Critical Perspectives on Accounting 52 (2018) 57–68

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Critical Perspectives on Accounting

journal homepage: www.elsevier.com/locate/cpa

Pataphysics of finance: An essay of visual epistemology q

Christophe Schinckus, Professor of Finance ⇑
Department of Economics and Finance, RMIT University, Vietnam

a r t i c l e i n f o a b s t r a c t

Article history: Since the economic crisis of 2008, numerous observers have called into question the way
Received 3 July 2014 that financial knowledge deals with economic reality. In this challenging context, the time
Revised 3 August 2016 has come to embark on a reflection about the role of finance (and financial knowledge) in
Accepted 3 August 2016
our contemporary society. This article contributes to this reflection by expanding the pro-
Available online 17 August 2016
cess of research through a pataphysical parody illustrating the imaginary dimension of
financial knowledge and its implications for accounting practices. Although this imaginary
Keywords:
aspect of financial knowledge is often forgotten in finance, it is nevertheless very important
Pataphysics
Financial economics
since, as I will explain, it directly shapes the computerization of financial markets and can
Accounting eliminate the economic referent of accounting signs. These claims will be discussed
Hyper-reality through the lens of a visual epistemology based on the science of imaginary solutions
Visual arts (pataphysics) to illustrate this imaginary nature of financial models. Discussion of the para-
doxical consequences implied by increasing computerized implementation of an imaginary
solution will ensue. More generally, this paper proposes, on one hand, an original (and crit-
ical) perspective on financial knowledge, and on the other hand, an invitation to discuss
and escape (from) the mainstream paradigm for the purpose of promoting pluralism in
finance.
Ó 2016 Elsevier Ltd. All rights reserved.

1. Introduction

As a part of culture, science is a human activity aimed at developing justified beliefs about the world (Lyotard, 1979;
Rorty, 1979). Some of these beliefs progressively crystallize and become stabilized conventions. However, scientific knowl-
edge is, by definition, incomplete in various ways (van Fraassen, 1991), leading scientists to create an ‘‘objective illusion”
(Baudrillard, 1981,1997) whose justification can be studied through several conceptual frameworks widely familiar to
philosophers: realism, empiricism, constructivism, and so on. Science is a human practice and therefore a specific imaginary
framework (shared by individuals) projected onto phenomenological events. This article deals with a very specific imaginary
framework called financial economics (‘‘finance”), which today refers to the science of ‘‘the allocation and deployment of
economic resources” (Bodie, Merton, & Cleeton, 2009). Finance as a field of research emerged in the 1950s when many busi-
ness disciplines sought to enhance their prestige by embracing quantitative methodologies developed in economics.1 This
paper will investigate the imaginary dimension of financial knowledge through a burlesque analysis of two well-known
financial models and their implications both for the organization of financial markets and for accounting practices. My reflection

q
I thank the editors and reviewers for their constructive comments.
⇑ Correspondence address: 702 Bd Nguyen Van Linh, District 7, 70000 Ho Chi Minh, Vietnam.
E-mail address: Christophe.Schinckus@rmit.edu.vn
1
On the emergence of financial economics, see Jovanovic (2008), Fourcade (2009) or Fourcade and Rakesh (2009).

https://doi.org/10.1016/j.cpa.2016.08.003
1045-2354/Ó 2016 Elsevier Ltd. All rights reserved.
58 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68

will be based on what specialists in contemporary literature call ‘‘pataphysics,” which, roughly speaking, refers to a sceptical
questioning of the social conventions (presented as imaginary solutions) that structure our society. In extending pataphysical
scepticism into the world of scientific inquiry, this essay can be seen as an argument, a plea2 for pluralism in science (and more
precisely in finance).
After defining pataphysics and its parodic way of dealing with knowledge, I will present, in the second section, two visual
entities evoking two key financial models. For the purpose of the analysis, these two models will not be explicitly named in
the second section (although readers familiar with the basics of finance will easily recognize them). The purpose of these
illustrations is to emphasize the imaginary dimension of financial models and therefore their remoteness from the economic
reality to which they refer. Because all scientific theories are idealized and incomplete representations of reality, there are
several ‘‘imperceptible gaps” that exist between reality and scientific knowledge. These gaps result from the fact that all the-
ories necessarily ‘‘miss something” about the reality that they are supposed to describe (van Fraassen, 1991). The visual par-
odies I propose aim to promote the necessary diversity of interpretations of these epistemological gaps propounded by the
philosopher van Fraassen (1991). This paper will develop this perspective contrasting with the financial mainstream, which
uses computerization of the financial sphere to shape financial reality in accordance with a specific theoretical framework.
Replacing financial markets with their theoretical representation in this way tends to eliminate gaps between reality and
models, therefore reducing the potential diversity of interpretations (pluralism) in finance. Although this trend towards com-
puterization of the financial sphere is almost universal (i.e. it is seen in all countries regardless of the culture), this process
does not necessarily imply a ‘‘uniformization of knowledge.”
In the third section, I will illustrate the ‘‘reification of theory.” After illustrating this phenomenon with concrete examples
(flash crashes), I will explain how this evolution of the financial sphere results from a computerized implementation of finan-
cial (mainstream) knowledge: by increasing the atomicity (number of actors), the liquidity (number of transactions in one
day) and the transparency (everything is recorded) of markets, computers have brought these markets closer to the theoret-
ical (hence imaginary) concept of a ‘‘perfectly competitive market.” In this context, we observe an imaginary construction of
financial reality. The reification of theory (i.e. the theoretical representation of reality progressively becomes the reality) con-
tributes to the development of a ‘‘financial hyper-reality” (Macintosh, 2003; McGoun, 1997; Schinckus, 2008), generating a
paradoxical circumstance in which we have financial markets without an economic referent (automated trade is discon-
nected from economic reality) or traders (transactions are automatically traded by algorithms). This situation generates
much debate about the potential bridge between the economic (productive) sphere and the financial (speculative) industry
(Cooper, 2015; Walker 2016). I will investigate this aspect in the fourth section, in which the implications of this imaginary
construction of the financial reality of accounting will be discussed.

2. Financial knowledge through the lens of pataphysics

Pataphysics is usually presented as ‘‘the science of imaginary solutions, which symbolically attributes the properties of an
object, described by their virtuality, to their lineaments” (Jarry, 1996, p. 21). The word ‘‘pataphysics” was invented by a group
of French schoolboys in the 1880s and used as ‘‘a barrage of mockery aimed at their unfortunate physics teacher, Mr. Félix-
Fréderic Hébert” (Hugill, 2012, p. 207). The first article dealing with pataphysics appeared in 1893 in the magazine L’écho de
Paris littéraire illustré. The author, Alfred Jarry (1873–1907), was an eccentric whose texts, novels and theatre plays were pep-
pered with sarcastic and sceptical reflections on society.3 Although Jarry’s works featuring the fictional character ‘‘père Ubu”4
defined all the symbolic foundations of pataphysics,5 the relationship between pataphysics and science is rooted in the text
entitled Gestes et opinions du Docteur Faustroll, pataphysicien, written in 1898 (but published in 1911). The character of Faustroll
was a sixty-three year old scientist who was ‘‘an altogether more scientific and exceptional entity than Ubu” (Hugill, 2012, p.
220). This text, which is often considered as the bible of pataphysics, also clarified how a pataphysical perspective can be useful
for analyzing scientific conventions. On this point, Vauberlin (2010) explained,
‘‘A reading of Gestes et Opinions suggests and makes possible an indefinite development of Speculation [. . .] But we must
beware: Speculation here does not consist in leading Faustroll toward the imaginary, the extraordinary, the rare, the fan-
tastic, or even toward humour, the nth degree, or pataphysics since Faustroll is already there! [. . .] Speculation here con-
sists of a ‘what if’ (Vauberlin, 2010, p. 21)
In this context, scientific authority (symbolized by Doctor Faustroll) appears as the gatekeeper of scientific conventions,
which are seen as a particular way of giving a meaning to the world/society. Pataphysics provides a burlesque way of dis-
cussing science and of illustrating the imaginary dimension of knowledge by speculating about what would happen if the
conventions that govern our knowledge and society were structured in a different way. What if all scientific models were
to become reality? What if scholars were to confuse their creation with reality? In his texts, Jarry dealt with such questions
sarcastically by emphasizing that science tends to replace the old superstition of religion. Because pataphysics is the science

2
One could claim that all ideas that must be defended are presumed guilty.
3
See Hugill 2012, Chap. 9) for more details about Alfred Jarry’s works.
4
‘‘Père Ubu,” who personified the unfortunate teacher of physics (Mr. Hebert) was the monstrous protagonist of a theatre play written by Alfred Jarry.
5
For instance, the symbol of Gidouille refers to the belly of Mr. Félix-Fréderic Hébert, Jarry’s physics teacher.
 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68 59

of imaginary solutions whose definition is itself an imaginary perspective, it exists only in its own tautological and instant
formulation. This spontaneity6 paves the way to a ludic (and critical) analysis of knowledge. Pataphysics often uses caricatural
illustrations to question the appropriateness of conventions ossified by social traditions:
‘‘The aim of pataphysics is not to establish a set of governing principles, nor is it to directly oppose them, but to discredit
the functions of those governing principles through humour” (Jeffra, 2009, p. 4).
In this Section, I will use pataphysics as a burlesque exploration of theoretical conventions ossified by financial knowl-
edge by questioning what if this knowledge were based on another imaginary solution with different codified conventions.
I will use pataphysical spontaneity as exorcism, as a means of escaping from the classical knowledge promoted by the finan-
cial mainstream. I have pushed open the door of this section like an explorer leaving his disciplinary mantle in the academic
room. In a sense, this section adopts an extreme epistemological position in order to shake all predicative ideas in accordance
with the ‘‘research from the periphery” approach promoted by Chabrak and Gendron (2015). Employing a pataphysical par-
ody will allow me to escape from this ‘‘objective illusion” enhanced by financial knowledge that I teach (with pleasure) by
irrationalizing some of its key concepts/models (in other terms, this section is far from the perfect rationality usually pro-
moted in financial economics). In so doing, I will present financial models (and more generally finance) as a specific imag-
inary solution developed by scholars. This idea of presenting finance as imagination has been studied in the field of
anthropology of finance, where authors (De Goede, 2008; Hertz, 2000; Ho, 2012; Ortiz, 2012) discuss the moral and political
implications of this dimension. Regarding this aspect, De Goede (2008, p. 156) wrote that ‘‘risk management itself has always
had to deploy imagination in order to offer a statistically categorizable and calculable world.” Although financial models are
often presented as ‘‘statistically significant,” their technique of calculation is never objective; they require a particular cul-
tural constitutive work to give a specific meaning to phenomena (Callon, 1998; Du Gay & Pryke, 2002). A pataphysical anal-
ysis can be looked on as a complementary approach to these anthropological studies. By parodying the internal logic of
models, pataphysics emphasizes how conventions are usually codified only for convenience (Beaumont, 1984). Such a per-
spective offers a creative way of thinking outside of the well-established traditions. Everett (2011) promoted this kind of
approach, which he associated with a ‘‘good” cynicism (kynicism) preventing knowledge from evolving towards a potential
intellectual conservatism. Concretely then, this section ironically apes the internal logics of financial models to better
emphasize their imaginary dimension and to suggest other conventions. This is an important first step towards discussing,
as I will do in the next two sections, the implications of this imaginary nature for financial and accounting practices.
Fig. 1 shows a ‘‘pataphysication” of a well-known pricing model transformed into what I call a Culinary Al-dente Pasta
Model (CAPM). This visual model suggests that the green quotient of a white piece of leek (stock returns) is equal to its sen-
sitivity to greenness (the stock’s beta) minus the vegetable combination between green and white (risk premium). The Culi-
nary Al-dente Pasta Model is not only composed of pieces of leek. We can also observe the importance of other pata-
components: pasta, information about financial prices and some explicit references to pataphysics (such as Jarry’s Ubu
and the Grande Gidouille as a watermark on the two ‘‘lasagne banknotes”). The metal handle on the canvas reminds viewers
of the handy and convenient dimension of my model (which appears to be an important feature in the financial literature,
McGoun, 1992).
In accordance with the vast majority of financial models, my visual model is not limited to a specific culinary situation but
it could be easily taken and applied to different vegetables: if you want to value the greenness of another vegetable asset,
simply choose the appropriate green benchmark. It is worth mentioning that the pasta on the canvas was cautiously used
while it was ‘‘al dente.” This term refers to a way of cooking pasta so that it keeps a ‘‘small resistance to the tooth.” This
al-dente dimension is a conceptual (but edible) reference to the model’s degree of resistance to reality, which appears to
be a key characteristic of the financial model. By resistance, I mean that the model does not follow the evidence or rules
of financial reality. It offers an intellectual resistance to empirical observations, as Roll (1977, p. 130) explained for a key
model in finance: it is ‘‘not testable unless the exact composition of the true market portfolio is known,” which is impossible
since that would imply that ‘‘all individual assets are included in the sample.”7 In the same vein, my culinary al-dente model
cannot be empirically tested because the real greenness of a specific vegetable should be valued on the basis of a salad composed
of all the individual vegetables. One could also wonder whether it is possible to make money with my Culinary Al-dente Pasta
Model. From a statistical point of view, my pataphysical model has the same chance as other financial models of becoming an
instrument to make cash: if financial models could make people rich, this would have been known a long time ago.
The second target of my pataphysical exploration is the idea of the ‘‘black-box financial model,” which is visually asso-
ciated with a black box with different music scales. The black-box concept is very common in finance since it refers to an
instrumentalist way of using models. In this context, practitioners applying a model do not necessarily know the theoretical
assumptions that were made in developing the model (Mackenzie, 2006). My visual representation is insidiously called ‘‘the
black and scales model” and is composed of two pictures: on the left (Fig. 2a), a black box with music scales is shown inviting
people to trust investing activities (collage on the box) and to push the model’s hypnotic button.8 The right-hand picture

6
The spontaneity of pataphysics contrasts with the historical anchoring usually associated with scientific disciplines for which past achievements are often
presented as the expression of their ahistorical universality.
7
For further details about debates on testability of the Capital Asset Pricing Model, see Roll (1997), McGoun (1992), Frankfurter and McGoun (1996).
8
That enigmatic button explicitly refers to the pataphysical Grande Gidouille, which has become the general symbol of pataphysics.
60 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68

Fig. 1. Culinary Al-dente Pasta Model (Pasta, leek, paper and metal handle on canvas 50 cm x 40 cm).

Fig. 2. The black and scales model (black acrylic cardboard case, cauliflower, papers, 32 cm x 14 cm x 24 cm).

(Fig. 2b) presents the opened black box showing financial (pata) data ruled by some music scales on the cover and what appears
to be a brain in the box (with an allusion to Jarry’s Ubu character).9
This caricatural illustration visually describes the epistemological role of a black-box financial model: it provides a useful
instrument for setting to music the complexity of financial markets. Moreover, thanks to this conceptual framework, people
do not have to rack their brain; they can use the model as a scientific measure capturing financial scales resulting from the
market’s moods. In this perspective, this black-box model can be looked on as a ‘‘disembraining machine” (Hugill, 2012, p. 7),
as is suggested in the right-hand picture. In a sense, all financial mainstream models are ‘‘disembraining machines”10

9
See footnote No. 5 about the importance of Ubu in pataphysics.
10
‘‘Disembraining machine” is a key theme in pataphysics (see Hugill, 2012, p. 7).
 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68 61

because they invite users not to think for themselves, models being rational whereas human beings are not. By illustrating this
black-box property of financial models, Fig. 2 offers a visual epistemology that shows the metaphorical implications of such a
use of models.
By parodying the internal logic of these two key financial models, the visual entities presented in this section offer a visual
epistemology illustrating the creative dimension of financial knowledge and question its methodological consequences.
Specifically, my pataphysical illustrations ape the internal and semantic coherence of each model to emphasize its distance
from the financial activity to which it refers. These models provide an approximate description of financial activity and the
progressive computerization of financial markets is making them meaningless. The next section will investigate this aspect
and explain how this imaginative activity (i.e. financial models) can shape the reality of financial markets by impacting on
accounting practices.

3. From imagination to reality

Financial economics has now become a very respected field with serious theoretical models to explain, describe, predict
or invent the reality in which business finance operates.11 Finance is a logical discipline based on weighty concepts such as
‘‘perfect rationality,” ‘‘Gaussian framework” and ‘‘arbitrage.” For more than fifty years,12 financial theory has been developed
in an objective framework that we call neoclassical finance (Ross, 2004) in which everything (social behaviours, financial inter-
actions, etc.) is reduced to empirical regularities.13 From this framework emerged the pillars of finance: the Markowitz Theory,
the Capital Asset Pricing Model (CAPM), the Efficient Market Hypothesis and a whole collection of improved CAPMs as well as
the famous Black & Scholes model. This field offers an argumentative framework and a specific interpretation of the world.
Nowadays, financial economics meets all required academic criteria to be considered as a ‘‘science” (Jensen, 1978).
Although there has been much debate and criticism of the epistemology promoted by financial economists (Frankfurter &
McGoun, 1996; Lagoarde-Segot, 2016; Schinckus, 2015), the knowledge they have developed directly influences financial
practices by providing pragmatic rules about investments.14 These rules have progressively become widespread in the finan-
cial profession to the point that they have even been automated in the recent computerization of the financial sphere
(Mackenzie, 2006). The aim of this section is to illustrate this evolution by discussing its epistemic (imaginary) foundations.
Since the 1980s, the greatest stock exchanges have been automated and auctions have been replaced by trading algo-
rithms. Every financial marketplace is now equipped with an electronic trading platform on which a large part of usual finan-
cial transactions can be automatically generated by ‘‘clever algorithms,” as illustrated in the graph below.
Fig. 3 shows a growing importance of automatic trading in every part of the world. While almost 70% of equities are
already traded algorithmically, an increasing trend is observed for other (less liquid) categories of financial assets. In other
words, one can observe an increasing automation of financial markets consistent with what Baudrillard (1968, p. 215) called
a ‘‘techneme” (i.e. an automated object that tends to be more and more independent of human actions). Automatic trading is
a very convenient way of organizing financial markets, and it is a technical way of improving their efficiency. However,
Dupuy (1992, p. 50) explains that this computerization directly results from a certain ideological image of the market pre-
sented in Black’s famous article (1971). In the same vein, Muniesa (2000) explains that the automated conception of the mar-
ket corresponds to the neo-classical idea of a perfect market in which financial prices adjust quickly to information in order
to prevent arbitrage. In this perspective, financial knowledge appears to be an ‘‘imaginary solution” implemented through a
specific computerization. This way of integrating technological progress into finance results from a specific perception of
what a market should be. Mainstream knowledge is mainly founded on the idea of an efficient market, which explicitly refers
to the notion of a ‘‘perfectly competitive market” (better liquidity, better operational and informational efficiency, better
transparency and lower transaction costs).15 Actually, automatic trading represents the best way of bringing real markets clo-
ser to our idealized conception of an efficient market. In this vision, technological progress seems to be used to create a virtual
market close to the idea of the ‘‘perfect market” that we find in our theoretical textbooks. In other words, the progressive com-
puterization of financial markets is explicitly based on an a priori representation of the market (i.e., a specific imaginary solu-
tion). Mackenzie (2006) showed that this ‘‘theorization” of financial practices existed before the computerization of markets
through what he called the ‘‘performativity” of models. This performativity was actually the first step towards self-referent
finance, because this dimension was subsequently enhanced by computers, which provided an opportunity to create an auto-
mated imaginary projection (implementation) of theory that appears to be a ‘‘hyper-reality” (this claim has been studied in
more detail in Balwin, 2012; Macintosh, 2003; McGoun, 1997; Schinckus, 2008). While performativity requires human interven-
tion (Mackenzie, 2006; Millo & Mackenzie, 2009), financial hyper-reality can be seen as a computerized imaginary construction
of financial markets in which no human intervention is required.
Algorithms used in the computerization of the financial sphere represent the most evolved form of implemented rational-
ity. In accordance with the financial mainstream, computers and algorithms are supposed to behave rationally; to identify

11
Nobody knows the real function (descriptive, predictive or explicative) of financial theory—see Schinckus (2012) on this point.
12
For a presentation of the emergence of financial theory, see Bernstein (1995) or Jovanovic (2008).
13
The neoclassical framework does not distinguish social behaviours from actions in the analysis of financial interactions. See Schinckus (2009) for further
details.
14
See Poitras (2000) or Belze and Spieser (2005) for a historical analysis of financial practices.
15
See Fain and Roberts (1997), Claessens et al. (2002), or Jiang et al. (2002) for further details about the influence of computers on market efficiency.
62 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68

Fig. 3. Importance of algorithmic trading Source: The Economist (25th February 2013).

the arbitrage opportunity and to make the ‘‘right decision” quicker than human beings. The theoretical argument behind
computerization refers to the necessity to exploit all arbitrage opportunities in order to bring financial markets to equilib-
rium (Jiang , Tang, & Law, 2002). However, one can find counter-examples in which the so-called computerized efficient mar-
ket may generate a paradoxical ‘‘inhuman irrationality” (non-human irrationality). I shall now provide an illustration of this
claim.
On Thursday, May 6, 2010, the Dow Jones Industrial Average plunged about 9% in less than five minutes. This fall was due
to ‘‘the combined selling pressure from the sell algorithm” (SEC, 2010), which generated a ‘‘hot-potato” volume effect by
quickly buying and reselling contracts. According to an SEC report (2010), more than 27,000 contracts (49% of total trading
volume) were traded on the market between 2h45:13 s and 2h45:27 s. Because algorithms have been created to react to
news or events faster than human eyes can scan them, we may observe ‘‘unreal situations” in which half of the market
can be traded in 15 s! A very rapid and deep fall (known as a ‘‘flash crash”) in security prices may occur within an extremely
short period. It is hard to believe that a large part of the American economy (represented by the DJIA index) can really lose a
significant percentage of its value in few seconds. Subscribing to such a vision can only be done from a strictly financial per-
spective totally disconnected from economic and social reality.
Historically, financial markets are supposed to contribute to the economy by helping to create equilibrium between com-
panies in need of capital and cash holders (Shiller, 2008). In this context, financial markets and the global economy were
supposed to be connected. In the past few years, many critics (Colander et al., 2009; Shiller, 2012; Stiglitz, 2010) have ques-
tioned whether wealth created by financial markets can really be distributed beyond its immediate recipient (the financial
industry). The financial sphere has strangely appeared more and more as a self-sufficient area disconnected from society,
promoting a predatory capitalism focused on short-term profit. Shiller (2008) points out that there is no explanation for a
continuously high growth of returns in the financial sphere when real economic growth is stagnant. Regarding this discon-
nect, Aoki and Yoshikawa (2007) observed an increasing difference between statistical distributions characterizing the evo-
lution of financial variables (stock returns, foreign exchange, etc.) and those describing economic fundamentals (growth of
GDP, etc.). This observation is consistent with the idea that the financial sphere appears increasingly disconnected from its
underlying economic fundamentals (while financial variables usually follow a power-law behaviour, economic ones are
characterized by an exponential distribution).16
Extreme variations and crashes are common in finance (Kindleberger, 1989) but, in the past, they were the result of
human behaviours and they historically appeared over a period of several days. In contrast, flash crashes appear in a few
seconds because they do not result from human actions. Concretely, this kind of crash results from a computerized excite-
ment of the market by algorithms, which creates a loop effect in buying and selling trends, generating a sharp fall in security
prices, as illustrated on the following graph:
Fig. 4 illustrates the decrease of the Dow Jones Index17 resulting from the fall in security prices on May 6, 2010. The sharp
decrease in the index (combined with a significant trade volume, meaning that algorithms were operating simultaneously

16
See Aoki and Yoshikawa (2007) for further details on this topic.
17
This flash crash was not the only one observed: another occurred on the NYSE on the same day. A flash crash can also appear on emerging markets – such as
the one that caused the Bombay SE to plunge on June 20, 2011. One could claim that the market quickly returned back to its ‘‘normal level,” which is true, but
real money was involved (and lost) in that 15-s crash (see Madrigal, 2010 for further details on this point).
 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68 63

Fig. 4. Flash crash on the Dow Jones Industrial Average Index (Madrigal, 2010).

within a very short period of time) created a paradoxical situation in which we had a market with neither referent (no economic
justification) nor trader (automated trade). Flash crashes transformed the financial market into a null space of simulacra wherein
all real economic justifications have been dissipated. Schinckus (2008) analysed other dimensions18 of computerization that can
also generate an economic crisis.19
Computerization of the financial sphere is based on an a priori representation (the efficient-market hypothesis) that does
not exist outside our textbooks. However, the development of computerized power paved the way to a reification of this
imaginary concept. This hyper-reality enhanced by the computerization of financial markets does not result from potential
reality (efficient markets do not exist), but paradoxically shapes reality. This process implies an interesting way of developing
knowledge: in opposition to the classical (Popperian) way of doing science, in which models are adjusted in order to improve
their consistency with reality, financial computerization appears to transform reality to bring it closer to theory. In other
words, computerization provides an opportunity to adapt financial reality to the original theoretical model (the efficient
market). This ideological evolution tends to use the computerization process as ‘‘a unified way of making real” (reification
of theory) the financial mainstream by reducing the room for pluralism in finance. Indeed, if financial markets can be shaped
in accordance with the theoretical framework espoused by the financial mainstream then there is no other potential inter-
pretation. However, this reification of theory tends to forget that all knowledge necessarily refers to a specific imaginary way
of thinking about reality that, once formalized in a computer program, really transformed social relations and interactions by
generating unexpected or unthought-of situations (Muniesa, 2000).

4. The pataphysics of finance

As mentioned in the previous section, the computerization of financial markets is founded on the conceptual framework
implied by the efficient-market hypothesis. In this perspective, the notion of valuation of financial assets is still important.
Regarding this aspect, the two key financial models that I parodied in the first section (readers will have easily recognized the
allusion to the Capital Asset Pricing Model and to the Black and Scholes model) are largely used in practice (MacKenzie &
Millo, 2003; Millo & Schinckus, 2016). Because of this, these two models served as a theoretical referent for the computer-
ization of financial markets (Mackenzie, 2006; Schinckus, 2008).
The two visual entities that I proposed in the first section were aimed at illustrating the imaginary dimension of financial
knowledge. By extending the reasoning of these models to another (absurd) context, I emphasized their relative (imaginary)
nature. Inspired by Everett (2004, 2011), I proposed a ‘‘performative parody” (i.e. ‘‘conscious use of parody or its more overt
forms such as irony, burlesque and satire,” Everett, 2004, p. 1072) to question the theoretical conventions that have shaped
the computerization of financial markets. More precisely, I used scepticism and the irreverent dimension exemplified by
pataphysics to caricature the gap between these two models and the reality they are supposed to study. This ironic way
of questioning financial knowledge is in line with what Everett (2011) called ‘‘kynicism”: ‘‘Good cynicism – we can call it

18
I could also mention how the development of a new intranet for specialized traders contributed to a financial crash in Croatia in 2008 (Sajter & Ćorić, 2009)
or the impact of the recent ‘‘Twitter crash” in which an erroneous tweet generated a brief plunge of 130 points in the Dow Jones Industrial Average.
19
It is worth mentioning that Keynes (1936) was the first economist to emphasize the dangerousness of the gap between the financial sphere and economic
reality. This disconnect can paradoxically create unjustified economic problems, such as an increase in the unemployment rate—see Sajter and Ćorić (2009), for
a concrete example.
64 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68

kynicism [. . .] is about performance and the motivation to act, parade or protest” (Everett, 2011, p. 150). Everett (2011) dis-
tinguished good cynicism from bad through a metaphor, likening the former to a sword contributing to reflexive and critical
thinking, and the latter to the shield of intellectual conservatism.20
The first model I questioned through a pataphysical illustration was the Capital Asset Pricing Model (CAPM), a main-
stream pricing method in which the price of risk (i.e. return) for a specific stock equals its sensitivity (i.e. the ‘‘beta”) to
the market multiplied by the spread between the return provided by the market and the risk-free rate. The CAPM is a corner-
stone of financial economics, providing a conceptual framework that introduced new ideas and notions, such as ‘‘the price of
risk,” ‘‘the financial market as a benchmark,” ‘‘the beta” and ‘‘the alpha.” As Kisssel (2013) explains, all these concepts defined
by the CAPM are widely used as key variables in the algorithmic trading of stocks. The CAPM has therefore contributed to the
theoretical definition of rules and variables that were computerized by means of algorithms. In other words, this model
defined an imaginary way of reducing the complexity of asset valuation to a simple framework whose key concepts lent
themselves to easy computerization (Kisssel, 2013). Today, the CAPM is a part of financial culture (McGoun, 1992) and is still
at the heart of financial economics, as we are reminded by Fama and French (2004, p. 25):
‘‘The capital asset pricing model (CAPM) of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing
theory (resulting in a Nobel Prize for Sharpe in 1990). Four decades later, the CAPM is still widely used in applications,
such as estimating the cost of capital for firms and evaluating the performance of managed portfolios. It is the centrepiece
of MBA investment courses. Indeed, it is often the only asset pricing model taught in these courses.”
Reading the Fama and French article on the CAPM from a pataphysical point of view while eating a green salad, a deep
question popped up in my mind: what could be the value (in terms of greenness) of a white piece of leek? This is a tricky
question, albeit silly at first glance. After considering the problem, the seed of an idea took root in my mind: the leek is nec-
essarily the reference for the greenness of its parts. This assumption strangely appears to be in line with the epistemological
role played by the market in the Capital Asset Pricing Model: it is a benchmark for all its components. Although my horti-
cultural assumption is not edible, it makes sense in a pataphysical kitchen and, after all, the market has some conceptual
similarities with a leek: the first is a vibrant trading place composed of a high number of assets, while the second is an
organic embodiment of many leguminous levels of green. The visual entity (Fig. 1) presented in the first section is the result
of my thoughtful ramblings: it is a pataphysical illustration caricaturing the epistemological status of the familiar CAPM. As
McGoun (1992, p. 167) explained, ‘‘The CAPM is essentially a mathematical artefact.” In the same vein, my caricature is a
visual artefact whose purpose is to remind us of its imaginary origins: the CAPM is a theoretical framework and although
computers tend to reify it, this process has generated a lot of unforeseen consequences (such as flash crashes for example).
The second target of my pataphysical exploration was the Black and Scholes model, developed in 1973 by Fisher Black and
Myron Scholes. This theoretical framework provides a pricing method for options by assuming that financial underlying fol-
lows a geometric Brownian movement. The implementation of this model generated a great deal of debate (Haug & Talber,
2011; MacKenzie & Millo, 2003; Mackenzie, 2006; Millo & Schinckus, 2016) because, in practice, this model is often consid-
ered as ‘‘a black box which is beyond the comprehension of anyone except the mathematically astute” (Marberly & Pierce,
2012, p. 2). The Black and Scholes model can be seen as a generalization of the CAPM (Wilmott, 2000), which (partly)
explains why it was widely used by financial actors. Actually, it is worth mentioning that Black and Scholes was the first
model to be computerized, and thus played a key role in the computerization of financial knowledge (Mackenzie, 2006).
The model is often said to be used as a device that helps practitioners to price derivatives: technically, practitioners have
merely to collect suitable inputs that they integrate into the model to obtain the desired output (an option’s price). In his
book entitled The Ascent of Money, Fergusson (2008) described this process as follows:
‘‘With wonderful mathematical wizardry, Black and Scholes reduced the price of the option to [one simple] formula. . ..
Work out [the] price accurately rather than just relying on guesswork and you truly deserve the title rocket scientist”
Fergusson (2008, p. 321).
In the second section of this paper, I illustrated the ‘‘black-box property” usually associated with this financial model21
through a visual entity. Fig. 2 presents this model as a ‘‘disembraining machine” that invites actors not to think for themselves
because computerized models are rational whereas human beings are not. This rationalization of the model took the form of a
computerization of financial interactions in which algorithms (based on a revised, improved version22 of the Black and Scholes

20
Everett (2011) explains that promoting good cynicism (kynicism) is a difficult task implying, for the promoter, the taking of a risk and a kind of
endangerment because this perspective often has to compete with well-established conventions. My pataphysics-based analysis, while following most of the
rules of academic writing, is an experiment in this ‘‘endangering situation” because it is not based on an expected critical perspective (such as Marxism,
structuralism, etc.). In a sense, this essay implicitly refers to the existence of an epistemology of critical perspectives. I have tried here to combine the imaginary
perspective promoted by an ironic pataphysics with a more classical theoretical critique of the financial mainstream without breaking the reader’s expectations
in terms of the conclusion or implication for finance and accounting (see last section). This attempt would not have been possible without the open-mindedness
of the editors and reviewers, whom I thank again for their constructive remarks.
21
Some authors (Stewart 2012) have recently criticized this black-box model by stressing its negative role in the financial crisis of 2008. For further details
about this dimension, see Mackenzie (2006), Fergusson (2008), Schinckus (2008), Haug and Taleb (2011), Maberly and Pierce (2012) and Millo and Schinckus
(2016).
22
There are a variety of models derived from the framework defined by Black and Scholes, but the most important was probably the binomial model
developed by Cox, Ross, and Rubinstein (1979), which eased the computerization of option pricing (Mackenzie, 2006, p. 59).
 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68 65

model) are expected to make better decisions than human actors. By considering people using their brain as irrational, disem-
braining computerized models propose a strange imaginary solution since they can generate non-human situations (that are
paradoxically irrational), as I illustrated by citing the emergence of flash crashes. Beyond this paradoxical situation, computer-
ization of the financial sphere has also highlighted another epistemological problem: by shaping the real markets in line with
the theoretical framework developed by the financial mainstream, computerized financial markets have reduced the room for
new imaginative solutions in financial economics (the financial mainstream appears to be an increasingly closed field; see
Lagoarde-Segot, 2016). However, the unexpected effects of the reification that I presented above call, at the same time, for cre-
ative solutions to capture all these unanticipated consequences.23
The aim of this section was to detail the pataphysical approach I initiated in the second section. In mobilizing the ‘‘what-if
question” promoted by pataphysics to question the ossified conventions of science, I ironically suggested new codified rules
in light of the logic of the CAPM and the Black and Scholes model. By extending the reasoning of these two models to other
contexts, I have illustrated their imaginary nature. Such an approach promotes creative initiatives in finance and shows that
even the dominant mainstream can be a source of inspiration.24 The following section will be more practical, since I will dis-
cuss the impact of this financial hyper-reality on accounting practices.

5. Implications for accounting practices

In presenting accounting as a structured language formalizing physical and social relationships between economic actors,
Macintosh, Shearer, Thornton, & Welker (2000) and Macintosh (2003) investigated the importance of the sign and referent in
accounting. Accounting theory and practice usually associate accounting signs with real economic activities (purchase pro-
cess, production, etc.) made by a specific economic entity. Afterwards, an evaluation of these activities through accounting
models/ratios provides accounting earnings, which, idealistically, are supposed to determine the financial value of stocks
traded on the financial markets. However, as mentioned in the previous section, financial prices observed in the stock mar-
kets can become self-referent and generate an independent financial reality (a hyper-reality) without any economic justifi-
cation (referent). This situation has real implications for accounting practices, as explained hereafter.
Macintosh et al. (2000, p. 35) explained that ‘‘accounting standard setters are embracing the use of the market values on
company sheets.” Actually, market-based accounting is promoted in IFRS standards (Chane-Alune, 2006), and was made the
US accounting standard (FAS157) in 2006. Market-based accounting is often associated with the ‘‘most relevant measure” or
with the estimation of the ‘‘fair value” for financial instruments. By fair value, accountants usually mean ‘‘the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date.” (FAS, 157, FASB, 2006—cited from Power, 2010). This definition raises many questions. First of
all, it assumes the correct functioning of markets since it provides the fair value of an asset. The fictional and imaginary
aspect of this point has been discussed in the literature (Bronwich, 2007; Casson & Napier, 1997; Power, 2010). The second
point I would like to raise concerns the organization and composition of financial markets. In the light of phenomena such as
the flash crashes evoked in the previous sections, can an algorithm be considered as a market participant? Given that algo-
rithms can have a loop effect, do algorithms really propose an orderly transaction? These questions are complex, because the
notion of fair value makes sense only in a context in which agents are perfectly rational. Although at first sight algorithms
appear as the ideal choice for the implementation of perfect rational behaviour, they also display irrational behaviour (see
the emergence of flash crashes). In this perspective, does it make sense to associate the notion of fair value with prices given
by algorithms? These questions deserve further investigation. However, this is not the place to deal with them; I will instead
focus my attention on the implications of financial hyper-reality on market-based accounting practices.
As evoked in the previous section, the market value (price) of financial assets is estimated through financial models
(imaginary solutions) whose computerized implementation tends to transform the financial markets into ‘‘a perfect compet-
itive sphere” (Muniesa, 2000), as is explicitly assumed in the theoretical framework within which these models were devel-
oped. In other words, a more market-value-based accounting can contribute to this imaginary construction of an ideal
financial hyper-reality in which ‘‘neither the accounting sign [earning] nor the financial market sign [price] appear to be
grounded in any external [economic] reality” (Macintosh et al., 2000, p. 36). In so doing, the concept of fair value appears
as a simulacrum (Bougen & Young, 2012) or a copy of a copy (market price) produced by a computerized simulation of a
specific imaginary solution (i.e. the efficient-market hypothesis). Fair value tends, therefore, to coincide with its model of
simulation, which is the price given by an imagined efficient market. Market-based accounting implies an absence of differ-
ence between ‘‘true” and ‘‘false” values simply because there is no longer an economic or management referent (Bougen &
Young, 2012).
In a criticism of the consequences of financial hyper-reality on accounting, Mattessich (2003, p. 60) explained that ‘‘every
process of valuation is a social reality derived from the mental reality of having preferences.” I agree that all evaluation pro-
cesses are a mental process, but that is not really the issue here. The real question is whether or not we can confront this
social reality with an economic referent. Mattessich (2003) dealt with the mental reality by implicitly assuming a pre-
existing social reality ‘‘out there.” In his perspective, accounting valuation can only be a methodological issue, as he rightly

23
See Lagoarde-Segot (2016) and Schinckus (2015) on this paradoxical aspect.
24
See also Schinckus (2011) for further details on this point.
66 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68

mentioned. In contrast to his analysis, I go upstream in the process by dealing, in this paper, with the mental (imaginary)
framework that has shaped the market organization providing the benchmark for a market value-based accounting (social
reality). The social reality (price) directly results from a reification of theory (mental reality) through a computerized process
and, in this context, the distinction proposed by Mattessich (2003) between social reality and mental reality collapses. This
situation generates a hyper-reality in which the boundary between mental reality (imaginary solution) and social reality
(codified conventions) melts away, creating a self-referential financial sphere. If the social reality (fair value or price) is
directly shaped by the mental reality (computerized simulation of the theoretical definition of fair value or price), then
all accounting valuation based on this (mental) reality appears to be a self-referential process consistent with the financial
hyper-reality evoked by Macintosh et al. (2000). Accounting evaluation is responsible for delivering the appropriate infor-
mation for a correct decision-making process. The computerization of financial markets and its consequences on the way
financial prices are estimated raises many questions in accounting as to the nature of fair value. Indeed, if fair value is asso-
ciated with the price agreed between two market participants in an orderly transaction and this price is algorithmically esti-
mated through a computerized simulation of the idea of efficient markets, then there is an urgent need for debate in order to
preserve a market-based accounting valuation founded on an economic referent.25
This last section discussed the consequences of a reification of a specific imaginary solution on accounting practices. Like
a number of authors (Bougen & Young, 2012; Bronwich, 2007; Casson & Napier, 1997; Power, 2010) who have written on the
imaginary nature of fair value, I conclude that, in the light of my analysis, fair value is increasingly tending to become a copy
of a copy (market price) produced by a computerized simulation of a specific imaginary solution (the efficient-market
hypothesis).

6. Conclusion

This article has dealt with the imaginary nature of financial knowledge and its relationship with the increasing comput-
erization of financial markets. Financial models, like all scientific initiatives, provide an approximate description of phenom-
ena under study, in this case of financial activity. The progressive computerization of financial markets is making them
meaningless by promoting reification of theoretical (imaginary) concepts. The imaginative aspect of financial knowledge
is often overlooked and forgotten in finance but it remains important since it directly shapes the computerization and orga-
nization of financial markets and it can also have a significant impact on the economic referent of accounting signs.
In this paper, I have questioned the imaginative dimension of finance through the lens of pataphysics. Specifically, I pro-
vided a parody of the internal logic of two key financial models in order to investigate an epistemological question: what if
our financial models were based on other conventions? The visual epistemology developed in this essay illustrates the cre-
ative dimension of financial knowledge and questions its methodological consequences. Indeed, my pataphysical illustra-
tions ape the internal and semantic coherence of the CAPM and the Black and Scholes models to emphasize their
distance from the financial activity to which they refer. This point is very important since these two models served as a con-
ceptual reference in the progressive computerization of financial markets. The vast majority of algorithms dealing with auto-
matic trading refer directly or indirectly to the CAPM or the Black and Scholes model, dependingrtd on the kind of assets
traded. However, although the knowledge associated with these models is claimed to meet the criteria to be considered
science (Jensen, 1978), its computerization generates a paradoxical circumstance in which we have automated markets
without an economic referent (trade is disconnected from economic reality) or traders (transactions are automatically
traded). This idea of the self-reference of financial markets echoes the concept of hyper-reality that this article extends to
financial knowledge in line with existing literature on the topic (Macintosh et al., 2000; Macintosh, 2003; McGoun,
1997). In financial hyper-reality, self-referent financial prices are often associated with the concept of ‘‘fair value” for assets,
and strictly market-based accounting could transform accounting into a formal language without any economic referent. The
association between fair value and the price given by a computerized reification of the idea of efficient markets calls for fur-
ther investigation and debate in the literature on fair value.
Accounting is a structured language formalizing economic relationships between economic actors. When the referent of
this formalized language becomes an imaginary projection of a theoretical concept, then the fair value becomes a copy of a
copy (market price) of a computerized simulation of a specific imaginary solution (i.e. the conceptual framework implied by
the efficient-market hypothesis). In this context, accounting evaluation in its entirety becomes an imaginary solution. When
the theoretical representations of reality tend to become real, the distinction between mental and social reality collapses and
the room for a critical or reflexive analysis narrows. This absence of correspondence between reality and computerized sim-
ulation of theoretical representations opens a pataphysical door26: what if accounting valuation were based on prices pro-

25
It is worth mentioning that the 2008 financial crisis has informed the debate: several authors (Kothari & Lester, 2012; Laux & Leuz, 2010; Stiglitz, 2010)
have argued that market-value-based accounting contributed to the recent crisis by valuing mortgage securities according to their market value rather than
their real economic expected value. Concretely, several financial institutions developed predatory practices convincing people with a poor credit profile to
borrow on the mortgage market (Shiller, 2008). Consequently, the economic (real) value of these agreements was over-estimated for two reasons: 1) the
implicit assumption behind the securitization of mortgages was that the price of houses would never fall; and 2) securitization offered the theoretical certainty
that diversification would dilute the real economic risk associated with the worst agreements. This over-estimation led to an unjustified level of financial prices,
which were then used as a benchmark for the accounting valuation of financial companies.
26
Actually, this is a key role of pataphysics broadly speaking (Hugill, 2012). See Baudrillard (2002) for further details about the importance of pataphysics in a
hyper-real environment.
 C. Schinckus / Critical Perspectives on Accounting 52 (2018) 57–68 67

duced by my culinary al-dente pasta model? This question seems silly only because my model is not the dominant imaginary
solution used in finance, because it has not become an ossified convention in finance (who knows, it might become one some-
day among the financial cooks). The pataphysical analysis proposed in this article subverts, through humour, the scientific pre-
tensions of financial models by taking to an extreme the very implosion they presuppose. Pataphysics thus offers an interesting
response to the call recently made by Bougen and Young (2012) to combat hyper-reality from within. Indeed, my pataphysics of
finance parodies the absurd consequences of a hyper-real finance shaped by a specific imaginary framework whose foundations
could be radically changed by other imaginary or creative conventions. This paper is an ironic call for debates on reality in finan-
cial and accounting practices (Walker, 2016) in line with recent debates on the necessity to develop a more interdisciplinary
research in finance and accounting (Chabrak & Gendron, 2015; Cooper, 2015; Gendron & Smith-Lacroix, 2015; Walker, 2016).

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