Who are the historians of the strange institutional developments in modern financial markets? I mean the straight narrative accounts that could, say, be used as reading material in university courses on money and banking (whose re-introduction was one of the suggestions made at the recent Bank of England/Government Economic Service conference on the teaching of economics). David Kynaston’s history of the [amazon_link id=”0701186534″ target=”_blank” ]City of London[/amazon_link], a work to which the adjective magisterial has to be applied, runs up to 2000 and is London-centric. (John Lanchester explains here why it’s  essential reading.) Michael Lewis has given us [amazon_link id=”0340767006″ target=”_blank” ]Liar’s Poker[/amazon_link] for the 1980s and [amazon_link id=”1846142571″ target=”_blank” ]The Big Short [/amazon_link]for the 20002. There have also been some terrific books, post-crash. Gillian Tett’s [amazon_link id=”B002VK2EK6″ target=”_blank” ]Fool’s Gold[/amazon_link] is one that illuminates a corner of the investment banking world in the 2000s. But I hunger for the kind of book which is common in business history – there are loads looking at the car industry, the oil industry, the computer industry. Finance suffers from a dearth of this kind of scrutiny, a mix of history, sociology and journalism.

[amazon_image id=”0701186534″ link=”true” target=”_blank” size=”medium” ]City of London: The History: 1815-2000[/amazon_image]

The reason this comes to mind is because of some of my weekend reading. One is a terrific essay by Andy Haldane of the Bank of England, The Doom Loop, in the London Review of Books. It has some obviously good suggestions. For example, bankers’ pay should be linked not to the return on equity (which incentivises them to take risks) but to return on assets (i.e. the loans they make, which would test whether they were doing their basic job of intermediating between savings and investment). The essay notes the increasing concentration of banking in the UK and the evolution of incentives to take risks. How did banking change its character so much? What regulatory and technological and social changes got us here?

The second was a terrifying Wired report on new research into high speed trading. ‘Flash crashes’ like the one that occurred in May 2010 turn out to happen very often, except normally so fast that humans can’t spot them. A new $300m undersea cable is being laid across the Atlantic (the first since the mid-1990s) to cut 0.006 of a second off the time it will take computers to communicate financial orders between the US and UK. How did this high speed financial market come about, who are the participants, what is being traded and where?

For now we have fiction – Robert Harris’s [amazon_link id=”0099553260″ target=”_blank” ]The Fear Index[/amazon_link], John Lanchester’s forthcoming [amazon_link id=”0571234607″ target=”_blank” ]Capital[/amazon_link]. One sociologist – Donald MacKenzie – has also looked at high frequency trading. But we need more light on this hidden world of finance. This is the story I want to be told.