The Ontology of Uncertainty in Finance: The Normative Legacy of General Equilibrium

Abstract

This paper considers in detail the ontological and normative presuppositions of the state-contingent approach to pricing commodities first introduced by Arrow (Le rôle des valeurs boursières pour la répartition la meilleure des risques. Econométrie, Centre National de la Recherche Scientifique, Paris, 1953) in his model of general equilibrium under uncertainty, which became a milestone in the theory of finance. By contextualizing Arrow’s fundamental contribution and subsequent developments in finance, it demonstrates how this new conceptual framework implied certain technologies—both intellectual and financial. In showing how theoretical thinking about finance was underlying institutional developments in finance, this paper complements the familiar narrative of the performativity of economics.