, with the underlying as a quasi-
arbitrary heuristic device to facilitate that measure.Ò¿
e succinct formulation is that implied volatility
‘indicates the prevailing opinion on the prevailing
opinion’. e elaborate version is that, as a measure,
volatility is an observation of the systemic dynamics
of second-order observation. Such an observation is
not external to second-order observation but is itself
an endogenously generated manifestation of second-
order observation that estimates its own effects on the
pricing mechanism that it is—yet another instance of
the recursive revisability of such systems. As such, and
because it is itself priced and traded on derivatives
markets (enabling gains to be made while the markets
for the underlying derivative make losses), implied
volatility explicitly demonstrates the reality of the
financial risk-order. It is an endogenously constituted
measure of the rationality and constructedness of the
system in and by which it is manifest. What is impor-
tant in this result is that volatility is ‘not a datum’;
rather, ‘it refers to the future’, to the inactuality that
constitutes the uncertainty of pricing qua risk order.
For Esposito, this means that volatility measures only
‘what the changes in the expectations of the operators
95. Ibid., 139.
728
Collapse 8.indb 728 27/11/2014 15:40

about these movements are’ and affecting the latter as

part of its reality.ÒÀ
Esposito’s systems-theoretical account of derivatives
pricing surpasses the constraints of the  model,
positively capturing price volatility as a direct and
necessary effect of pricing via the notion of coun-
terperformativity, exposing that derivative pricing
instantiates the kind of minimal continuity between
time binding and social binding typical of risk-order
societies. In short, it shows that risk ordering is intrinsic
to derivatives pricing. In these terms, the  model
is a mistaken because unilateral determination of
the integrated sociotemporal constitution of price.
A more complete account of derivative pricing requires
that it be apprehended as at once a political economy:
the market endogeneity of derivative pricing is at
once a complex form of time management and as
such a complex form of social organization. It is this
injunction that returns the overall argument back to
Nitzan and Bichler’s contention that capitalization
constituted via pricing is a political economy of accu-
mulation; but three further steps need to be taken in
order to make the two otherwise divergent theories of
pricing congruent.
Firstly, the immanent sociality of pricing for Espos-
ito is restricted to traders as the second-order observers
who make up the market, and does not extend to the
96. Ibid.
729
Collapse 8.indb 729 27/11/2014 15:40

COLLAPSE VIII
entire and universalisable social complex that is for

Nitzan and Bichler the purview of price as organis-
ing term for the ‘single quantitative architecture’ of
capital-power. In view of the latter, the endogeneity
of the political economy of market pricing must be
extended beyond the confines of its immanent social
determination. Secondly, Esposito’s entire theorization
revolves around the primacy of observers and their sys-
tematic intradetermination of price. is sociological
determination accords with the Neoclassical paradigm
in supposing traders’ subjectivity as the condition and
term of analysis, as indicated by Esposito’s reliance
on G.L.S. Shackle’s theorization of the uncertainty
of economics for the economic agent who relies upon
her or his imagination in entrepreneurial endeavors.ÒÌ
e argument of counterperfomative pricing is anti-
realist not just because of this assumed primacy of
the sociosubjective dimension, but also owing to the
theoretical basis of its constructivism: for Esposito,
the volatility of pricing demonstrates that the reality
of the derivatives market is indifferent and detached
from any referent exogenous to the derivatives mar-
kets: (i) volatility does not refer to a reality beyond
the system of observation, and (ii) even when it seems
to (with, say, the movement of prices putatively in
relation to an underlying), that exteriority qua real
97. See for example J. L. Ford (ed.), £me, Expectations and Uncertainty in
Economics: Selected Essays of G.L.S. Shackle (Aldershot: Edward Elgar, 1990).
730
Collapse 8.indb 730 27/11/2014 15:40

is in fact predicated on the (system of) observation

in its ontology, semantics, and rationality. As such,
volatility in this account is an index of what Quentin
Meillassoux has influentially called ‘correlationism’,
verging here on idealism.ÒÍ By contrast, for Nitzan
and Bichler, all market entrepreneurs follow the logic
of differential accumulation that is capitalization’s
98. Correlationism as Meillassoux defines it for noetic cognition is

not to be confused with the various correlations of derivatives pricing
structures, not least because the latter are derived on the basis of normalised
probability calculations whereas noetic-cognitive correlation is the putatively
ineliminable subjective structuring condition of knowledge, as instantiated
by second-order observers. For Meillassoux the noncorrelational real, the real
beyond thought that it yet comprehends, can only be determined by rational
thought to be entirely contingent—that is, without cause or reason—meaning
that the real of thought is only the contingency of the fact of thinking,
which contingency of the real is therefore its absolute condition (A¤er
Finitude, tr. R. Brassier [London: Continuum, 2008], Ch.3). Consequently,
it is Meillassoux’s noncorrelational realism that is schematically analogical
to the dyadic contingency of abstraction and revision structuring the
underlying of derivative structures even though its content is directly
contrary to it. On the basis of the anticipatory pricing model, Meillassoux’s
‘Principle of Insufficient Reason’—that the unique and supreme necessity for
thought of the absolute contingency of the real means that nothing of the
real is necessary, including physical laws—can be characterised as rational
thought’s determination of the real as having the Markov property of
memorylessness. But the analogical coherence of the two schema should
not belie their substantial divergence: while anticipatory financial models
of speculative pricing delimit the contingency of the price of the underlying
by probabilistic normalization, for Meillassoux the absolute contingency
of reason prevents the establishment of an upper-bound or circumscribed
set of possibilities necessary to establish probabilistic calculation
(A¤er Finitude, Ch.5).
For a relatively nontechnical introduction to financial correlations and
their central role in the structuring of the collateralized risk portfolios
central to the 2008 financial crisis, despite recognition of their theoretical
failure as well as that of delta-hedging in the ‘correlation crisis’ of May 2005,
see P. Triana, Lecturing Birds on Flying: Can Mathematical eories Destroy the
Financial Markets? (Hoboken, NJ: Wiley, 2009), Ch.4.
731
Collapse 8.indb 731 27/11/2014 15:40

COLLAPSE VIII
dynamic reordering. Determined by that logic, price

is ‘a calculable measure’ that is systemic, ordering, and
external to the subjective observation and action which
it shapes.ÒÒ Taking up Esposito’s words about implied
volatility, then, price ‘has its own objectivity to which
one can refer’, one that overdetermines the trader’s
subjectivity: the objectivity of its market-endogenous
constitution. As Esposito proffers in passing, it is
necessary to deduce
a form of rationality that includes the volatility smile

and its consequences for markets. According to this
rationality, paper markets are not unreal, and their
operations are (o¶en) not irrational at all. We should,
however, find out what kind of reality and what kind
of rationality are at stake. ÚÚ
In terms of the systemic objectivity of pricing, such

rationality and reality are those of capital accumula-
tion’s finance power, but now determined as an objective
risk order. e systemic objectivity and logic of capital
accumulation then require a noncorrelationist theory
of derivatives pricing that accommodates both the
endogeneity of market making and the sociosubjective
dimension mandating Esposito’s constructivism. Such
a realist theory of pricing is at once also a theory of its

100. Ibid., 151.
732
Collapse 8.indb 732 27/11/2014 15:40

rationality, the latter term incorporating the dimension

of both power (from Nitzan and Bichler) and risk
(from Esposito). e required theory is therefore a real-
ist ontology of price qua rational risk order of capital
accumulation. As will be seen, it is this ontology that
permits the specific determination of finance power.
irdly, Esposito’s ‘pragmatic’ theory or practice
of time qua freedom upon which the theory of risk is
constructed supposes and requires that the present is
only actual and the future wholly inactual, the two
remaining firmly distinct. In this theory, any derivative’s
price is the price of ‘today’s risk’, risk in the ‘present
future’, strictly distinct from a ‘future present’. Implied
volatility is for her ‘the projection of the future from
the considered present’, and risk the anticipation of the
inactual future present as a distinct present future. Ú
Consequently, even if derivative pricing qua différantial
temporization is partially comprehended within the
constructivist account of derivatives markets qua the
reflexivity of time binding and the risk order it inaugu-
rates, the differential organization of that pragmatism
(and its counterperformative freedom) remains an
attenuated if complex and recursive form of presentism.
As such, it is inadequate to the différantial organization
of derivative pricing that is the mechanism for the rela-
tion between the actual and the inactual in Esposito’s
theory of present pricing of risk as ‘management’:
733
Collapse 8.indb 733 27/11/2014 15:40

COLLAPSE VIII
if ‘the future is not the present future or the future

present, but the difference between the two’, Ú§ then the
pricing of risk by derivatives ‘manages’ the future qua
inactuality in the present. e present/pricing is then
no longer present to itself, but is deferred from itself qua
futurity. What is deferred from the present in pricing
risk is the future: the uncertainty and inactuality that
the present maintains. Equally, risk is the present mani-
festation of future uncertainty and, as such, displaces
the actuality of the present into an inactuality within
the present. Possibility, the freedom occasioned by the
distinction in kind between actuality and inactuality in
time binding, is then granted by différantial temporiza-
tion. But différantial temporization also immediately
constrains possibility, not because of the limitations
of the given actuality of the present but because the
constitutive imbrication of future and present means
that the future present is not wholly distinct from the
present. at is, possibility and the freedoms of the
present are constrained because the deferral of the
present future from itself opens to the future present
in the present (which intrinsic condition is also why
there can be a present future at all). In the complexity
of the partial indistinction of present and future that is
the temporization of both, possibility cannot be wholly
distinguished from actuality; freedom qua possibility is
granted by the circumstances of the present. e real of
102. Ibid., 127.
734
Collapse 8.indb 734 27/11/2014 15:40

derivative pricing is its actual-inactual temporization,

a liberation from the present in priced risk.
Given the minimal continuity of the integrated
sociotemporal binding that is risk order, the three
redeterminations of derivatives pricing remarked here
are coextensive: the real of différantial pricing is that of
the noncorrelational real of endogenous pricing in its
systemic and objective logic of differential capitaliza-
tion. Elaborating the three redeterminations of risk
order in reverse leads to the explicit formulation of this
comprehensive identity of the real of derivative pricing,
which is in fact finance power in its dual dimensions of
financial operations and the a priori of capitalization.
.  
e price of an asset in capitalization is only a finan-

cially formulated magnitude of anticipated earnings.
e contention here is that derivatives pricing dilates
and makes explicitly manifest the process of that for-
mulation and, insofar as the underlying asset is only a
contingency upon which that process is occasioned, its
primacy for capitalization. While constraints may be
imposed on derivatives construction by jurisdictional
authorities regulating contract law, such pricing con-
struction is anyway constructed qua legally-binding
arrangement. Consequently, regulatory regimes per
se are not an external obstacle to the structuring of
735
Collapse 8.indb 735 27/11/2014 15:40

COLLAPSE VIII
derivative pricing, but an implement determining

its construction. Put otherwise, derivatives construc-
tion and therefore pricing is variable without intrin-
sic or necessary determination as regards either the
mobilisation of the price differences it constitutes or
its time-binding. Limitations imposed on derivative
construction are wholly contingent and malleable (via
changes in regulation, or the invention of alegal or
quasilegal derivatives structures—or both, as with the
invention of swaps), structuring pricing by constrain-
ing their pathways in a dimension that is endogenously
constituted, differentiating, and universalisable thanks
to the contingency of its abstraction with respect to the
underlying occasions. e variability of derivative pric-
ing is only ever realised in locatable and circumscribed
contracts specifying particular pricing conditionality
and temporization structures.
Exotic options are an operational index of the
indefinite variability of derivatives pricing, yet they
are constrained by the requirements of the currently
prevailing standard model of capitalization. But this
standard determination, while dominant, is not neces-
sary. eoretically, the liberation of business from
its industrial determination by derivatives pricing
(to adopt Veblen’s terminology) is a dynamic power-
ordering that is simultaneously more extensive and
more intensive than the geospatial and industry-based
business variants of differential accumulation to which
736
Collapse 8.indb 736 27/11/2014 15:40

Veblen remains bound and from which Nitzan and

Bichler draw their analysis. It is more extensive because
the ‘single quantitative architecture’ of price, coupled
to the risk-rationality of derivatives pricing—as a claim
on earnings that are explicitly unknown, inactual, and
constituted by a futurity that is in principle uncon-
strained—means that financial pricing and claims on
earnings can extend transhistorically from the present
in which the contract is written to any moment in
spacetime, including all futurity, indefinitely (if the
legal structures are durable enough). And it is more
intensive because, to put the preceding point the
other way around, derivatives pricing is endogenously
constituted, meaning that the in-principle universal
extension of price is operationalised (i) across time (at
whatever scale), and (ii) in relation to an underlying
that is therefore fungible, a contingent conditional for
the organization of power qua price. Combined as
two aspects of the one instantiation of power-ordering,
the universal fungibility of the underlying in deriva-
tives pricing has its systemic correlate in the universal
fungibility of pecuniary assets in the dynamic reorder-
ing of capital-power—which can, for this reason, be
determined as a risk order.
e theoretical consequences extend to the con-
ceptual schema of derivatives pricing, in so far as their
in-principle indefinite variation requires a significant
divergence from Derrida’s determination of the logic
737
Collapse 8.indb 737 27/11/2014 15:40

COLLAPSE VIII
of différance, the elaboration of which requires a last

brief return to phenomenology. Unlike Husserl, for
whom there is but one single presence even though the
lived present as such is an ideal and never any factual
lived presence, for Derrida the present is necessarily
different from itself, the living present being no less
the simultaneity of the lived present idealiter (which
is infinitely deferred from being manifest as such) and
realiter. Ú¬ e infinite différance constituting the ideal
present takes place in the finitude of the real present.
e logic of différance is thereby exempted from the
opposition of finitude and infinitude. Furthermore,
because the ideal lived presence is no fact of lived
presence, its only manifestation is in fact the absence
of a lived present: death. Transposing the logic of diffé-
rantial temporization to the constitutive structuring of
derivatives pricing, Derrida’s summary of the relation
between the factual lived present and its supposed
ideality finds its direct analogue in taking the payoff
and (where it happens) the exchange of the underly-
ing at maturity not as the terminal point at the outer
103. J. Derrida, Speech and Phenomena and Other Essays on Husserl’s eory
of Signs, tr. D. B. Allison (Evanston: Northwestern University Press, 1973
[1967]), 99ff. For Derrida, the différantial constitution of the living present
in Husserl’s phenomenology is instantiated by the deferral of the ideality of
that living present (and that of the pure thought Husserl also relies upon)
as it is by the non-ideal present which is no less the living present in fact.
e living present is different from/to itself (ideal, factual) and is the fact
of its deferral. e Ideal living present—what the living present truly is
for Husserl—never appears in fact. It is a Kantian ideal, infinitely because
constitutively deferred from the presence that it ‘is’, a present that is then
necessarily different from itself.
738
Collapse 8.indb 738 27/11/2014 15:40

limit of the contract (its ‘expiration’ as the terminology

for options has it), but rather as one of its intrinsic
constitutive and structuring features:
only a relation to the expiration [Derrida: ‘my-death’]

could make the infinite différance of pricing [pres-
ence] appear. In the same blow, compared to the
ideality of the positive infinite, this relation to the
expiration [my-death] becomes an accident of empiri-
cal finitude. e appearance of infinite différance is
itself finite. Consequently, différance, which is noth-
ing outside of this relation, becomes the finitude of
the derivative [life] as an essential relation with its
expiration [oneself and one’s death]. Infinite dif-
férance is finite. Ú°
at is, the in-principle indefinite variability of différan-

tial pricing, including its expiration, is always manifest
in the ‘empirical finitude’ of its pricing, which is the
theoretical corollary to the volatility smile: maturity/
expiration, which is the constitutive deferral of dif-
férantial pricing, is but one variable amongst others
in pricing. In philosophical convention: the tempori-
zation of différantial pricing up to and including its
termination is immanent to pricing. Ú¿
104. Derrida, Speech, 102.

105. Once constituted, derivatives markets can be conceptualized as a field
of immanent differentiation, for which Deleuzian categories and dynamic
schemata provide productive theorization especially of the dual deployment
739
Collapse 8.indb 739 27/11/2014 15:40

COLLAPSE VIII
However, the analogy is not a complete one. e logic

of différantial pricing diverges significantly from Der-
rida’s deduction of différance from phenomenological
consciousness for two reasons:
. Death and the absolute past are distinct from any
living (self-)presence of a consciousness because of the
unity and inexchangeability of that consciousness; ÚÀ
whereas there is no such constraint on the différan-
tial pricing of derivatives. In general, a derivatives
contract can be terminated before maturity/expi-
ration (for example, with American-style options).
e purported exchange of the underlying required
for the structure of the particular derivatives contract
and, historically, to distinguish derivatives trading
from gambling, is only a conditional term providing
of the actual and inactual, the latter being translated in Deleuzian

convention to the virtual, which together compose the real—the latter being
contrasted for Deleuze to the possible. See B. Lozano, Of Synthetic Finance
(Abingdon: Routledge, 2015) and Elie Ayache’s characterisation of the
market a ‘pure becoming’ (e Blank Swan [Chichester: Wiley, 2010], 39).
Such accounts however presume and neglect the constituting deferral of
the strike price or expiration at maturity as ordering term of the forward
contract, ordering it instead as an inactualized virtuality of the market and
thus susceptible to the criticisms put to Esposito’s systems-theorization and
the BSM regime, upon which such theorizations tend to depend. Jakob
Arnoldi hybridises Deleuzian and systems-theoretical notions of the virtual
as a space of calculative probabilities distinct to the possible in ‘Derivatives:
Virtual Values and Real Risks’, eory Culture Society 21:23 (2004), 23–42.
106. e condition of the unity of consciousness is not limited eidetic
phenomenology. at consciousness has a primary unity is proposed in
cognitive neuroscience by omas Metzinger, e Ego Tunnel (New York:
Basic Books, 2009). Ch.2, and for semantic inferentialism by Robert
Brandom (Reason, Ch.2), for whom it is a condition of philosophy and
sapience (see n.133).
740
Collapse 8.indb 740 27/11/2014 15:40

the terms for the contract’s payoff and determining

its market price. e time to expiration is, in other
words, but one variable among others in the finite
construction and pricing of the derivative and its
trading. Consequently, the endogenous différantial
pricing of any particular derivative, constructed in
its finitude thanks to its contractual boundedness,
is intrinsically imbricated with its market pricing,
which is its exchangeability in advance of its matu-
rity. In distinction to Derrida’s phenomenological
commitments, the finitude of the différantial tempo-
rization of the derivative contract is constituted in
its exchangeability.
. Since this means that the market is not outside
of the endogenous construction of derivative pricing,
a derivative’s expiration/maturity is one variable in the
more general revisability of derivatives market pricing
and their concomitant contingeny. is is to reiterate
once again that derivatives are constituted in the institu-
tions of différantial pricing (derivatives markets); but
it also makes explicit that the finite temporization of
pricing is necessarily imbricated with market trading.
e contingency of revision characteristic of deriva-
tives pricing supervenes on the terms of the contract’s
expiration, which determine its finitude. Consequently,
if the expiration and payoff are but variables of dif-
férantial market pricing, the temporization of pricing
is not constrained by its finitude qua termination of
741
Collapse 8.indb 741 27/11/2014 15:40

COLLAPSE VIII
the derivative at expiration/maturity, but rather by its

termination qua marketisation. is is the condition
and structure of speculative finance, now distinguished
from investment by operationally prioritizing market
pricing qua the contingency of its revision over its
termination in relation to the underlying (meaning the
provision of liquidity outside of the market upon expi-
ration/maturity). Moreover, because of the priority of
the contingency of revision for différantial pricing, the
only constraints for market speculation are regulatory,
rather than stemming from a putatively ‘real economy’
external to it. But because such regulations and the
institutionalisation of pricing that they permit and
impose are themselves as constructed, variable, and
subject to the contingency of revision as the pricing
mechanisms they regulate, unlike death for the living
consciousness the speculatively organized constraints
of derivatives pricing are not uniquely determined but
somewhat arbitrary.
Combining these two partial results, the specula-
tively-organised termination of the derivative via its
marketisation means that différantial pricing is consti-
tutively indefinite in two regards: firstly, the derivative
can be traded at any point up to its expiration; and, sec-
ondly, its price varies with the derivatives market, not
just that of the market of the underlying. Constituted
and instituted in the finite but also variable contractual
terms of any particular derivative, the price variability
742
Collapse 8.indb 742 27/11/2014 15:40

of différantial pricing is therefore intrinsically indefi-

nite. In this it diverges from the logic of différance
established in Derrida’s deconstruction of phenom-
enological consciousness, for which infinite différance
is finite and the différance of the lived present of con-
sciousness is in ‘an essential relation’ to its finitude qua
the unique termination that is its death: not only is infi-
nite différance finite for derivatives, finite différance is
also indefinite.
e two dimensions of variation for différantial
pricing—the price-setting schedule of the finite because
bounded contract, and its market price variability and
trading—are constitutive of one another: the indefinite
price-variability depends upon the variable finitude
of the contract (its expiration, the payoff schedule,
amongst other conditionals) and the speculatively-
organised variations in what a derivatives contract
might be are constructed with regard to their indefinite
market variability, not the payoff. is integrated
dual variability of the derivative contract with its
pricing constitutes the operational terms of the deriva-
tive’s price-endogeneity in its intrinsic contingency of
revision, which is here designated as the plasticity of
the derivatives contract. In practice, and to reverse-
engineer the argument, the plasticity of the deriva-
tive is the condition for the indefinition of derivative
pricing without which there could be no operative
market qua contingent repricing of derivatives, the
743
Collapse 8.indb 743 27/11/2014 15:40

COLLAPSE VIII
bounded pricing structures and schedules of which are

fabricated in view of that constitutive and endogenous
indefinition. Or, again, market pricing and trading is
the operational manifestation of derivatives’ intrinsic
operational contingency of revision.
at derivatives are constitutively rather than sec-
ondarily speculatively organised in their own markets
is demonstrated by the ‘closing out’ of positions. While
futures contracts require the buyer to take delivery of the
underlying asset at the expiry date, a trader speculating
or hedging on the futures market can exit the contract
by executing exactly the opposite trade to the initial
one, doing so at any time prior to the latter’s maturity.
e trader then has a long and short position on the one
trade, resulting in no net position at maturity. While the
position is then ‘flat’ and the delivery of the underly-
ing need not be made, the trader can still make a gain
or loss—or, more likely in the latter case, circumvent
anticipated greater losses—in futures prices over the
period. e vast majority of futures contracts are closed
out, with delivery of the asset being ‘relatively rare’. ÚÌ
744
Collapse 8.indb 744 27/11/2014 15:40

Illustration
e strike price for a futures contract in URB maturing in three

months is ¿Úlcu per share. A speculator takes a short position for
ÚÚ shares, locking in revenue of ¿ÚÚÚlcu at maturity (excluding
transaction costs).
A¶er two months, the delivery price of URB shares at expiration
is anticipated to be °Ìlcu at maturity. e trader anticipates a gain
of ¿Ú− °Ì = ¬lcu per share, or ¬ÚÚlcu on the contract, provided all
the shares are immediately bought at °Ìlcu at maturity.
e speculator guarantees such a purchase by going long on
ÚÚ URB shares priced at °Ìlcu with the same expiration date as
the original trade.
e trader then has a ‘flat’ position regarding the asset, trade in
one position cancelling out the trade in the other, yet gains ¬lcu
per share by closing out the deal.
If the spot price on maturity looks like it will be greater than the
delivery price (say ¿§lcu), the trader with the short position looks
to lose ¿Ú−¿§ = −§lcu per share on the futures contract.
Closing out the deal by going long with a strike price of ¿§lcu
gives more certainty to the net loss of §ÚÚlcu, rather than taking
the risk of an even greater effective loss by the anticipated rising
price of URB stock.
745
Collapse 8.indb 745 27/11/2014 15:40

COLLAPSE VIII
at more than one position is taken on the same

asset (and by the same trader) inflates the nominal
size of the market beyond its actual credit exposure.
is explains in part the operational causes for the
sizes of the financial markets that underpin Lesson
Two in the introductory comments above. In terms
of the general theory of capitalization, that Lesson is
instructive as a practical demonstration of the liberty
derivatives markets have with regard to the parochial
statutory limitations imposed on them at the historical
inauguration of the  in Illinois. Closing out makes
it quite explicit that the delivery of the underlying is
but a jurisdictional requirement to be circumvented—
one that is historically fundamental but operationally
trivial. It is one among other requirements structuring
the early derivatives markets and which, rather than
containing them by imposing a relation to the under-
lying, expanded them by liberating the endogenous
plasticity of derivatives pricing.
.  :
    
Closing out operationally demonstrates that the libera-

tion of différantial pricing from its exogenous referent
is tantamount to the delivery price of the underlying
being identified as a conditional within the derivative
pricing process rather than as being rooted in the
746
Collapse 8.indb 746 27/11/2014 15:40

markets of the underlying. is deracination from

exogenous markets is imposed, first, by the endogene-
ity of différantial pricing, which proscribes the exog-
enous referent from being anything but a variable of
the finite temporization constructed by the derivative
contract. And it is also imposed because, second, capi-
talization per Nitzan and Bichler is organised through
price qua ownership claims and derivative contracts
are only juridicofinancial constructions which build
in and make explicit the variability of the price over
the duration of the contract. at is, the price of the
underlying as object of capitalization on derivatives mar-
kets is determined not on the basis of prices exogenous
to those markets, but on the basis of the plasticity of
the construction, temporization, and market pricing.
at plasticity is the real of derivative pricing. Conse-
quently, the distinction between derivatives markets
and gambling is both operationally and constitutively
rescinded, as the institutional and regulatory develop-
ment of the derivatives markets demonstrates. What is
less directly evident from that history of institutional
practices, however, is that while derivatives markets
have in more or less attenuated ways formally observed
the distinction from received constructions of gambling
for regulatory reasons, they have also inaugurated and
massively operationalised an unprecedented mode of
the wager.
747
Collapse 8.indb 747 27/11/2014 15:40

COLLAPSE VIII
Derivatives pricing cannot be identified with conven-

tional notions of gambling, in that the standard wager
depends on an exogenous referent that is uncertain
at the time the wager is made (archetypically, the
throw of the dice) from which occasion the wager
itself (as an if-then payout conditionality) is distinct,
and which it cannot affect without vitiating the very
meaning of the term (archetypically, loading the dice),
a schema designated here with the term extrowager.
In the extrowager the gambler is constituted by her
or his necessarily limited knowledge of an inactual
future occurrence, a subjective manifestation of the
inadequacy of finite epistemology to ontology. In these
terms, the anticipatory  regime attempts to bypass
the constraints of the extrowager (the prohibition of
gambling), while observing them (the constitutive
exogeneity of what is priced to the pricing process
itself). e contention here is that, in formulating
options pricing as an extrowager, as derivatives typi-
cally are, the  regime apprehends and domesticates
the realist constitution and ontology of the wager
inaugurated by derivatives markets. is domestication
is reiterated in another format by Esposito’s systems-
theoretical account of derivatives pricing process as a
sociosubjective construction. Furthermore, however
prevalent and institutionally dominant such accounts
of derivatives pricing may be, the latter is distinct in
kind to the extrowager because of the constitutively
748
Collapse 8.indb 748 27/11/2014 15:40

endogenous operation of différantial pricing and its

concomitant indefinite plasticity. To be exact:
—It shares with the extrowager the exogeneity of the

underlying as condition of the derivative’s pricing
process.
—Yet différantial pricing is distinct from the extrowa-
ger in that the former is an endogenous operation
with an indefinite plasticity until expiration for which
the conditional exogenous referent is operationalised
as only a contingent abstraction of the pricing process.
Derivatives pricing is conditional upon whether the
set conditions at expiration will transpire or not, and,
if so, what the payoff will be.
—e price of the derivative itself as well as (indi-
rectly) the spot price of the underlying at delivery
are themselves then priced in their markets (and its
pricing is itself priced in the volatility markets); that
is, any instance of derivative pricing is a wager placed
not just in an indefinite betting process but also on it.
—Derivatives markets pricing is thereby akin to odds
lengthening or shortening on a bet according to what
other bets are placed. However, while the price of
odds changes for the extrowager according to what
other bets are placed, its changing odds and prices are
always in reference to the exogenous circumstances
conditioning the payout.
—In contrast, what is unprecedented about derivatives
749
Collapse 8.indb 749 27/11/2014 15:40

COLLAPSE VIII
pricing is that its plasticity explicitly subordinates

that external determinant for pricing to its own pro-
cess, such that the market refers to the changing
prices operationalised via that market.
—What is priced by derivatives markets, then, is the
pricing process itself. Unlike the extrowager, deriva-
tives pricing is an infrawager, for which the terms at
expiration are not externally determined conditionali-
ties but only parametric constraints.
Displaced to the activities of traders, the processual

and referential endogeneity of pricing is what Esposito
calls second-order observation. Its determination qua
infrawager, in contrast, explicates différantial pricing
as an impersonal institutional fact, rearticulating its
counterperfomativity in terms of the objective dimen-
sion of price. It is the real of derivative pricing not as
a sociology of derivative pricing but as the ontology
of all betting as a pricing process. Because the refer-
ent of the extrowager is the assumed condition and
terminus of the wager, it proscribes identification of
the endogenously constituted conditionality of the
derivative pricing process as well as the contingency
of abstraction with the underlying. is mistake is the
consequence of a more or less implicit correlationism,
the error of which is in fact exposed and operationally
negated by the explicit manifestation of the infrawager
in derivative pricing. Put the other way around, the
750
Collapse 8.indb 750 27/11/2014 15:40

operational and practical exposure of the infrawager

by derivatives markets is the historically unprecedented
liberation of both the wager as such and of price from
their assumed historical and theoretical subordination
to exogenous terms that are not, in fact, conditions
of pricing.
Commencing instead from the ontology of the
infrawager, as the logic of pricing requires, it is, in
Elie Ayache’s formulation, ‘easiest to withdraw’ the
underlying ‘from underneath the contingent payoff
and subsequently to claim that contingency is absolute
and no longer derivative on that state’. ÚÍ at is, the
derivatives contract is not predicated on the under-
lying but entirely on the indefinite plasticity of the
infrawager—including the price at expiration, which
is only a structuring parameter. us the real of the
infrawager, manifest and institutionalised as derivatives
pricing, consists solely in its twofold contingency: the
contingency of abstraction (the universal fungibility of
the underlying) and the contingency of revision (the
indefinite plasticity of différantial pricing). Establish-
ing that the infrawager is the endogenously-constituted
and -referencing real of derivatives pricing provides
the basis for the final steps to complete the present
argument; namely, to generalise the determination
of pricing beyond the specific institutional practices
108. E. Ayache, ‘e Turning’, in Wilmott Magazine, June 2010, 45, www.
ito33.com/sites/default/files/articles/1007_ayache.pdf.
751
Collapse 8.indb 751 27/11/2014 15:40

COLLAPSE VIII
of derivatives markets to price as such (its intensive

aspect) which, per Nitzan and Bichler, is the single
universal architecture of capitalization (its extensive
aspect). e two imperatives for this comprehensive
theory of price are, firstly, that it specify the articula-
tion of finance in its practical dimension (institutional
operations of capitalization via ownership claims) with
financiality (the a priori of capitalization); and conse-
quently, that the theory of price advanced must also
provide a specific determination of finance power and
thereby the primary characteristics of the state-finance
nexus and its cogency (however riven and incoherent
it may be in theory). It is Ayache’s theorization of
pricing that advances the generalisation of pricing
required here, thanks to its positive determination
of pricing as such as instantiating contingency qua
absolute futurity, thereby (to go beyond the terms of
Ayache’s own argument) specifying the mode of time
binding of capitalization not in the dimension of its
sociology but of the real of price that is its ontology.
.  
ough Ayache’s argument is not directly that of the

infrawager, his principal contentions are congruent
with it, namely (i) that forward contracts have no
price process shadowing a succession of prices out-
side of the derivative itself. Predicated instead on the
752
Collapse 8.indb 752 27/11/2014 15:40

contingency of the underlying as its real, (ii) the price

process given by the stochastic model and its elabo-
rations are ‘eliminated’. Consequently, (iii) the only
reality derivatives prices have is that of the long/short
position as the contract is re-entered (or not) every
day the market is open, and no less (iv) at expiration.
Ayache’s claims follow from the observation that the
real of the derivatives pricing process in the present is not
the ‘path’ of différantial pricing, which is the dynamic
actualisation of its temporization. Rather (and this is
what Ayache adds to the determination of the real of
derivative pricing) ‘what exists today’ for the forward
contract (here a metonym for the derivative structure
in general) ‘are contingent claims, paying or . […]
[B]oth belong to the world now and also to the world
“taking place”’. ÚÒ In addition to the contingency of
abstraction that is the universal fungibility of the
underlying of the forward contract, the derivative
is also contingent in that it posits a speculative ‘as-
yet-unknown’ eventuality. at eventuality does not
preexist the contract but is fabricated by it; the contract
constitutes it in its inactuality and unknowness. e
two outcomes are the ‘branches’ of two different reali-
ties only one of which will be actualized at expiration
because of the contract. It follows that the derivative
contract is, in Ayache’s terms, always a ‘contingent
claim’. e contingency identified by Ayache is one
109. Ayache, ‘Turning’, 41; emph. added.
753
Collapse 8.indb 753 27/11/2014 15:40

COLLAPSE VIII
that the derivative constitutes and inaugurates and, as

such, can be designated as its thetic contingency.
What this third contingency of the derivative consti-
tutes is its deracination, not with regard to the underly-
ing (from which the derivative is deracinated by the
contingency of abstraction) but rather the deracination
of price itself in the pricing process: it posits that ‘the
world is actually what it is in reality’—the derivative
has a particular price in fact—‘except that it could have
been different’—only one of the contingent inactuali-
ties is actualised, the other remains inactual. Ú etic
contingency is the necessary prerequisite of derivatives
pricing, in that ‘the contingent claim is only conceived
as the written formula that it is (pay $ if S is greater
than K, otherwise)’, and also that the endogenous
variability of pricing in the infrawager supposes price
not to be a fixed given but, precisely, revisable. Inau-
gurated and instituted by the derivatives contract, the
thetic contingency of pricing is endogenous, real, and
absolute for it.
is requires a revised determination of différantial
pricing. e thetic contingency of différantial pricing
means that:
110. Ayache, ‘Turning’, 36.

111. e quote is from E. Ayache, ‘e End of Probability’, Wilmott Magazine,
October 2010, 41, www.ito33.com/sites/default/files/articles/1011_ayache_0.pdf.
754
Collapse 8.indb 754 27/11/2014 15:40

—Derivatives are not just a counterperformative time-

binding of the present and the future in which the
deferring and displacing of the present into the future
prevents the actuality of the present from being
constituted as clearly distinct from the inactuality
of the future.
—What is to be added to that determination of deriva-
tive pricing qua temporization, is that the constitu-
tive futurity of the différantially organised present
of risk pricing is that of the splitting of the future
payoff—that is, the thetic contingency inaugurated
by the derivative contract.
—at eventuality is endogenous to the pricing pro-
cess, absolute yet presently unknown. e only rela-
tion to it in any present is speculative.
—e time-binding of derivatives pricing is conse-
quently a constructed relation of the (thereby deraci-
nated) present to the contingency of the split future,
which will be both actualised and (with the eventual-
ity that does not transpire) inactualisable.
—e logical a priori of the derivatives contract
in the present is the absolute futurity of its thetic
contingency.
—at is, to vector Esposito’s formulation of the risk
order across the dimension of the real of pricing: the
inactual dimension of the present of pricing (risk) is
ineliminable, even in any future present. e present
can never be determined as a full actuality, not even in
755
Collapse 8.indb 755 27/11/2014 15:40

COLLAPSE VIII
the future present; what is real to derivatives pricing

is an absolute future that it endogenously constitutes.
e future present is therefore itself susceptible to

revision in the way Esposito describes, as integral
to a social binding permitting the future revision of
decisions made today, but now with regard to the real
of the infrawager. e logical a priori of the contract
in the present is the absolute futurity of its thetic
contingency. Consequently, the deferral of derivatives
pricing is not that of a durational extension of the
present (that would be the anticipatory formulation)
but an irreconcilable and endogenous splitting of the
present. at thetic, futural contingency occasioned
in the present is the precise sense in which pricing is
necessarily counterperformative: it is the positing of
a future supervening on any continuity of the present,
a futurity that is absolute for différantial pricing. In
Ayache’s words, the thetic contingency of the forward
contract is the ‘real thread of the future’ in the present
qua pricing, up to and including its payoff. §
As the absolute of derivatives pricing, thetic contin-
gency is the truth of its counterperformativity. Conse-
quently, three preceding determinations of derivative
pricing need to be revisited, the third of which is taken
up in the next section.
756
Collapse 8.indb 756 27/11/2014 15:40

Anticipatory pricing. Future prices cannot ever be pre-

dicted or anticipated, because the delivery price qua
conditionality structuring the derivative ‘collects as one
writing the two branches of the alternative incompat-
ible in actual reality’. at is, the pricing process is
inaugurated by positing a split futurity that then not
only refutes but also vitiates the possibility of antici-
pation qua extension of the present. ¬ Which means
that anticipatory models of actual price movement,
including but not restricted to , are only retrofit-
ted elaborations, provided at maturity, of how the
strike price was supposed to have been reached. e
counterpossibilities to the actual price development
of the derivative are, qua probabilities, only idealized,
retrofitted reconstructions of a futurity; while once
real in their inactuality, they were never actualised.
Such counterpossibilities are a consequence of the
absolute futurity of différantal pricing: just as the
future present of différantial temporization is itself
revisable because it too is constituted by the absolute
thetic contingency of the real of the infrawager, so
the past that determines the present as its actual yet
revisable future is itself saturated with the unactual-
ised eventualities of the past, of yet-other-futures for
the past that are not the present from which they are
apprehended. ese past inactualised eventualities are
only fictive idealizations in that they have not in fact
113. Quoting from Ayache, ‘Turning’, 41.
757
Collapse 8.indb 757 27/11/2014 15:40

COLLAPSE VIII
been actualized and, unlike future inactualities, they

remain perennially inactual given that actuality turned
out to be the present from which they are surmised.
at is, they are only possible, never real. Furthermore,
with derivatives pricing,such past inactualities cannot
be predicated on an absolute past in counterpoint
to its endogenous absolute futurity because, being
logically predicated on that futural contingency and
historically inaugurated by the contract, the a priori
of the pricing process cannot precede it in time. Or,
as Ayache puts it, the anticipatory articulation of the
price process always and necessarily comes ‘a¶er reality,
not before’. ° Inversely, mistakenly presuming that
derivative pricing takes place against a stable time
background rather than instituting a temporization
of contingent futurity, the probabilistic calculation
of price development assumes that ‘possibility pre-
cedes reality and that the different possibilities facing
the world become realized as time passes’. ¿ As such,
retrospective-anticipatory pricing regimes—which take
derivatives pricing to be strictly secondary to price
movements and actualities elsewhere—repudiate the
futural contingency that is the real of derivative pricing.
114. Both quotes in this paragraph are from Ayache, ‘Turning’, 37.
115. is is not to refute any and all manifestations of probabilistic
formulations of pricing of contingent claims. Ayache supports the ‘episodic’
deployment of probability and stochastic control in the trader’s daily market
interventions (‘Probability’, 42).
758
Collapse 8.indb 758 27/11/2014 15:40

Volatility. Previously designated as volatility, the endog-

enous thetic contingency of derivative pricing can
now no longer only be rendered by its ‘implied’ deri-
vation by which, recall, it can only be reconstructed
consequent to its preclusion by the constraints of
anticipatory pricing models (), or as an effect of
the reflexivity of derivative markets as a risk-order
(Esposito). Rather, volatility is the absolute of deriva-
tive pricing: there is no derivative pricing without
the splitting of the real of price into unknown actual
and inactualisable futures; without, that is, a futural
contingency that, in the endogeneity of the derivative
market pricing, is instantiated in the indefinite plastic-
ity of the infrawager. at contingency of revision is
however actualised only by virtue of the operations of
derivatives markets: the actuality of derivative pricing
is, precisely, its price, instantiated nowhere else but
in the dedicated market of the particular derivative.
Consequently, ‘the reality of the whole market worms
its way into every attempt that possibility undertakes to
precede the real’. À e real of derivative pricing is then
endogenously constituted and actualized in its plastic-
ity as a marketised futural contingency. While this is a
familiar result, reiterating in other terms that derivative
pricing is volatile because it is counterperformative,
the formulation advanced here makes explicit that
the ontology of price qua différantial temporization
759
Collapse 8.indb 759 27/11/2014 15:40

COLLAPSE VIII
is necessarily predicated on an absolute futurity. at

is, what is realized in every instantiation of derivative
pricing is a volatility that is absolute for it.
e thetic contingency of an ineliminable futurity
that splits the present—the absolute futurity inaugu-
rated in différantial pricing—is the real of derivative
markets. e innocuous account of the derivatives
market as ‘the place where contingent claims get
prices attached to them’ Ì—a put must be met by a
call, a short position by a long position—is a prel-
ude to the comprehensive determination of market
operationality as the endogenously constituted mate-
rial occasion—the institution—by which the futural
contingency of derivative pricing is actualised and
manifest with each reiteration of pricing. As condi-
tion of the plasticity of derivatives pricing, the market
is the material topology—more exactly, given that
in the technical vocabulary of the market, the put
option is said to be ‘written’, it is the toposcription—of
the absolute volatility that is the actualisation of the
futural contingency of derivative pricing. A number of
equivalent formulations follow: necessarily instantiated
in the derivatives market, the futural contingency of
derivatives pricing requires its dynamic yet metastable
toposcription, meaning that ‘only the market preserves
contingency in the present’; Í or, as Ayache puts it
117. Ayache, ‘Probability’, 42.

760
Collapse 8.indb 760 27/11/2014 15:40

elsewhere, the market is ‘the medium of contingency’. Ò

Emphasising the endogeneity of pricing, ‘the market is
its own source of contingency’; §Ú emphasising instead
the absolute volatility instantiated by that institutional
toposcription, market pricing can be characterised as
a ‘technology of the future’. §
To be clear, and to draw the argument back to the
broader political economy of derivatives markets: the
‘preservation’ of contingency by derivatives markets,
its technology, is necessarily contrary to stability. e
ontology of these market institutions is predicated on
119. Ayache, ‘In e Middle of e Event’, in R. Mackay (ed.), e

Medium of Contingency (Falmouth: Urbanomic, 2011), and ‘e Medium
of Contingency’, Pli 22, 2011, 62–87. While market pricing is a medium of
contingency, following Nitzan and Bichler it is also at once the medium of
power. e implied codetermination of contingency and power via price
is explicated in §11.1 below. e subordinate point is that, determined
as these mediations, finance theory is a variant of media studies. Vogl
similarly proposes that finance demonstrates the general characteristic of all
media, that they ‘communicate themselves in their operation’ as well as the
communicated ‘content’, in this case because the control over the contingent
future sought by finance is betrayed by the ‘time-critical processes’ that
finance markets are (‘Taming Ùme: Media of Financialization’, tr. C. Reid,
Grey Room 46 [Winter 2012], 82). However, Vogl’s argument obviates the
primacy of volatility in the pricing of risk and, following Keynes, also
predicates the contingencies generated by market pricing on time distinct
to the ‘control’ of price. Ayache’s and Esposito’s otherwise divergent theses
are, rather, that the temporization of market pricing is constituted by the
latter’s contingencies. at is, the market is a medium of contingency and
consequently a medium of time qua futurity. Still opaque, however, is what
that futurity is with respect to both the contingency and power it posits, and
this is what §11.2 below elaborates.
121. E. Ayache, ‘e Next Question Concerning Technology. Part 1: e
Significance of Dynamic Replication’, Wilmott Magazine, June 2007, 33 [www.
ito33.com/sites/default/files/articles/0703_nail.pdf].
761
Collapse 8.indb 761 27/11/2014 15:40

COLLAPSE VIII
the absolute volatility (thetic contingency) and indefi-

nite plasticity (contingency of revision) of derivatives
pricing that together constitute such markets as risk-
orders. Locating the instantiation of pricing identifies
the market as the sociotechnical condition—the institu-
tion—for the contract-exchange that determines price
on each occasion. Ayache literalises that condition as
the trading pit for options, whereas Esposito notes
that derivatives markets are, amongst other markets,
now geospatially ‘distributed […] as a ubiquitous form
of calculation and reasoning’, in accordance with the
weakening norms of jurisdictional authority in the
geospatially attenuated institutional forms of the risk-
order. §§ Furthermore, and to begin the redetermination
of the contingency of abstraction that will be taken up
more fully in the next section, since derivative pricing
is liberated from any intrinsic or necessary relation to
the underlying, and given that there is no ‘cause’ for
the contingency of pricing outside of the endogenous
pricing process, for Ayache that contingency is instanti-
ated primarily by the existential participation of the
derivatives trader in the pit who, in Badiousian fashion,
is subjectivised by its eventhood §¬—a singularisation
effected, without standing in complete contradiction
to Badiou’s philosophy despite the theoretical-political
incongruity with it, as a personalized embodiment

123. Ayache, Blank Swan, §4.3.1–2.
762
Collapse 8.indb 762 27/11/2014 15:40

of the second-order observer who is Esposito’s sys-

temic agent. But such determinations are again epi-
phenomenal and inadequate precisely because they
are subjectively organised rather than determined by
the logic of differential capitalization. Against such
correlational determinations, the real of différantial
pricing that is the absolute volatility of the infrawager
must rather be apprehended in terms of its impersonal,
socio-institutional ontology. Taking up that injunction,
as the next section does, provides the argument for
determining the ontology of price in general to be the
real of derivative pricing, a result that in turn permits
the operational and a priori dimensions of finance to
be coarticulated without subreption.
.   , , 
at volatility is the absolute of derivatives pricing

does not revoke the delivery price as a constitutive
conditionality for that process. ere can be no deriva-
tives pricing without the delivery price as a structuring
parameter. Moreover, in Ayache’s formulation, only at
the expiration of the derivative pricing process is ‘the
contingent claim really derivative on its underlying
because its price is then settled and rigorously equal
to that function of the underlying called the payoff’. §°
at is, maturity/expiration is the one point at which
763
Collapse 8.indb 763 27/11/2014 15:40

COLLAPSE VIII
derivative pricing is convertible to the price of the

underlying asset, a moment conventionally called
the valuation of the contract and thereby of the pric-
ing process. In Ayache’s terms, valuation is when the
‘underlying’ of the derivative transfers from the paper
on which the contract is written to the asset, a figura-
tive articulation of the conversion of the endogenous
plasticity of the pricing process to its determination by
the price of the exogenous referent in its own market,
a determination cashed out as the payoff. Valuation
is the completion, exhaustion, and conclusion of the
pricing process.
Because valuation is determined by the difference
between the delivery price and the strike price at
expiration, the former being a static structuring con-
ditional of the pricing process while the latter is also
set in the market of the underlying asset, it seems
that valuation is an external, structuring boundary
condition for derivatives pricing. e institutional
distinctions between derivatives markets and those of
the underlying assets (when the latter are nonfinancial)
confirm the exteriority of valuation to the plasticity of
derivatives pricing. Yet price volatility is operationally
generated by activity in any market, including those
trading assets to which the derivatives refer (§´ above)
and, theoretically, determined as it is by the difference
between delivery and strike prices, the valuation of a
derivative is precisely what is itself priced and varied
764
Collapse 8.indb 764 27/11/2014 15:40

by derivative markets. As such, valuation is an internal

boundary condition to the derivative pricing process
even as it conditional on the price of the underlying
asset in its own market. e valuation of the underlying
is, as Ayache puts it, ‘dictated by the programmatic
character of the payoff schedule’. §¿
At best, then, valuation is determined on the one
side in relation to the price of the underlying in its
own market or, on the other, by an internal boundary
condition for derivatives pricing. e two sides are
constitutively and institutionally distinct and, as such,
the determinations of valuation are in opposition. But
they are not incoherent or contradictory; nor can the
ambivalence of valuation be settled by a more exacting
analysis. In Derridean terms, valuation is a supplement
to derivatives pricing, a term held to be outside of the
derivatives pricing process but structuring it as a condi-
tioning origin, principle, or terminus, yet which in fact
is only stipulated as an extrinsic determination by that
process (for example, for Husserlian phenomenology,
the lived present is a supplement of what is in fact a
differentially constituted present). at supplementary
condition is what permits différantial pricing to be
subordinated to the anticipatory regime of pricing,
which is premised on valuation; and what permits the
infrawager that is the real of price to be correspond-
ingly determined as an extrowager, in which the real
125. Ibid., 47
765
Collapse 8.indb 765 27/11/2014 15:40

COLLAPSE VIII
of pricing is its exogenous referent (in the case of

derivatives, the price of the underlying asset). Equally,
however, if derivative pricing is instead predicated on
the infrawager and its différantial logic as its real, as
has been established here, then the supplementary
condition loses its prerogative over the pricing process
and must instead be determined in terms of its real.
To anticipate the next steps of the argument, and
without confusing the specific meaning of derivatives
valuation with the generality of value as such, what this
‘supplementless’ determination of valuation means is
that (i) value is in every case an exogenous cipher for
pricing, and that (ii) price is in every instance predi-
cated on its absolute volatility, including the price of
the underlying in its own market. e argument on
value follows from that on price, which is itself a gen-
eral theory deduced from the comprehensive theory
of derivative pricing:
—Valuation is the conversion of the derivative at expi-

ration/maturity in its own market to another market
in which the underlying is priced. In valuation, the
pecuniary magnitude of the derivative contract payoff
is exchanged in its equivalence qua price for the asset
in its own ‘primary’ market.
—‘Equivalence qua price’ across markets supposes the
commonality of price for both the derivative and the
asset as pecuniary magnitudes. And because value
766
Collapse 8.indb 766 27/11/2014 15:40

is the conventional term for the conversion point of

one market to another via price (as discussed further
below), price itself then being determined as a value
because of its exogenous referentiality across markets,
‘valuation’ is the appropriate conventional term to des-
ignate this moment in the derivatives pricing process.
—e valuation of the derivative and therefore of the
underlying asset is, however, at once priced by the
derivatives pricing process itself and, qua volatility,
modified by it. Furthermore, valuation cannot be
recused from derivative pricing without mistakenly
limiting derivative pricing to the standard format
of the extrowager—an extrojective circumscription
that is in any case proscribed by the logic of the dif-
férantial constitution of the infrawager, according to
which the identity of terms cannot be preestablished.
—at is, if valuation is an exchange predicated on
prices, this now means that the putatively exogenous
referent of the derivative’s valuation—the price of
the underlying in its own market—is not in principle
distinct from price as it is constituted by différantial
pricing. If it were so distinct, derivative pricing would
be inequivalent to price in the markets for the under-
lying, vitiating valuation in particular and derivative
markets in general, as well as fracturing the ‘single
quantitative architecture’ of pricing in capitalization.
—For this reason, valuation as the conversion point
from one pricing process to another is constituted by
767
Collapse 8.indb 767 27/11/2014 15:40

COLLAPSE VIII
and manifests the two contingencies—thetic (absolute

volatility) and revisability (plasticity)—of derivative
pricing. As such, and as already noted, valuation is
an internal structural conditionality of the derivative
pricing process. But ‘internal’ now indexes only its
institutional formats: the exchangeability of deriva-
tive pricing with prices outside of derivative markets
via valuation means that the infrawager is the struc-
tural and ontological condition of price per se; and
the absolute volatility of derivative pricing is the
absolute of price within and outside of derivatives
markets.
—e price of the underlying is thus institutionally exter-
nal to derivatives markets, but constituted in their logic.
Or, inversely, derivative pricing exposes and makes
institutionally and operationally manifest the general
condition of pricing as such. Extending outside of
the specific institutions of derivatives markets to
the fact of price as such, the différantial ontology of
derivative pricing is the real of price per se.
On the basis of that general theory, Ayache’s char-

acterisation of the absolute volatility of derivative
pricing, that the ‘written and material character of the
contingent claim repeats that value is in fact unset-
tled and that it could have been different (i.e., it is a
price)’ holds even for prices outside of the derivative
768
Collapse 8.indb 768 27/11/2014 15:40

markets. §À More broadly, it is intrinsic and necessary to

the valuation of derivatives that all prices ‘could have
been different’ because any price means that another
price could have been given thanks to the plasticity
and absolute volatility of pricing.
Value
ough this means that price is in general predicated
on the real of derivative pricing that is the infrawager
and its dyadic contingency, the supplementary deter-
mination of valuation persists in the primary sense
informing the term ‘valuation’: that price reflects value
(or, at least, it should). As noted above, the value
of derivative pricing is its payout, occasioned in its
putative exchange for the (price of the) underlying, at
which point the derivative pricing process vacates the
operating logic of the infrawager and converts into a
mercantile exchange; as the terminology for options
has it, derivatives and their markets expire when they
are exchanged for the underlying asset. More gener-
ally, value is the exogenous determination of pricing
which, in the standard determinations of Neoclassi-
cal and Marxian doctrine, also anchors it—the very
same conversion of pricing that was operationally
imposed by the regulators of the early . Formally,
the argument against the priority of value over price
follows quickly from its différantial logic: what is
769
Collapse 8.indb 769 27/11/2014 15:40

COLLAPSE VIII
conventionally supposed as the condition and referent

of price is in fact constituted and deconstructed by
the latter. Price deconstructs value, and that decon-
struction is explicitly manifest in derivative pricing.
Substantially, the endogenous constitution of price
qua infrawager means that the value-referent of price is
not established on the basis of circumstances external
to the relevant market such as trade, scarcity, demand,
use, labour, or any other determinant external to pric-
ing, all of which beg the standard economic question
of how these heterogeneous nonpecuniary conditions
and specificities can be commonly calibrated via pecu-
niary magnitudes. §Ì As closing out and the universal
127. In obviating even the means of means of production as a prerequisite

of pricing, this result goes farther than Ian Steedman’s conclusion that ‘in
general, profits and prices cannot be derived from [Marx’s] ordinary value
schema’ but rather only from the ‘physical schema’ of physical production
and labour costs’ (‘Value, Price and Profit’, New Le¤ Review I.90, March-
April 1975, 78). Marxist criticism of Steedman’s argument focus on the
formal idealizations of the static model of production Steedman inherits
from Piero Sraffa’s Production of Commodities by Means of Commodities (1960).
While Steedman and Saffra both present NeoRicardian critiques of Marxian
value-theory, recuperating the division in kind between price (exchange,
distribution) and value (production, labour), with Steedman dispensing
with valuation as a necessary mediation between labour and price, the
claims of the main argument here correspond more to Samuel Bailey’s 1825
criticism of David Ricardo’s derivation of value on the basis of labour rather
than in terms of exchange alone.
For Marxism, all such results can only be errors: Marx’s primary theoretical
contribution is the synthesis of production/labour and distribution/
exchange with his labour theory of value in Capital 1: that theory is not an
account of the generation of value by labour alone (Ricardo’s thesis) but
of labour as an abstract social form constituted by exchange determined
in its universal instance by money. Bailey’s thesis is that such exchange is
the common term of value. As I.I. Rubin remarked in the 1920s, given the
dialectical unity of labour as a social form (exchange) and concrete action
770
Collapse 8.indb 770 27/11/2014 15:40

COLLAPSE VIII
fungibility of the underlying make explicit, the opera-

tion and dynamic of price in derivatives markets are
(labour), any separation of its aspects is only a mistaken hypostatization

of its comprehensive constitution (‘Abstract Labour and Value in Marx’s
System’ tr. K. Gilbert, Capital and Class 5 [Summer 1978]). Rubin’s
resolution however also throws up its own difficulties on how exactly values
then change between the input and output of a production process, and
how they are converted to prices. e latter is known as ‘the transformation
problem’ and was addressed by Marxist theorists countering Steedman’s
result by insisting mainly on the intratemporality of value-development and,
with regard to price, the dialectical integration of value via the commodity
form, constituted on the one hand by labour in its concrete instance (as
the yet-to-be-realised form of value, its substance in Hegelian terms) and,
on the other, by exchange (as the realized form of value or, per Hegel, its
appearance), with money as the (universal) abstract equivalence of value in
general (see in particular E. Mandel [ed.], Ricardo, Marx, Sraffa [London:
Verso, 1984]; G. Carchedi, ‘e Logic of Prices as Values’, Economy and
Society, 13.4 [November 1984]; A. Freeman and G. Carchedi [eds.] Marx
and Non-Equilibrium Economics [Cheltenham: Edward Elgar, 1996]; and A.
Freeman, A. Klimam, J. Wells [eds.] e Value Controversy and the Foundations
of Economics [Cheltenham: Edward Elgar, 2004]).
While the argument of the main text here is congruent with the Marxian
criticism of both Bailey and Ricardo as wrongly restricting the formulation
of valuation to either exchange alone or labour alone, it also diverges from
Marx’s explanation of valuation in general as the dialectical integration of
these determinants in the commodity-form. What is instead proposed here
is that valuation is but pricing in its exogenous conversion. Contrary to
what Marx takes from Ricardo, labour then has no particular privilege in
constituting value; and contrary to what he takes from Bailey, exchange
only involves values as exogenous referents for the mobilization of prices
that set the market, not as the ontogenetic condition of prices. On this
basis, the extension of valuation to the ‘physical schema’ of production is
not only theoretically trivial, it is necessary: if labour is value-constituting
it is not because it is simultaneously constituted by the general social form
of value in exchange and concretely constitutes value in particular. Rather,
labour is value-constituting only because it is priced. Moreover, with
regard to exchange, it is on this basis that market exchange at whatever
scale (from individual bartering or obligation) has to be taken as a modality
of pricing rather than the latter developing from the former (as per Adam
Smith). Constituting valuation with regard to labour as a primary category,
as Marx(ism) does, not only misapprehends valuation and therefore what
labour is (the prevalent mistake of political Marxism), it also explains how
and why dominant capital-power is not thereby troubled.
772
Collapse 8.indb 772 27/11/2014 15:40

overtly liberated from these exogenous determinations

irrespective of whether they are cast subjectively (in the
Neoclassical paradigm) or objectively (in the Marxian
paradigm).
In other words, given the contingency of abstrac-
tion as a condition of price in relation to value, price
in general is not an epiphenomenon or overcoding of
values that preexist it, nor an order of marketisation
imposed upon them. Rather, in the condition of capi-
talization, price is the precondition of valuation. at
is, the condition for the variability, transformation,
and equivalence of value—the intrinsic mobility and
multiplicity of values synchronically or diachroni-
cally—with regard to price is not value, but pricing.
As such, price has no intrinsic value. And because value
has no basis outside of the pricing process determined
as the infrawager constituted in its triadic contingency
(thetic contingency together with the contingencies of
revision and abstraction), value has no intrinsic value. §Í
Value is not then a condition or necessary limitation
on pricing and therefore on capitalization, as a real
other to them, but only one of the assigned variables of
128. e three main ideas of Nietzsche’s later philosophy from the period
of composing the Zarathustra book (1880s) onwards—the will to power,
the revaluation of all values, and the eternal return of equivalences (as an
idiomatic translation of ewige Widerkehr des Gleichen)—can then be identified
as variants of the deconstruction of value by price. In rendering the
transmutation of valuation in terms of the philosophico-religious traditions
of moral value-formation and their modern weakening, Nietzsche correctly
identifies the determination of modernity in non-financial terms yet, for that
reason, largely misapprehends its constitutive elements.
773
Collapse 8.indb 773 27/11/2014 15:40

COLLAPSE VIII
the real of price, a real exposed as such by derivatives

market operations. On the contrary, value is but the
exogenous determination of price, the conversion of
one pricing process to others or to what lies outside
of price altogether. As such, and as both Marxism and
Neoclassical orthodoxy stipulate, value subtracts the
contingency of abstraction from the triadic contingency
of price in general, now meaning that value is not only
a reduction of pricing to the dyadic (thetic and plastic)
contingency characteristic of the infrawager but also
that, since price, valuation extends the structure and
contingencies of the infrawager outside of price and
in other terms.
e formal result above is thereby substantially
confirmed: assuming the supplementarity of value as
the basis of pricing, price deconstructs value. In the
condition of capitalization, value (commonly identified
with the qualitiative) is a financial term in principle
and in fact (it is quantitative). Derivatives pricing
exposes, institutes, and operationalises price as the
differential variability of value in general, but without
delimitation by an exogenous referent, and thus as a
valueless process. Equally, the variability of reference
characteristic of value, which is indefinite because
value has no intrinsic value, is the condition made
explicit and exact as ‘abstract pecuniary magnitudes’
in a universalisable ‘single quantitative architecture’
organized by and for capitalization: as price, that is,
774
Collapse 8.indb 774 27/11/2014 15:40

for which valuation and what is valued (whether or

not it is opposed to price, for example as use-value)
are only functional occasions for the instantiation of
a capital-power. §Ò
e Arkhéderivative
at a price ‘could have been different’ even once it

is set and a value given, and that values (are liable
to) change are demotic articulations of the general
theory of price advanced here: that price is constituted
in the triadic contingency of the abstract infrawager.
Implicit in the commonplace of price contingency,
and now fully exposed, is that, rather than prices
arising from exogenously-derived valuation, values
129. Confirming from a completely obverse aspect one of the primary

theses of communization theory, that because labour is constituted by
the value-form, contrary to orthodox Marxian praxes which vectors class
struggle via labour organization the only viable exit from capitalism
is rather the (theoretically organised) abolition of labour, establishing
in its stead ‘immediate social relations between individuals’ (Endnotes,
‘Communisation and Value-Form eory’, Endnotes 2, April 2010, endnotes.
org.uk/en/endnotes-communisation-and-value-form-theory). In terms of
the logic of the main text here, and to preview later developments, such
a claim is a perfectly symmetrical abreaction to the strictly endogenous
constitution of pricing, and thereby abets finance-power from a putative
‘outside’. Communization is consequently a politics entirely compatible with
now-prevalent finance-power, reconstructing in other terms the exclusion
of anthropological interests from the endogeneity of the infrawager—
if, that is, communization is in any way a politics: the evacuation of power-
price determinations in the ‘immediate social relations between individuals’
abolishes the futurity and calculative risk of abstract sociality by which, as
argued below, politics is constituted, proposing instead a countermodern
ethical relationality. Or, as Endnotes themselves affirm, the ‘radical politics’
of their conclusions are in fact strictly and wholly ‘anti-political’.
775
Collapse 8.indb 775 27/11/2014 15:40

COLLAPSE VIII
are variable by virtue of their price-ontology. Nitzan

and Bichler, Esposito, and Ayache each formulate
variants of this primary thesis. Nitzan and Bichler
note that price as the elementary unit of capital-power
cannot be established because both the anticipated
earnings and the future normal rate of return for the
asset, meaning that the basic discount price formula
can not in fact be known. Accordingly, the price of
capitalization in the present, which orders industry, is
always and necessarily speculative, variable (plastic),
and contingent (abstract) and thereby permit differ-
ential accumulation—that is, they are administered
prices. For Esposito, derivatives pricing is a particularly
complex and advanced form of sociotemporal bind-
ing that determines the present as revisable (plastic),
maintained primarily with regard to the inactual and
unknown future (absolute volatlity), a condition typi-
cal of the risk-order constituting modernity in general.
And for Ayache, referring to the contingency of the
definite uncertainty of the absolute volatility of price
explicitly posited by derivative pricing (thetic con-
tingency), each price ‘successively repeats the whole
genesis of price’. ¬Ú
Each is however only a partial and circumscribed
determination of the general theory of price accord-
ing to which price as such, and value a¶er it, are
constituted by and instantiated as différantial pricing
776
Collapse 8.indb 776 27/11/2014 15:40

wherever and however spontaneously they happen.

Furthermore, the ontology of price, which is the general
and realist theory of the ‘genesis’ of price repeated
by each price, is explicitly materialized, institution-
alized, and operationalised qua derivatives in their
markets. But, to return to the organizing caveat in the
introductory comments above, if the financial opera-
tions of derivatives markets are empirical-institutional
manifestations of the ontology of price per se, the two
dimensions referred to—institutional practices and
ontology—cannot be directly identified: for all of their
transnational systemic integration, derivatives markets
are a parochial set of institutional constructions for
capital accumulation via complex ownership claims
formulated via specific juridical-financial contracts;
on the other hand, the ontology of price as such is
the a priori of pricing in every instance. Following
Derridean convention, wherein the writing that is the
logically a priori condition for speech, though it may
be historically posterior to speech, is demarcated from
the historical manifestation of writing by designating
the a priori an ‘arkhéwriting’, the conditional pri-
macy and priority of the derivative for price as such
is here designated the arkhéderivative. ¬ e term is a
131. ough it is not named as such, arkhéwriting is at the core of Derrida’s

Edmund Husserl’s Origin of Geometry: An Introduction (tr. J. P. Leavey (Lincoln,
NE: University of Nebraska Press, 1989 [1962])), §VII, esp.89), in which
a modality of writing is identified as the historical and logical condition
of science. at derivation is rehearsed in Chapter Six of Speech and
Phenomena, where arkhéwriting is explicitly named (85, translated as
777
Collapse 8.indb 777 27/11/2014 15:40

COLLAPSE VIII
theoretically-organized construction articulating and

exposing the two dimensions of pricing via one other,
integrating them without direct identification.
at the operations of financial markets are consti-
tutively predicated on the ontology of price is a trivial
consequence of identifying the arkhéderivative. e
non-trivial corollary is that financiality, the a priori
of price in capital power, is also predicated on the
arkhéderivative. e arkhéderivative is then the a priori
of the political economy constituted by the ontology of
price. at is, the arkhéderivative is not only manifestly
and explicitly operationalised by finance markets for
capital accumulation, it is also the ontology of every
instantiation of capital-power. As regards the former,
it is not just the fact of price but also the ontology
of price that is made explicit and operationalised by
the complexities of the time-binding of derivatives
pricing. As regards the latter, the arkhéderivative is
the ontological a priori of capitalization, as political
‘protowriting’), becoming a primary thematic in Of Grammatology as an

explanans of the constitutive role of the expressive/extensive dimension
of signification in the otherwise idealised accounts of structural linguistics
(tr. G.C. Spivak [Baltimore: Johns Hopkins University Press, 1997 (1967)]),
59–61, from which the following quotes are taken). at arkhéwriting
is the a priori ‘of all linguistic systems’ means for Derrida that it cannot
be an object in any language nor ‘enrich the scientific [or] positive
description of the system itself’ as the object of a science. Derrida’s retreat
to transcendental-empirical or essence-appearances disjunctions at the very
point that he surpasses them leads to his influential but therefore restricted
characterisation of writing per se as primarily literary (59), distinct from
the protoscientific synthesis of the real of writing for which Husserl also
provides reasons.
778
Collapse 8.indb 778 27/11/2014 15:40

COLLAPSE VIII
economy in general, and in its each time particular

instantiation qua price. Financiality is, in other words,
the power determination of the arkhéderivaitve qua
ontology of price.
e complex institutional-practical operations
of financial markets are integrated with the a priori
financiality of capitalization by the arkhéderivative in
the real of price (what could sarcastically be called its
common-wealth) as its respectively operational (power)
and constitutive (infrawager) dimensions, and this can
be stated without making the category error of directly
identifying them. Conjoining these otherwise disparate
dimensions of financial pricing, the arkhéderivative
is the comprehensive realist ontology of finance. In
particular, thanks to their complex forms of time-
binding, financial markets make explicitly manifest
and operationalise not just price but also the ontology
of the instantiation of capitalization in general. e
irrevocable lesson of the arkhéderivative is that price
is at once institutionally and constitutively financial.
.. -: 
e arkhéderivative is the ultimate term in this argu-

ment or the ontology of price, serving as a summarising
metonym for the various determinations contributing
to the general theory of price and permitting, by way
of conclusion, the redetermination of finance-power
780
Collapse 8.indb 780 27/11/2014 15:40

as a risk-order constituted by price contingency. at

redetermination is not an arbitrary or parochial issue
for theorizing the political economy of capitalization:
if the arkhéderivative is the real of finance in its con-
stitutive and operational dimensions, then derivative
markets are the truth of market financiality qua the
dynamic power-ordering of capitalization. Moreover,
that dynamism is constituted by the triadic contingency
of the arkhéderivative, generally actualized by the
universal fungibility of what is priced (contingency of
abstraction), the variability of price (contingency of
revision), and the futural absolute volatility of pricing
(thetic contingency). ese are the primary conditions
of the risk-order instituted by price; a risk-order deter-
mined now not in terms of the sociology of the markets
but in terms of the real of price. at risk-order is also
and immediately a political economy, because in con-
stituting the financiality of price, the arkhéderivative is
no less the ontology of capital-order. As a consequence
capital order is necessarily a risk-order.
Distinct from the broad characterisation of moder-
nity as a ‘society at risk’ (as per Esposito’s systems-
theoretical determination) social-institutional order in
capital power is contingent not because the future is
uncertain in the present in general (Esposito) but, more
exactly, because the present of capital power—soci-
otemporal binding—is split by the absolute volatility
of pricing into the realisation of incompatible futures.
781
Collapse 8.indb 781 27/11/2014 15:40

COLLAPSE VIII
Turning now to Nitzan and Bichler’s account, capital

power is dynamic and transformative not only because
of the strategically common conflict between capitalists
(which again would be a sociological determination of
the political economy of capitalization), but because
that conflict is itself only possible via pricing because
the latter is constituted in the arkhéderivative qua the
dyadic contingency of the infrawager, manifest in the
standard discount price formula of capitalization as the
uncertainty of its inactual variables. And because the
arkhéderivative is the condition of capital-power, the
absolute volatility of pricing theorised by Ayache per
force instantiates capital-power. In general, the actu-
alisation of the arkhéderivative’s triadic contingency
qua price is in every instance capitalization’s dynamic
and transformative social (re)ordering (including the
stability and preservation of extant power configu-
rations, for which the only absolute is their futural
contingency and whose stability thereby needs to be
actively maintained by repricing). e arkhéderivative
is the dynamic metastability of the capital-order.
e triadic contingency instantiated qua price is
not just one of pricing with regard to other prices
and value but—precisely because price is the ordering
schema of capitalization—also the intrinsic contingency
of the constitution and organization of capital-power.
It is in other words price that necessitates politics.
e capital-order, which is a risk-order, is constituted
782
Collapse 8.indb 782 27/11/2014 15:40

as a political economy. Even if it is a commonplace

that finance, exemplified by derivatives pricing, is
necessarily a mode of capitalization qua social order-
ing, the ontological corollary established here is that,
predicated on the arkhéderivative, social power qua
capitalization is transformable, mutable, and contin-
gent as a futural unknown. ¬§ Such is the contingency
of revision conditioning the risk-order of finance-power,
for which (i) the financiality of the arkhéderivative
‘depriv[es] the very meaning of normativity’ from the
social order, and (ii) capitalization instead implements
the continual and nonterminal revision of social order
via price. Consequently, the only basis for the dynamic
institution of power in capital-order is capital-power,
instantiated by price, the logic of which is organized
by differential accumulation.
It follows that differential accumulation is not a
norm but a politics, the term now futurally deter-
mined as the normless revision of power qua risk
(that is, instantiating and capitalising on the futural
132. Roberto Mangabeira Unger proposes that the modern social order is
an endlessly plastic and transformable ‘artifact’ by virtue of acknowledging
society to be constructed by human imagination and creativity rather than
posited as a given (Z. Cui [ed.], Politics: e Central Texts [London: Verso,
1997 (1987)], 3–18 and 172–204). at ‘negative capability’ of social
institutions (contrasted against their extant positive terms) is dedicated
to emancipating subjective experience from established scripts but is
however o¶en practically constrained and circumscribed by extant elite
configurations and ‘entrenched’ social structures. While the latter point
is uncontentious, in the terms of the thesis of the main text here Unger’s
proposition psychonaturalizes and thereby cloaks the sociopolitical
plasticity wrought by capitalization as the prevailing condition of modernity.
783
Collapse 8.indb 783 27/11/2014 15:40

COLLAPSE VIII
contingency of price). ¬¬ Such politics is a recusal of
133. is result countermands the political and theoretical adequacy

of neorationalist doctrine to the modernity it claims to advocate for
and advance via Le¶ Accelerationism. A short detour into Brandom’s
philosophy demonstrates why: the consistent and thorough synthesis of
judgements in Brandom’s ‘strong semantic inferentialism’ (SSI) consists
of three simultaneous activities (Reason, 36–38): (i) the consistency of
critical responsibilities ‘requir[ing] judgers to renounce commitment to
contents that are incompatible to other commitments’ or their consequences,
because each can ‘serve as a reason to give up the other’; (ii) completion
via ampliative responsibilities, requiring the judger to accept other
commitments on the basis of what she or he is already committed to; and (iii)
the warrant of justificatory responsibilities, requiring the giving of reasons
for one’s commitments by recourse to prior commitments. e synthesis
of judgements in SSI results in the transcendental original synthetic
unity of apperception at the base of Kant’s account of the epistemological
subject: normative revision integrates (= unity) the endorsements intrinsic
to inference-making (= synthesis) by the judgement that these norms
inaugurate (= original) by a sapient being (= apperception). Furthermore,
these conditions are not just those of judgement but necessarily also of
what is judged, which is the content of the concept (= transcendental not
formal logic). is latter objective dimension of the unity of apperception
constitutes a representational relation to the content of the concept that is
therefore intrinsically determined by the constraint of consistency, meaning
that in its rational validity of no one object or subject in its unity can maintain
incompatible properties (principle of non-contradiction), though two
different subjects/objects can exhibit the inconsistency between them (45).
e subjective dimension of such necessary exclusions and consequences are
its deontic or normative relations (responsibilities and liabilities), and the
objective corollary is their ‘alethic modal’ relations, meaning that a ‘single
object just is what cannot have incompatible properties (at the same time).
at is, it is an essential individuating feature of […] objects [that they] have
the metaproperty of modally repelling incompatibilities’ (48) as a necessary
consequence of their having ‘objective validity’ by inference. Hence, rational
inferentialism necessitates a unified and coherently integrated subject and
object of judgement that each repudiates incompatibilities.
Against the homology between reason qua SSI and risk-rationality
proposed in n.89 above, neither of these two principal conditions of SSI
holds for pricing in its thetic contingency and the concomitant future-
constituted risk-order, for two reasons: firstly, contrary to the normative
performativity of rational inference, pricing is counterperformative and
necessarily goes in the ‘wrong’ direction to any that might be inferred by
stipulation of an ‘ought’. Secondly, pricing’s absolute volatility is precisely
and only the positing of a futural contingency qua incompatibilities of what
784
Collapse 8.indb 784 27/11/2014 15:40

the future will be even once the contingency they construct is settled (the
price ‘could have been different’). As such, pricing in its absolute volatility
instantiates and maintains incompatibilities rather than repelling them.
Consequently, pricing and the risk-order do not comply with the deontic
constitution of the subject in its orginary synthetic unity of apperception,
or to the alethic modality of the object’s noninconsistent validity, or to the
thus coordinated inferential consequences and deontic adumbration. In
formulating the basic unit of judgement not in the predicative form of <If p
then q> but in the contingent formulation <If p then q or r or s or …, where
p is insufficient to determine q, r, s….>, the risk-order vitiates reason qua the
positive freedom and authority of normative constraints (60).
In Brandom’s terms, which have an immediate political overdetermination,
it follows that pricing and the risk-order of capitalization are not rational
but are conditions of unfreedom (cf. Negarestani, ‘Labor’). But such a
Brandomian critique of capitalization via pricing is only a doctrinal result,
one among several consequences to the incompatibility of the risk-order
with the normative synthetic unity posited by philosophical reason. What
can also be inferred is:
• that as a discursive social practice with some rules (the logics of
differential accumulation and différantial pricing as well as the delimited
regulatory requirements for markets), the risk-order is quasirational
precisely because it posits an order that maintains incompatibilities;
• that risk-rationality is a nonnormative modality of reason, meaning that
the social order of risk is shaped not by rational norms but by inferential
processes whose logic surpasses that of the deontic-alethic modalities of
unified synthetic judgement;
• given the expansion of inferential pragmatics in the risk-order
beyond Brandomian doctrine, the latter is an unnecessary and limiting
commitment to philosophical-rational determinations of inference and
reason. More assertively, the deontic-alethic modalities of incompatibility-
repelling synthetic unity postulated by SSI are undone by the risk-order
of capitalization, which socially instituted practice constitutes the very
political modernity of which SSI claims to be the philosophy and moral-
conceptual authority.
Philosophical adequacy aside, the incompatibility of risk rationality and
SSI formulates a schema for the politics of normative reason with regard to
the risk-order, botho f these being taken as practices of revision. Affirming
SSI, the subjective and objective unity it instantiates as well as its subtending
normative constraints mean that SSI necessarily counters the construction
of incompatible inferences characteristic of the risk-order of capitalization.
But that is to repudiate the primary futurity constituting the risk-order
thanks to pricing. is repudiation is evident in Brandom’s affirmation of
Hegel’s configuration of the rational integration of conceptual content by
785
Collapse 8.indb 785 27/11/2014 15:40

COLLAPSE VIII
norms which, thanks to the arkhéderivative’s contin-

gency of abstraction, is exacerbated in its scope by
the universal fungibility of what may be priced (in
contrast, then, to the typical but restricted referent
of capitalization—production for Marxism or, in its
more recent biopolitical overdetermination, ‘life’, or
for Veblen, ‘industry’). ¬° What is indexed here by the
the process if ‘recollection (Erinnerung)’, which provides a ‘genealogical

[…] vindication’ of inferential commitments ‘currently being integrated’ (16,
and Ch.3)—another variant of synthetic unity of reason now with regard
to the sociohistorical fabrication of discourse which, tellingly, is the way
that reason ‘is the way [reason] moves forward, by looking backward’ (23).
Inferential reason is then a synthetic traditionalism at a variety of scales
and venues—sociohistorical, subjective individual, and objective validity—
all of which will come to be integrated with one another. By contrast,
asserting the risk-order of capitalization qua generation and maintenance of
incompatibilities, rationality is not an attribute primarily of sentience but of
pricing, reason being here determined with regard to the futural contingency
of temporization. at practice prevents retrospective semantic vindication
and, concomitantly, the formulation of an original synthetic unity as the
organizing term of reason or the quasinorms it posits. In terms of SSI, risk-
rationality inaugurates what Meillassoux elsewhere calls the Principle of
Insufficient Reason not with regard to the insufficiency of the ontological
causal relation as basis for what happens next that concerns Meillassoux
(see n.98) but as the constitutive insufficiency of the very establishment and
construction of semantic-discursive inference-making itself, vitiating the
‘bindingness’ of any normative construction.
If, following Brandom, the Enlightenment is the ‘development of secular
conceptions of legal, political, and moral normativity’ predicated on the
‘conception of normative positive freedom’ as formulated via SSI in its
necessary sociohistorical dimension (60)—which is the to-be-vindicated
philosophy of political modernity according to neorationalism—that
determination of modernity misidentifies it as the coherent generation of
retrospectively constituted and integrated semantics rather than the futural
positing of incompatibilities. As such, the Enlightenment has little if any
salience for apprehending the risk-order of capitalization.
134. ese determinations are compounded via the recent emphasis on the
‘precarity’ of life-work and experience in neoliberalism: see M. Lazzarato,
e Making of the Indebted Man, tr. J. D. Jordan (Los Angeles: semiotext(e),
2012) and C. Marazzi, e Violence of Financial Capitalism, tr. K. Lebedeva
786
Collapse 8.indb 786 27/11/2014 15:40

otherwise paradoxical formulation of an order without

norms that is universal in principle, is that the real of
capitalization is not constituted materially, normatively,
or conventionally, but by stable-enough institutions
positing a contingent yet power-hierarchical relation
to an indefinite future via price.
If differential accumulation means that price vari-
ability is the reorganization of power, the redetermina-
tion of capitalization in terms of the arkhéderivative
means that power is now not only a power over what
the future may be—the standard criticism that capi-
talism segments the future in favour of those with
the greatest capital, though since finance-power such
a segmentation is in fact all that politics is qua the
power-organization of the future. Predicated on the
arkhéderivative, power is moreover power over the
organized uncertainty that price posits in the present
(thetic contingency). To elaborate: because the real of
price is the endogenously constituted infrawager, the
futurity of the arkhéderivative is itself priced as its vola-
tility. As such, the futural thetic contingency of pricing
is itself subject to the power instantiated on each occa-
sion of price. Consequently, price qua the magnitude
of power of social institutions is the paradox of the
magnitude of social power over uncertainty, a measure
of the size of a futural contingency instantiated by price.
and J. F. McGimsey (Los Angeles: semiotext(e), 2011). With respect to

finance-power, precarity is but an anthropological-industrial incidental
determination of generalised price sabotage.
787
Collapse 8.indb 787 27/11/2014 15:40

COLLAPSE VIII
Capitalization is thereby determined as a risk-order of

power not only extensively, across the entire ‘spectrum
of social institutions’ or ‘societies at risk’, but also
intensively in each instance of price. Price indexes the
magnitude of the absolute volatility of power in the
present. It is not then that risk is to be priced by deriva-
tives markets but, constituted in the arkhéderivative,
price itself is the magnitude of risk, which is to say the
magnitude of absolute volatility that is posited in the
present. It is a measure of the futurity of the present, a
quantification of différantial temporization. Consequently,
the political economy of price since finance-power is
immediately the politics of futurity itself.
Finance-power instantiated via price is therefore
analytically dual: it is the magnitude of power in the
holistically organized present of intracapitalist con-
flict and it is the magnitude of the thetic contingency
of power. For all of the analytical distinction, the
two determinations are however not operationally or
ontologically distinct, and for two closely aligned but
operationally distinct reasons:
() In general, risk is in fact indistinct from all price

qua power. It is not just that power involves risk,
such that the greater the power the greater the risk.
Rather, price is at once the magnitude of power
and the quantification of the futural contingency
concomitant with any instance of power, no matter
788
Collapse 8.indb 788 27/11/2014 15:40

what the magnitude. Price is both the magnitude of

power and the magnitude of futurity qua systemic
uncertainty—so price itself is ‘systemic risk’. Since
price is necessarily determined in regard to capital-
power, every price is intrinsically an occasion of politi-
cal economy, of what, where, and how much power
over futurity is to be had—a systemic conclusion that
is effectively dramatised by the size and consequences
of the credit default that comprise Lesson Two of the
financial crisis.
() Sectorially, as the toposcription of the absolute

volatility of price, priced risk is the power magnitude
of the futural contingency of power’s instantiation.
Extensively operationalised qua accumulation by
derivatives markets, priced risk is how one sector
of the entire spectrum of social institutions assigns
a power-magnitude to the futural contingency of
price. In doing so it gives the futural contingency of
power a power-determination in the present and, at
once and for that reason, subjects the systemic power-
organization of risk-pricing to the triadic contingency
of price, which is what is dramatized in Lesson One
of the financial crisis.
789
Collapse 8.indb 789 27/11/2014 15:40

COLLAPSE VIII
.. -: 
While the pricing of risk by derivatives markets opera-

tionally demonstrates that they empirically institute
finance-power as an infrawager, the single ‘abstract
pecuniary magnitude’ that is price is at once quanti-
fied power (capitalization) and quantified futurity
(absolute volatility). at duality of price can only
be analytically (rather than ontologically or opera-
tionally) demarcated: more emphatically, the con-
stitutive ontology of the risk-order is given in the
unicity of power and futurity via price. Predicated
on the arkhéderivative as political economy is—as all
politics is—and taking the power-futurity duality of
risk-pricing by derivatives markets to be the explicit
historical-institutional manifestation of that constitu-
tive condition, this section elaborates in theoretical
terms what the political economy of a risk-order con-
stituted by price entails, providing the basis for the
more explicitly institutional-sectoral consequences of
the power organization of the state-finance nexus that
is taken up in the concluding section.
Operationally, derivatives pricing qua infrawager
means that prices in derivatives markets are conditions
for further pricing and also conditional upon them.
Because of the universal fungibility of the exogenous
reference of derivatives (its contingency of abstraction),
and because price is the instantiation of capital-power,
790
Collapse 8.indb 790 27/11/2014 15:40

the endogenous plasticity of derivatives pricing (its

contingency of revision) is then primarily the direct
dynamic reorganization of capital-power on itself
according to the logic of differential accumulation, and
only incidentally the reorganization of capital-power
outside of the pricing process (qua value). Returning
to Means’s distinction as it is taken up by Nitzan and
Bichler, pricing primarily with regard to other prices
is to set administered prices rather than market prices.
With derivatives markets, it is not that revenues are
fixed against the variable cost of production, as in
Means’s industry-based account, but that derivatives
trading qua infrawager sets prices only on the basis
of ‘back-calculat[ing] the mark-up [the price of the
derivative] necessary to realize a rate of return’. at is,
derivatives are not priced competitively but rather to
maintain a mark-up, doing so in real-time rather than
the medium-to-long-haul typical of industrial processes.
In terms of the arkhéderivative, the infrawager is the
plastic reorganization of administered prices, and the
market as a whole is comprised of this price setting of
the market. But administered prices are set not only via
their immediate markets but also by the organization
of the spectrum of social institutions, the general name
of which, with respect to what Veblen calls industry, is
sabotage. Consequently, sabotage is a primary charac-
teristic and necessary effect of financial markets. ere
are two distinct aspects to this conclusion:
791
Collapse 8.indb 791 27/11/2014 15:40

COLLAPSE VIII
—From the optic of industry exogenous to derivatives

pricing, the plasticity of the latter is pure sabotage
because derivative pricing is directly a magnitude of
endogenously-constituted capital-power. is is just
to reiterate from another angle the criticism of the
finance sector’s siphoning of capital, productivity,
and social reproduction in general. ¬¿
—However, the industrial determination of derivative
pricing is strictly speaking only incidental to the latter
qua infrawager. e endogenous operationalisation
of derivatives pricing is primarily the plastic redeter-
mination of prices and therefore of power within the
price-terms of those markets. Operationalising the
arkhéderivative, derivatives markets directly redis-
tribute power qua capital accumulation in its own
terms, rather than those of what, for it, is only the
incidental condition of historical precedents or needs
(for example, production or consumption).
If sabotage is the vitiation of industry because busi-

ness implemented via administered prices diminishes
social capacity in favour of the price organization of
power via capitalization, the infrawager of derivatives
pricing is, in contrast, the intensive determination of
135. See Lapavitsas, Profiting, 146; Marazzi, Violence, 44-46; and Hudson,
‘Goldman Sachs’. Nitzan and Bichler complicate the basic assumptions of
this claim and received assumptions on the global political economy of the
finance sector in ‘Imperialism and Financialism: A Story of a Nexus’, Journal
of Critical Globalisation Studies 5 (2012), 42–78, www.criticalglobalisation.com/
issue5/42_78_IMPERIALISM_AND_FINANCIALISM_JCGS5.pdf.
792
Collapse 8.indb 792 27/11/2014 15:40

the operational dynamic of sabotage. It is the sabotage

of capital-power by capital-power across time and
markets via price plasticity, an autosabotage. To be
clear: the intensive autosabotage of capital-power is
not operationally distinct from its extensive determina-
tion as industrial sabotage; but it is also not reducible
to the latter, given the explicitly universalising and
abstracting contingencies of the infrawager qua real of
price. In its most general determination capital-power
is not just counterproductive (a ‘negative industrial
magnitude’); it is also and primarily (as a positive finan-
cial magnitude) its own intrinsic counterpower: the
autosabotage of dynamic price-setting in its own terms
which, constituted in the infrawager of the arkhéderiva-
tive, is intrinsic to all price. Price qua capital-power
is then necessarily its own partial countermanding;
the very instantiation of capital-power is at once the
instantiation of its own counterpower, the sociologi-
cal corollary of which is the intracapitalist struggle in
differential accumulation. ¬À
136. e standard reference for the endogenous fragility of economies

relying on financial intermediaries (primarily banks) is Hyman Minsky’s
Financial Instability Hypothesis (Stabilizing an Unstable Economy) (New York:
McGraw-Hill, 2008 [1986]), Chs. 7–10). Minsky notes that the increasing
innovation and elasticity of financial instruments by financial intermediaries
encourages short-term lending and leverage, fuelling economic booms and
expanding balance sheets for financial intermediaries. Short-term borrowing
by commercial banks in these conditions are however overextended
against their nonfinancial assets and also susceptible to market volatility.
Consequently, and counter to the investment-supporting claims legitimising
finance, long-term investment undertaken and facilitated by financial
intermediaries is driven by short-term price movements on unregulated
793
Collapse 8.indb 793 27/11/2014 15:40

COLLAPSE VIII
Misfortune and Historicity

e real of price qua power is, in sum, extensive and
intensive differential sabotage. In its intensive determi-
nation of financiality, price endogenously instantiates
a power gradient, incapacitating in some respect that
which it overpowers by outpricing it. at which is
outpriced is also a term of capitalization, just a lesser
one. However, if prices set the market then the market
is the toposcription not only of capital-power qua
autosabotage but also, at once, of the thetic contin-
gency instantiated on every occasion of price. at is,
pricing is not autosabotage only in respect of the inca-
pacitation of what is thereby outpriced, in relation to
other prices in the presently and historically comprised
capital-order, but also, as elaborated above, in respect
of its intrinsic thetic contingency whereby the extant
society-wide organization of power is futurally risked
to the degree indexed by the magnitude of a particular
price. While the two counterpowers of the arkhéderiva-
tive—autosabotage and futural contingency—can be
markets whose instability thereby extends to the entire financial system.

For Minsky, the endogenous instability of finance is institutionally
formulate rather than located in the fact of price. Minsky’s hypothesis has
been extensively taken up in theorizations of the 2008 financial crisis. A
striking example of this literature discussing the global expansion of the
dollarised shadow banking system as condition for both the systemic
reach and magnitude of the 2008 financial crisis, paraphrased in the above
account of Minsky’s hypothesis with regard to the development of financial
innovations, is presented in J. Tokunaga and G. Epstein, ‘e Endogenous
Finance of Global Dollar-Based Financial Fragility in the 2000s: A Minskian
Approach’, PERI Working Paper Series 340, January 2014, www.peri.umass.
edu/fileadmin/pdf/working_papers/working_papers_301-350/WP340.pdf).
794
Collapse 8.indb 794 27/11/2014 15:40

analytically demarcated, they are again inextricable

and mutually constitutive in the ontological unicity
of finance articulated by the arkhéderivative. In that
unicity, it follows that price-sabotage risks the mar-
ket. at is, price is simultaneously the power over
present and futural disestablishments of power, an
autosabotaging futural contingency of capital-power.
e several aspects of this unwieldy characterization
of finance-power—autosabotage, futural contingency,
and capital—are effectively synthesized by the term
‘misfortune’, but only if it is taken in this precise sense.
Instantiated via the misfortune of price, then, capital-
power’s dynamism necessitates the persistent contin-
gent reorganization and revectoring of capitalization,
a reorientation and contingency in time-binding whose
direction and gains necessarily cannot be secured.
e determination of the arkhéderivative as a mis-
fortune of power—meaning, to reiterate, an autosabo-
taging futural contingency of capital-power—is the
comprehensive ontology of the market qua risk-order.
As such, it is a systemic determination of capital-power,
providing a diagnostic matrix for its historical develop-
ment. Taking ‘capitalism’ as the name for the holistic
systemicity of capital-power, the misfortune intrinsic
to pricing means that there is no necessary or required
direction, orientation, or identity to capitalism; its
ordering via price is also the occasion of its contingent
reordering. e only sociohistorical constraint for
795
Collapse 8.indb 795 27/11/2014 15:40

COLLAPSE VIII
capitalization, given its organization by differential

accumulation, is that one capitalist accumulated more
capital-power than another, and some sectors against
all others. But that is only a constraint of its reason,
not a prescription as to who or what will have the
greater capacity for capitalization (meaning setting
larger prices), nor for where and to what capitalization
will be directed. at is, the duality of price-power’s
misfortune as regards sabotage and futural contingency
is the constitutive condition for the sociohistorical
contingency inaugurated by and as capitalism, thanks
to which price’s contingencies of abstraction and revis-
ability are preserved across capital-power’s necessary
social-systemic operation. ¬Ì
137. In terms of Aristotelean categories (Nichomachean Ethics, Book VI),

finance-power is then a tekhné, a process whose ends (teloi) are exogenous
to that process and which may therefore never be attained by it (example:
a building may never be completed). Aristotle distinguishes tekhné from
poiésis, an artificial process with intrinsic ends (example: live music, which
is heard as it is played), and phúsis, processes which always and necessarily
have intrinsic ends (nature). e exogeneity of purpose to process in tekhné
is why in general any technical process can be repurposed, and why in
particular whatever is repurposed is a technics (including then nature). For
Massimo Amato and Luca Fantacci, the problems of modern finance stem
precisely from its operational divergence from its intrinsic purpose, which is
investment via completed debt promises within given time frames (e End
of Finance [Cambridge: Polity Press, 2011]). Securitization, intermediation,
and large-scale complexity have also anonymised finance, vitiating what
for Amato and Fantacci ought to be the intimate purpose of finance but
which condition is here recognized as the consequence of its constitutive
technicity. e emancipation of technics from the modern category of
energy (which is predicated on work and thereby determines ontogenesis
via the intrinsic ends or ‘entelechy’ common to phúsis or poésis, a logic
organising both Marxian and Neoclassical economic doctrine) is proposed
in S. Malik, ‘Tekhné is Fond of Túkhé, and Túkhé of Tekhné: Energy and
Aristotle’s Ontology’, Tekhnema 5 (1999), 124–53; an emancipation that
796
Collapse 8.indb 796 27/11/2014 15:40

Constituted qua finance-power, capitalism is realised

only in more or less local, more or less large power
conflicts. It has no necessary operational, social, cul-
tural, or institutional identity, nor (qua différantial
pricing) any constitutive identity in its logic. Con-
trary to Marxian doctrine, then, internal contradic-
tions do not necessitate its expansion or its demise. ¬Í
Equally, capitalism cannot extinguish or supersede
itself at a putative conversion point (the reassuring
myth of singularity). ¬Ò e constitutive misfortune
of financiality proscribes any terminal or tendential
logic or practice of capitalization, instead advancing
only increased magnitudes of capitalization (which
itself requires more complex, integrated, and differenti-
ated forms of social-order qua risk-order). e history
and future of capitalization is comprised only of the
interminably tactical, dynamic reorganization of price,
power, and the ‘entire spectrum of social institutions’
along both external and internal vectors of finance,
the latter having ontological, operational, and politi-
cal precedence. Constituting the identityless increase
implicitly countermands the DeleuzoGuattarian transcendental energetics

underpinning Nick Land’s convergence thesis (see n.139).
138. at contradictions within the capitalist totality drive the territorial
expansion of capitalist countries via colonial and imperial domination
is first proposed by Rosa Luxemburg, e Accumulation of Capital, tr. A.
Schwarzchild (London: Routledge, 2003 [1913]).
139. is is the characteristic claim of Right Accelerationism. See N. Land,
‘Meltdown’, in R. Mackay and R. Brassier (eds.), Fanged Noumena (Falmouth:
Urbanomic, 2011 [1994]) and ‘Teleoplexy: Notes on Acceleration’, #Accelerate,
509–20.
797
Collapse 8.indb 797 27/11/2014 15:40

COLLAPSE VIII
in aggregate capital-power, enfuturing the present

in the autosabotage of pricing, the misfortune of the
arkhéderivative is the historicity of capital-power.
. . -:
 -  
Price is the measure of the political economy and the

power over misfortune. e operational toposcription
of finance-power via the abstraction of the number
scheme of price markets means that markets are the
basis for the comparison of finance-power in all times
and places. Returning then to the contentions of the
introductory comments above, the power magnitude
and constitution of derivative markets can be directly
compared to other organizations of power in terms
of the ontology of finance—which is to say, by compari-
son of their respective prices. In particular, taking
up Haldane and Alessandri’s comments in terms of
finance-power, the threat that the finance sector now
presents to states is twofold: firstly, if  is a proxy for
state power in global political economy (for reasons
to be presented shortly), then for the most part the
transnational derivatives markets outprice state-level
, which is to say that, in terms of the power theory
of price, these markets overpower states even if the lat-
ter have jurisdictional power over them. e political
and theoretical question of relative powers then has
798
Collapse 8.indb 798 27/11/2014 15:40

to be recast as a question of whether statutory author-

ity, stemming from state sovereignty, is endemically
more powerful than finance-power, and sufficiently so
as to not be overpowered by the latter’s quantitative
determination. e second identified threat to state
sovereignty from finance markets is that all juridi-
cal aspects of state power in Westphalian modernity
are territorially constrained, including the typical
determinations of what that power is tantamount to:
the monopoly over violence, guarantor of security,
popular autonomy, legislative centrality, bureaucratic
control, the ipseity of authority, the paramount status
of popular sanction, and so on. Whatever determina-
tion of ultimate power is given to state sovereignty, its
reach and legitimacy is necessarily territorially limited
and constrained, particular (up to and including its
global or extraterrestrial extension, as in some sci-
ence fiction or political theory). As such, it is unable
to attain the universal extension permitted by the
‘abstract universality of magnitudes’ constituting and
actualising finance-power in its price-organization. °Ú
140. In Gilles Deleuze and Félix Guattari’s terms, such quantitative

abstraction is the primary condition and vector of capitalism’s
‘deterritorialisation’ as a countervector to the system of capture that is the
State and its particularising-segmenting codifications (Anti-Oedipus, tr.
R. Hurley, M. Seem, H. R. Lane [Minneapolis: University of Minnesota
Press, 1983 (1972)], Ch.10, esp. 251–54). Capitalism’s ‘lines of flight’
from State territorialization are nonetheless fundamentally constrained
and ‘reterritorialising’ for Deleuze and Guattari insofar as capitalism is
axiomatically organized by the commodity form and production for the
market. at axiomatic is for them the progenitor of capitalism rather than
invented by it, and requires the historical institutionalization of various
799
Collapse 8.indb 799 27/11/2014 15:40

COLLAPSE VIII
at is, the (necessarily universal) geospatial extension

of finance-power is in principle if not historically in
fact greater than the (intrinsically particular) power
of state sovereignty.
In terms of finance-power, the territorial exorbi-
tance of finance-power to state sovereignty does not
threaten the latter so long as the capacities of their
economies and revenues are greater in magnitude
than the resources of financial organizations. How-
ever, if ‘causality has reversed’ between states and
financial institutions, as Haldane and Alessandri put
it, because regular defaults of monarchical loans in
early institutional capitalism are replaced today by
organized State forms according to its level of development. Revoking

the basic Marxian determinations of capitalism’s axiom that Deleuze and
Guattari adopt, capitalization in the logic of differential accumulation
can instead be construed as a wholly formal axiom that is operationally
aterritorial and abstractly constituted (via pecuniary magnitudes) and
which, in its intrinsically dynamic constitution of intracapitalist conflict via
the infrawager, is therefore unbound in its overall axiomatic production—
hence, its extensive and intensive universalism. Equally, as discussed in the
closing sections below, insofar as pricing relies on enforceable regulations of
money and contract (including the ‘convertible abstract rights’ that secure
private property [Deleuze and Guattari, A ousand Plateaus, tr. B. Massumi
(Minneapolis: University of Minnesota Press, 1987 [1980]), 454]), the state
form is indispensable to capitalism, which means that capitalization is not
so much the reterritorialising deterritorialization Deleuze and Guattari
propose as it is an each-time territorially inaugurated deterritorialising.
‘Territory’ in these formulations is only the limitation imposed by sovereign
jurisdiction rather than a geospatial factum: any such factum can be
subordinated to the reorganization of jurisdictional authority and is thus
not at all intrinsically bound to the figure of the nation-state even if that has
been its dominant historical configuration. For the specific transformations
of Westphalian jurisdictional and financial institutional infrastructures to
facilitate transnational capitalization since the 1970s see S. Sassen, Territory,
Authority, Rights (Princeton: Princeton University Press, 2006).
800
Collapse 8.indb 800 27/11/2014 15:40

crises in financial markets requiring state interven-

tions in order to sustain not just that sector but also
the entire social order, then in terms of finance-power
this reversal is only a historical transformation: the
greater power is determined only by which sector
has the greater price. at aggregate magnitude is
determined for states primarily by their operational
capacity and revenues, which is precisely what 
indexes. Furthermore, given that nonfinancially gener-
ated operational capacity and revenues of states from
production and consumption are again constrained
in the Westphalian settlement by material and ter-
ritorial factors determined by the inviolable borders
sanctioned in that regime, the pecuniary magnitude
of nonfinancially generated annual  for even the
largest states is necessarily constrained in a way that
the plasticity of pricing and market-interconnectedness
of finance are not. e ‘price magnitude’ of finance as
an operational sector can then in principle be greater
than that of any state—or, because finance-power is
endogenously constituted, the sectorial price of finance
can always be exorbitant to any of its previous levels
including that constrained by state-level organization.
e current size and transnationalism of financial mar-
kets is an institutional-historical figure of the hybrid
configuration of finance-power and state sovereignty,
the relative sizes of global derivative markets (by credit
exposure) and state s indicating the approximate
801
Collapse 8.indb 801 27/11/2014 15:40

COLLAPSE VIII
equality of their respective finance-powers at the level

of most of the wealthiest states, and the greater power
of finance market to the majority of nation-states.
Which is to say that it is not that power has ‘reversed’
between states and the finance-sector over the course
of modernity, but that while state sovereignty has been
the toposcription of the largest financial powers in that
period, that historical condition is now in mutation
and no longer a historical given. at is, thanks to
the increasing aggregate price of derivatives markets,
finance is now relatively more emancipated from the
primary political configuration of historical modernity
and, with that, the state-finance nexus is reorganised
and revectored.
To elaborate this reorganization by way of conclu-
sion: as Nitzan and Bichler remark, the sovereign state
is but one of the social institutions in the arrangement
of capital-order, albeit the one that has been most
dominant in securing the normal rate of return against
which all differential accumulation is pegged. But that
congruence between sovereignty and finance-power
is also countermanded by their typological dispar-
ity. If sovereignty is constituted by the indivisible
unicity and centrality of its decision as much as by
the assumed supremacy of its performative diktats,
in contrast finance-power is constituted by the pri-
macy of its thetic futural contingency, the plasticity
of the infrawager, and its misfortune. For all of the
802
Collapse 8.indb 802 27/11/2014 15:40

complexity of the power-misfortune duality of price, its

quantitative determination in every instance rescinds
qualitative particularity as the term of power, whether
that particularity is organized in terms of history, tra-
dition, authority, or the other semantically rich or
impoverished meanings typically invoked to warrant
sovereignty (up to and including the transcendentality
of its theological determination). ° Minimally, then,
finance-power is typologically a counterpower to sov-
ereignty: the primacy and irreducibility of sovereignty
qua determinant of power is violated by finance-power
both in principle (quantity and triadic contingency
against the particularity and the insuperability of
authority) and socio-institutionally (finance markets
outprice states). Finance-power threatens sovereignty
not just because its greater financial magnitude and its
absolute volatility prevails, but because the splitting
of the present by price in the contingency of its irrec-
oncilable futurity overpowers the otherwise assumed
and inviolable authority of sovereignty.
at threat is manifest, and state sovereignty is
degraded with regard to the arkhéderivative, when
states are outpriced by finance markets—as is largely
the case today, thanks to neoliberal institutional activ-
ism since the early s. Exemplified by the inven-
tion of the  and other derivatives markets, the
141. C. Schmitt, ‘All significant concepts of the modern theory of the state
are secularized theological concepts’, Political eology: Four Chapters on the
Concept of Sovereignty, tr. G. Schwab (Cambridge, MA: MIT Press, 1985), 36.
803
Collapse 8.indb 803 27/11/2014 15:40

COLLAPSE VIII
consolidation and expansion of derivatives markets

since the s not only operationally liberates the
real of price from nonfinancial determinations such as
production and material resources (the putative ‘real
economy’), it moreover concretizes and manifests the
countermanding of any necessity or finality of value,
price, or other financial measure, per the ontology
of price. Consequently, the aggregate price magni-
tude of the financial institutions operationalising the
arkhéderivative in its own terms are limited only by
regulatory requirements and the tactical assessments of
a risk-rationality—a liberation unavailable to modern
state sovereignty. anks to finance-power, sovereignty
is no longer the supreme power, but is itself now sub-
ject to contingency. More exactly, the very conditions
of legislation sanctioning and regulating finance is
itself now constituted in terms of the contingency of
finance-power. °§
142. e disambiguation of misfortune is politically and analytically crucial

here. By an argument similar to Esposito’s, Vogl too proposes that thanks to
finance capitalism ‘danger and chance have returned in an archaic form, as
túkhe or fortune’ in contrast to the historically preceding welfare societies
that sought to ‘tame contingency’ (Specter, 130). Consequently, ‘the
hazardous whims and caprices (Launen) of age-old figures of sovereignty
have returned under modern conditions’. e present thesis is precisely
the contrary: the arbitrariness of sovereignty is anything but contingent
while the contingency of finance-power is highly risk-rationalised and
anything but arbitrary. And now the latter dominates the former, further
obviating sovereign caprice. Which is also why, for all the vast discrepancies
in wealth implemented by neoliberal policy, it ought not to be designated
as a neofeudalism (as Hudson or Lazzarato do, for example) nor, for that
matter, is it the biopolitics that Vogl mistakenly proposes finance to be in its
‘determining [of] the life processes of a society by a single force’.
804
Collapse 8.indb 804 27/11/2014 15:40

Ineliminable Statism
What is established here is that, cogent as it may
otherwise be, the state-finance nexus is riven in its
power ontology. e argument is not primarily that
the operational-historical growth of the finance sector
deprioritises sovereignty in favour of other modes of
power (a Foucauldian variant of the thesis), or that
the indebtedness and other financial commitments of
the state (whether it be monarchical, or a parliamen-
tary democracy, bureaucratic control, autocracy, etc.)
require it to resort to finance markets to maintain itself.
Rather, whatever power can be summoned by the state
thanks to its sovereignty can be (i) determined as a spe-
cific magnitude in any particular instance, and (ii) that
magnitude is comprised of the aggregate prices it can
command from jurisdictionally-bounded institutions
and social organization. e ‘command’ of prices is not
that of a state-controlled economy, but rather the price
that the state can raise on the basis of its sovereignty
(taxation being the obvious example). While this
injunction practically presumes the hierarchy of social
institutions and order, the channeling of command
via price, qua instance of finance-power, necessarily
imposes a dynamic reorganization of social order. In
its conservative formulation, this partial conclusion
proposes that states are committed to their reorganiza-
tion in order to sustain their integral role in the gen-
eral ordering of social institutions by capital-power.
805
Collapse 8.indb 805 27/11/2014 15:40

COLLAPSE VIII
is is, to reiterate, not a reordering directed by sover-

eign command, but a political-economic transforma-
tion in which sovereign power has a key, judicious role. °¬
And it is this last-mentioned condition that provides
the more comprehensive formulation of the reorganis-
ing command structure of states in the condition of
finance-power: that sovereignty is not the theoretical
or operational basis of political economy nor exempted
from it, but is institutionally and theoretically deter-
mined by it. is consequence is partially recognized,
in other terms, in Modern Money eory (), for
which state sovereignty is tantamount to the authority
to impose and maintain money as legitimate unit of
account for creditory relations, generating a demand
for those units and also destroying them (by removing
them from circulation) via taxation. °° e immediately
relevant argument of  is that monetary policy is
fiscal policy is social policy, and there is no monetary
economy without state debt (which is therefore a public
virtue). In terms of the broader argument of power
typology advanced here, this would mean that state
sovereignty is nothing but a term of political economy,
143. See P. Mirowski, Never Let a Serious Crisis Go to Waste (London: Verso,
2013), 56.
144. See n.54 above, L. R. Wray, Modern Money eory (Basingstoke:
Macmillan, 2012), Ch. 2, and, for a discussion of the genealogy of MMT,
‘From the State eory of Money to Modern Money eory’, Levy Economics
Institute Working Paper 792, March 2014, www.levyinstitute.org/pubs/
wp_792.pdf; also P. Tcherneva, ‘Chartalism and the tax-driven approach to
money’, in P. Arestis & M. Sawyer (eds.), A Handbook of Alternative Monetary
Economics, (Cheltenham: Edward Elgar, 2006), 69–86.
806
Collapse 8.indb 806 27/11/2014 15:40

and that, as such, it is not typologically distinct from

finance in either its institutional operation or ontology.
Yet if the state is a financial institution, it is the only
one that fabricates and imposes money on a popula-
tion that must then use it to pay taxes, and it is for this
reason also a distinct and unique financial institution
in its sovereign power. Taxation is the state’s premon-
etary but nonetheless financial claim over the power
organization of social institutions. In terms of finance-
power, taxation is the price of the state—the price of
monetisation—for the nonstate sector. Furthermore, as
condition of the monetary arrangement of price, the
sovereign state is only a subordinated necessity for the
chronic reordering of complex modern societies qua
risk-orders. Which is only to reiterate through the mon-
etary dimension of finance-power that sovereignty and
finance comprise a nexus—modern capitalism—that is
at once congruent and also internally disparate, but
is in any case constituted as finance-power. As such,
the state-finance nexus is a particularly prominent,
because systemically ineliminable, example of a gen-
eral requirement of capital-power: that finance-power
maintain institutions in order to advance capitalization,
including, for example, sovereign jurisdictions with
the authority to sanction and enforce the contracts
fabricating derivatives (jurisdictions which in theory
need not be nation-states).
807
Collapse 8.indb 807 27/11/2014 15:40

COLLAPSE VIII
e Political Risk of Futurity

In general, then, finance-power is bound to capital-
order, an organization of power by which greater and
lesser magnitudes of capitalization can be socially
implemented—and transformed at every instance
thanks to the price indexing of that power-ordering:
price qua misfortune transforms the order of power
it measures. Constituted by the arkhéderivative, the
dynamism of capital-power (‘the most dynamic of all
historical orders’) is not reducible to nor predicated
on the history or sociology of the capital-order but
is a result of the thetic futural contingency and auto-
sabotage of price. Capital-power is in other words a
prevailing risk-order dedicated to the future contin-
gency of the present and, at the same time, to its partial
incapacitation. Two mutations to primary categories
of modernity can then be identified, serving here as
terminal remarks:
Statist futurity. In the political economy of sover-
eignty, statism and even sovereignty itself cannot be
opposed to futural contingency. On the contrary, in
the near-equality of aggregate price levels of (neces-
sarily local) states with (necessarily crossbordered)
derivative markets the state is a particularly privileged
organization in capital-ordering, but one that now
has a surmountable price: as noted, because deriva-
tive markets operate across borders, their monetary
levels are not limited by the monetary constraints
808
Collapse 8.indb 808 27/11/2014 15:40

that particular states have to observe, an operational-

historical exorbitance that is theoretically warranted.
And because states are now explicitly priced (if not
outpriced) sovereignties, they too occasion not just the
autosabotage of capitalization (which is the standard
criticism of the state by advocates of the so-called
‘free market’), but also the thetic futural contingency
of pricing. To use Ayache’s formulas, the state too is a
medium of contingency or a technology of the future.
Dynamic and plastic rather than static (despite
the etymology, which provides only a lexical rather
than semantic constraint here), the state as a political-
economic term deposes the inviolability of sovereignty
in its actuality and also its theoretical-ideological jus-
tifications. e state may be a term of social sabotage,
but in this it is not typologically distinct from any
other instance of capital-power (which is why the ‘free
market’ is an untenable doctrine); it is distinct only
with regard to its still relatively large size in terms of
prices it can set, in being an identifiable actor, and
the authority to explicitly transmit its finance-power
across all social institutions by law and taxation. As the
price of monetisation, taxation itself is at once dually
sabotage (the standard libertarian complaint) and,
typically, a large power over collective thetic futurity.
Political Reason. Requiring an order yet dynamically
transforming it without certainty in its thetic futural
contingency, finance-power observes and instantiates
809
Collapse 8.indb 809 27/11/2014 15:40

COLLAPSE VIII
a risk rationality to which even sovereign states as

prominent modes of power are subordinated. If power
in modernity is predominantly organized between
states and capitalists, it has been primarily determined
across that history according to a risk-rationality.
is is a history of sabotage in order to accrue power
via price setting. And it is inextricably also politics, the
chronic transformation and contestability of power (‘it
could have been different’) predicated on the definitely
uncertain future posited each time by price. It is not
just that politics is inaugurated with each price qua
instantiation of capital-power, apprehended now as a
sabotage-contingency duality. Politics itself now means
not just what the future will be but also the power
over the magnitude of futural contingency and who
or what owns it across the entire social order, includ-
ing but not limited to the sovereign state. As such,
politics is not predicated on the relation to statedom,
although that, also, is not proscribed. Rather, politics
is more generally both constituted and determined
by risk-rationality, which is to say with a view to the
uncertainties generated by the autosabotage of power
and the contingencies of abstraction, revision, and
thetic futurity of the arkhéderivative that splits the
present from itself. Politics in risk-rationality is then
occasioned in terms that are not commutative with
qualitative determinations of authority and command,
and it moreover rescinds any priority conventionally
810
Collapse 8.indb 810 27/11/2014 15:40

granted to them—and, with that, it also rescinds reason

in its sovereignty (if ever there was such) or social
normativity, maintaining both only so as to reorganize
the necessary misfortune of price.
811
Collapse 8.indb 811 27/11/2014 15:40

Bna-443 Malik 2014 The Ontology of Finance

Uploaded by

Copyright:

Available Formats

Bna-443 Malik 2014 The Ontology of Finance

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bna-443 Malik 2014 The Ontology of Finance

Uploaded by

Copyright:

Available Formats

Malik, Suhail

Book Part — Published Version

Provided in Cooperation with:

This Version is available at:

Standard-Nutzungsbedingungen: Terms of use:

Collapse 8.indb 3 27/11/2014 15:39

Collapse 8.indb 1 27/11/2014 15:39

Notes on Contributors and Acknowledgements 

Collapse 8.indb 2 27/11/2014 15:39

The Ontology of Finance:

e  financial crisis presented two overt lessons:

1. Bank of International Settlements (BIS), ‘Table 23A: Derivative

Collapse 8.indb 629 27/11/2014 15:40

derivatives market, give or take a couple of trillion

2. e World Bank, ‘World Development Indicators: Gross domestic

Collapse 8.indb 630 27/11/2014 15:40

percent of the notional value; a sum comparable with

5. O. Kaya, ‘Reforming OTC derivatives markets’, Deutsche Bank

Collapse 8.indb 631 27/11/2014 15:40

upended (as this article will demonstrate)—by these

7. M. Hudson, e Bubble and Beyond (Dresden: ISLET, 2012); J. C. Hull,

Collapse 8.indb 632 27/11/2014 15:40

as to the creditworthiness of all financial institu-

13 March 2013, Washington DC [michael-hudson.com/2013/03/government-

Collapse 8.indb 633 27/11/2014 15:40

the SMP circumvents this core injunction by providing a guarantee for

Collapse 8.indb 634 27/11/2014 15:40

directives formulated by the G in  sought to

Collapse 8.indb 635 27/11/2014 15:40

of risk-management and the provision of liquidity to

11. FSB, Implementing OTC Derivatives Market Reforms, 25 October 2010, 8,

Collapse 8.indb 636 27/11/2014 15:40

If finance (represented by banking or derivatives mar-

Collapse 8.indb 637 27/11/2014 15:40

at overview also presents the primary features of

Collapse 8.indb 638 27/11/2014 15:40

sectorial terms but according to the universalising yet

13. See R. Mackay and A. Avanessian (eds.), #Accelerate: e Accelerationist

Collapse 8.indb 639 27/11/2014 15:40

Le¶ Accelerationism from its neohumanist tendencies:

14. Accelerationism’s ambivalence towards Marx(ism) is clearly presented

Collapse 8.indb 640 27/11/2014 15:40

subjective norms can be progressively transformed

16. e neorationalist position is espoused notably by R. Brassier,

Collapse 8.indb 641 27/11/2014 15:40

the other side—the side of the social order constituted

.     

e power determination of finance sought here is

17. J. Nitzan and S. Bichler, e Global Political Economy of Israel (London:

Collapse 8.indb 642 27/11/2014 15:40

business dogma has it) to maximize profits, but rather

18. Ibid., 11.

Collapse 8.indb 643 27/11/2014 15:40

systemically and in its aggregate or micro tenden-

Collapse 8.indb 644 27/11/2014 15:40

‘the discounted value of future earnings capacity’.§

Collapse 8.indb 645 27/11/2014 15:40

by price and pricing rather than being the substantial

(i) Indexing the power of ownership indifferently to

e financial crisis presented two overt lessons:

2. e World Bank, ‘World Development Indicators: Gross domestic

directives formulated by the G in sought to

at overview also presents the primary features of

16. e neorationalist position is espoused notably by R. Brassier,

.     

e power determination of finance sought here is

at this renders untenable any distinction between

.. : 

e myriad derivatives structures prevalent in finance

36. e technical account in this section paraphrases elements of the

.. : 

is straightforward illustration demonstrates that