The Worth of Goods This page intentionally left blank The Worth of Goods Valuation and Pricing in the Economy Edited by Jens Beckert and Patrik Aspers 1 3 Great Clarendon Street, Oxford OX26DP Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York # Oxford University Press 2011 The moral rights of the authors have been asserted Database right Oxford University Press (maker) First published 2011 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data Data available Typeset by SPI Publisher Services, Pondicherry, India Printed in Great Britain on acid-free paper by MPG Books Group, Bodmin and King’s Lynn ISBN 978–0–19–959464–1 (Hbk) ISBN 978–0–19–959465–8 (Pbk) 13579108642 n ACKNOWLEDGMENTS This volume is part of a larger research project on markets at the Max Planck Institute for the Study of Societies in Cologne. Issues of valuation and pricing on markets are important aspects of this project: understanding how value is constructed in markets and how prices for goods emerge is key to understand- ing the operation of the economy. In recent years, valuation and pricing have generated great interest among economic sociologists and now comprise a significant research area in the discipline. This book assembles research articles from some of the core contributors to the debate on value and pricing in economic sociology. The chapters were presented at two conferences on the topic of valuation and pricing that we organized in the summer of 2009. The first conference, “Valuation and Price FormationonMarkets,” took place in June 2009 at the German–Italian confer- ence center of Villa Vigoni in Menaggio. A second miniconference on “Price and Value in Markets and Firms” took place in July 2009 in Paris as part of the annual meeting of the Society for the Advancement of Socio-Economics (SASE). We would like to thank all participants, including those who commented on the papers presented, for their contributions. We are grateful to the director of Villa Vigoni, Gregor Vogt-Spira, for his hospitality, and to his staff for their generosity at this truly remarkable place. We thank the president of the SASE, Kathleen Thelen, for supporting the miniconference during the Paris meeting. Thanks also to Martha Zuber and her staff, Annelies Fryberger and Miranda Richmond-Mouillot, for their outstanding organizational support. The path from the conferences to the publication of this book is by no means the result of our efforts alone. We would not have been able to succeed without the help of many people, above all Astrid Dünkelmann and Cynthia Lehmann from the Editorial and Public Relations Unit at the Max Planck Institute. Casey Butterfield carefully edited all contributions and coordinated much of the communication of the project between authors, editors, and the publisher. Scott Kushner translated the chapters by Marie-France Garcia and Lucien Karpik from the French. Emma Lambert of Oxford University Press organized the production of the volume at the publisher. To all of them, our warmest thanks for their very thorough work. Finally, we would like to thank David Musson of Oxford University Press for his support of the project. Patrik Aspers gratefully acknowledges the support of Research Grant No. M2007- 0244:1-PK from the Riksbankens Jubileumsfond and Research Grant No. 2009-1958 from the Swedish Research Council. Jens Beckert Patrik Aspers Cologne and Stockholm, October 2010 This page intentionally left blank n CONTENTS LIST OF FIGURES ix LIST OF TABLES x NOTES ON CONTRIBUTORS xi INTRODUCTION 1 Value in Markets 3 Patrik Aspers and Jens Beckert PART I WHAT IS VALUABLE? 2 Price and Prejudice: On Economics and the Enchantment (and Disenchantment) of Nature 41 Marion Fourcade 3 What Is the Price of a Scientific Paper? 63 Lucien Karpik 4 The Value of Ethics: Monitoring Normative Compliance in Ethical Consumption Markets 86 Peter Gourevitch 5 The Transcending Power of Goods: Imaginative Value in the Economy 106 Jens Beckert PART II AESTHETIC MARKETS 6 Symbolic Value and the Establishment of Prices: Globalization of the Wine Market 131 Marie-France Garcia-Parpet 7 Pricing Looks: Circuits of Value in Fashion Modeling Markets 155 Ashley Mears 8 Damien’s Dangerous Idea: Valuing Contemporary Art at Auction 178 Olav Velthuis 9 Infinite Surprises: On the Stabilization of Value in the Creative Industries 201 Michael Hutter viii CONTENTS PART III FINANCIAL MARKETS 10 Forecasting as Valuation: The Role of Ratings and Predictions in the Subprime Mortgage Crisis in the United States 223 Akos Rona-Tas and Stefanie Hiss 11 Selling Value in Kenya’s Nairobi Stock Exchange 247 Christopher Yenkey 12 Coping with Contingencies in Equity Option Markets: The “Rationality” of Pricing Charles W. Smith 272 PART IV ORGANIZATIONS 13 Valuing Products as Cultural Symbols: A Conceptual Framework and Empirical Illustration 297 Davide Ravasi, Violina Rindova, and Ileana Stigliani POSTSCRIPT 14 What’s Valuable? 319 David Stark INDEX 339 n LIST OF FIGURES 2.1 The two roles of economics 47 5.1 Typology of value 111 6.1 Wine investment: Capital gains in a bottle 139 7.1 Editorial and commercial worlds in the fashion field 161 11.1 Creating familiarity with the industry in awareness phase advertisements 259 11.2 Establishing firm performance in awareness phase advertisements 260 11.3 Countdown phase advertisement 263 11.4 IPO advertising relative to regional population 265 11.5 IPO advertising relative to regional wealth 266 n LIST OF TABLES 7.1 Range and averages of models’ earnings per job 164 8.1 Summary of conditions determining the use of price mechanisms 182 11.1 Descriptive statistics of each initial public offer 254 11.2 Correlations between number of new NSE accounts opened and firm, offer and market-level attributes 254 11.3 “Psychographic types” of consumers, as defined by advertising agency 257 11.4 Four-stage advertising strategy used in Kenyan privatizations 258 n NOTES ON THE CONTRIBUTORS Patrik Aspers is Associate Professor of Sociology at Stockholm University. Aspers’ topics of research include economic sociology and sociological theory. His research in the field of economics has concentrated on markets, with particular emphasis on the question of market constitution. He has conducted empirical work on the garment industry. His recent books include Markets (Polity Press, 2011) and Orderly Fashion: A Sociology of Fashion (Princeton University Press, 2010). Jens Beckert is Professor of Sociology and Director of the Max Planck Institute for the Study of Societies in Cologne. His general research interests include economic sociology, organizational sociology, sociology of inheritance, and sociological theory. Beckert’s current work focuses on the sociology of markets. He is the author of Beyond the Market: The Social Foundation of Economic Sociology (2002) and Inherited Wealth (2008), both published by Princeton University Press. Marion Fourcade is Associate Professor of Sociology at the University of California, Berkeley. A comparative sociologist, she is interested primarily in cross-national differences in political and economic cultures. She has worked comparatively on the formation of knowledge, disciplines, and professions; the making of economic policies; the forms of political organization; and international processes and dynamics. Her first book, Economists and Societies (Princeton University Press, 2009), explores the institutions and cultural forces that have shaped the professional identities, practical activities, and disciplinary projects of economists in the United States, Britain, and France in the twentieth century. Marie-France Garcia-Parpet is a French anthropologist who presently works for the French National Institute for Agricultural Research (INRA) and is a member of the Centre de sociologie européenne (Ecole des hautes études en sciences sociales). Her research focuses on the social construction of markets. She has recently published a book on the globalization of the wine market and its repercussions for the field of wine-production in France. Peter Gourevitch is Founding Dean of the School of International Relations and Pacific Studies and Distinguished Professor of Political Science at the University of California, San Diego. His research interests include corporate governance