Boom and bust in financial and housing markets: re-readings through Schumpeter and Bourdieu

This chapter explores policy on and regulation of financial markets from the perspectives of rightist economist Joseph Schumpeter and leftist sociologist Pierre Bourdieu. Why these two theorists? Because one, Schumpeter – a critical friend of markets – well illustrates contemporary economic thinking on causes of market crises. He gets us half way to understanding why crises occur and why policy makers repeatedly do more to hasten than to lessen them. Schumpeter gives us the ‘what happens’ half of the sad story. The other, Bourdieu, represents the sociological and cultural thinking that remains so undeveloped in economic analysis. He has a nuanced, empirically-based account of the social sources of power, is sympathetic to non-market forms of social interaction, and is a fierce critic of neoliberalism and of what today has become known as market fundamentalism. Bourdieu gives us the cultural ‘why and how’ of the story. Taken together – or rather alongside each other (for they offer complementary rather than similar stories) – these two permit us to better understand policy issues and regulatory failures vis-à-vis boom and bust in financial and housing markets. Also, taking these two together, as bearers of the split in knowledge between economics and the social sciences, provokes some thoughts about the inadequacy of the present knowledge base for policy making and about the intellectual challenge that this implies.