What is a financial crash, and why does it happen? The answers to these fundamental questions require an investigation of the ontological and epistemic state of the financial markets which will identify the causes of a financial crash, the entities involved, and the relations between them.To this end, I examine several theories on financial systems which have conceptualized financial crashes. I analyze how these theories: a) identify different causes of a crash; b) (...) deal with the basic entities and units of analysis; c) define what we can know about those causes and entities, and what they can reveal about an impending crash. On this basis, I outline some ontological and epistemic preconditions that are necessary for a financial crash to occur. I also examine an example of a price drop on the stock market and the role played by the epistemic and ontic states of the market in that event. (shrink)

Rising income inequality was a major factor in the surge of household debt that brought on the financial crash and Great Recession. Other studies have identified rising household debt as a cause of the crash but not income inequality as a cause of the rising debt. Here the unusual rise in household debt post 1995 is documented. Econometric evidence links rising income inequality to the rise of household debt. Consumer expenditure data shows that prices of major necessities (...) —shelter, healthcare and education—rose faster than inflation as demand by high-income households surged. In order to maintain their consumption of such necessities, lower-income households resorted to massive borrowing. Their rising debt precipitated the financial crash and Great Recession. That link was overlooked by mainstream economists because they adhere to a theory of household consumption that posits no role for income inequality. (shrink)

In October 2008, one of the largest bank crashes in history struck Iceland, a country of three hundred and thirty five thousand inhab-itants. The aim of the article is to examine two cultural responses to the crash and the crisis that followed. More precisely, the aim is to analyse how the creation of the haunted house in I Remember You, a crash-horror story by crime writer Yrsa Sigurðardóttir, as well as the spectral half-built houses portrayed by visual artist (...) Guðjón Ketilsson refer quite directly, yet spectrally, to the period. The spec-tral themes of the two works give the opportunity to discuss the moment following the crash as a moment of haunting—but who is haunted and by whom? (shrink)

Barnett and Block establish that not only are fractional reserve demand deposits fraudulent and create an Austrian Business Cycle , but that a certain type of mismatching between time deposits and the period for which the depository institution relends the deposited funds are also contrary to libertarian law. The question we address in the present paper is whether or not this type of disconnect between the period for which the ultimate lender committed funds and the ultimate borrower gained possession thereof (...) also necessarily start an Austrian Business Cycle. Even though this does not constitute an increase in the stock of money, we answer in the affirmative. (shrink)

‘@AP: Breaking: Two Explosions in the White House and Barack Obama is injured’. So read a tweet sent from a hacked Associated Press Twitter account @AP, which affected financial markets, wiping out $136.5 billion of the Standard & Poor’s 500 Index’s value. While the speed of the Associated Press hack crash event and the proprietary nature of the algorithms involved make it difficult to make causal claims about the relationship between social media and trading algorithms, we argue that (...) it helps us to critically examine the volatile connections between social media, financial markets, and third parties offering human and algorithmic analysis. By analyzing the commentaries of this event, we highlight two particular currents: one formed by computational processes that mine and analyze Twitter data, and the other being financial algorithms that make automated trades and steer the stock market. We build on sociology of finance together with media theory and focus on the work of Christian Marazzi, Gabriel Tarde and Tony Sampson to analyze the relationship between social media and financial markets. We argue that Twitter and social media are becoming more powerful forces, not just because they connect people or generate new modes of participation, but because they are connecting human communicative spaces to automated computational spaces in ways that are affectively contagious and highly volatile. (shrink)

The global financial crisis that began in 2007 concentrated attention on the morality of banking and financial activities. Just as mainstream businesses became increasingly defined by their financial performance, banks, it seemed, got themselves - and everyone else - into trouble through an over-emphasis on themselves as commercial enterprises that need pay little attention to traditional banking virtues or ethics. While the GFC had many causes, criticism was legitimately levelled at banks over the ethics of mortgage creation, (...) excessive securitisation, executive remuneration, and high-pressure customer sales tactics, amongst other things. These criticisms mirror those that have been levelled at the business more generally, particular in the last decade, although the backdrop provided by the GFC is more dramatic, and the outcomes of supposed wrongdoing more severe. This book focuses on business ethics after the GFC; not on the crisis itself, but how we should respond to it. The GFC has focused minds on the proper role of ethics in the understanding and conduct of business activity, but it is essential to look beyond the crisis to address the deeper challenges that it highlights. The aim of this volume is to present examples of the latest philosophically-informed thinking across a range of ethical issues that relate to business activity, using the banks and the GFC - the consequences of which continue to reverberate - as a point of departure. The book will be of great value to researchers, academics, practitioners, and students interested in business, ethics in general, and business ethics in particular. (shrink)

Introducing the concept of Crisis Solution Marketing, this research explores how metaphor pre-packages information, proposing “solutions” to “problems” they discursively construct in the media. These conceptual frameworks are capable of influencing how readers perceive and interpret news events, ultimately influencing their behavior as consumers and the financial decisions they make. This article explores the relationship between editorial positioning and ideology in financial news and the types or ontologies of metaphors used to describe the nature of the stock market (...) via reporting on the stock market crash of 2008 in online news media. Results indicate a statistically significant preference for The New York Times and The Wall Street Journal, liberally positioned newspapers, for animate-biological metaphors which promote understanding of the stock market in terms of a living being that must be ‘nurtured’ through intervention as opposed to being ‘left alone’, which is more consistent with laissez-faire approaches to economic crisis scenarios. (shrink)

We study the Johansen–Ledoit–Sornette model of financial market crashes :219–255, 2000). On our view, the JLS model is a curious case from the perspective of the recent philosophy of science literature, as it is naturally construed as a “minimal model” in the sense of Batterman and Rice :349–376, 2014) that nonetheless provides a causal explanation of market crashes, in the sense of Woodward’s interventionist account of causation.

Neoliberalism and financialization are not synonymous developments. Financialized nations are directed by particularly financialized epistemologies, cultures, and practices, not only neoliberal ones. In examining the financialization of the UK economy since the mid-1970s, this study discovers a socio-economic shift beyond the broad transition from Keynesianism towards free-market fundamentalism. Economic developments were guided by the very particular economic paradigms, discursive practices, and financial devices of the City of London, as financial elites became influential in the Thatcher governments. Five epistemological (...) elements specific to finance are discussed: the creation of money in financial markets, the transactional focus of finance, the centrality of financial markets to economic management, the orthodoxy of shareholder value, and the intensely micro-economic approach to financial calculation. Identifying these distinctions creates new possibilities for understanding financialization, elites, and the neoliberal condition that brought about both the financial crash of 2007–8 and the political and economic crises that have followed. (shrink)

The aim of this paper is both to use Kindleberger’s thesis to analyse banking crashes of the Middle Age and to give proof of whether the medieval banks do or do not raise the same theoretical analysis as the modern banks. This is of importance, because the theories that are invoked by Kindleberger concern banks very different from the medieval banks. If the financial instability of the 14th century is similar to that of the 19th or the 20th century, (...) this leads to amend the impact and generality of Kindleberger’s instability model.L’objet de cet article est d’utiliser la théorie de Kindleberger pour analyser les krachs bancaires du Moyen Age et vérifier si les banques médiévales relèvent ou non du même appareil théorique que les banques modernes. Cela représente un enjeu important car les banques médiévales sont très différentes de celles qu’étudie Kindleberger. Si l’instabilité financière du XIVe siècle est comparable à celle des XIXe et XXe siècles, cela nous amène à reconsidérer l’impact et la généralité du modèle de Kindleberger. (shrink)

In the period since the 2008 Wall Street crash, little consensus has emerged on its causes or actions to prevent a recurrence. Our capability for rational decision making was overwhelmed. Viewing the entire financial system as a huge, richly interconnected organization suggests that its structure and associated management practices are suited for a far simpler environment. An organization that is large relative to its environment and sufficiently complex to require the coordination of specialized expertise cannot function by enabling (...) decision makers to respond only to local demands. The resulting inability to recognize critical interdependencies and the nature of their risk makes periodic catastrophic failure likely. Specifically, compartmentalization of information, influence, and reward creates a myopic decision environment in which individual decision makers are unlikely to make effective or ethical decisions. Useful criteria for evaluating solutions can be suggested by considering the interaction of two factors: limited human information processing capability and the effect of motivation on information processing. Taken together, they suggest that human information processing is both limited and opportunistic. We cannot process all information available and the information selected for processing narrows to that needed to achieve salient rewards. Because of this, the organization's reward practices and their effect on motivation are a critical variable. Large financial rewards contingent upon short term, local, simplistic measures inevitably narrow the focus of decision maker's attention to a small part of the system. In contrast, dominant intrinsic motivation is rooted in awareness of, and responsibility for, broader outcomes. Each type of motivation differs in its requirements for sharing of information, influence, and reward. These, in turn, determine the adaptability of the organization to complexity and change. While this has significant ethical implications, its logic rests on the limitations of human information processing and motivation. Aligning human motivation and information flow to the demands of a complex, turbulent financial environment is the challenge we must meet to prevent further cataclysms. (shrink)

Throughout the history of capitalism, there have been tensions between financial institutions and the state, and between financial capital and the firms and households engaged in the production and consumption of physical goods and services. Periods of financial sector dominance have regularly ended in spectacular panics and crashes, often resulting in the liquidation of large numbers of financial institutions and the reimposition of regulatory controls previously dismissed as outmoded and unnecessary. The aim of this article is (...) to consider measures to restore financial markets to their proper role, as servants rather than masters of the market economy and the society within which it is embedded. (shrink)

How to mitigate stock price crash risk has become a focus in the theoretical and practical fields. Building on the work of Kim et al., this paper investigates the relation between corporate philanthropy and crash risk under the unique Chinese institutional background. The results show that both state ownership and the 2005 split share reform attenuate the mitigating effect of corporate philanthropy on crash risk. Specifically, the negative relation between corporate philanthropy and crash risk is less (...) pronounced for state-owned enterprises than for non-state-owned enterprises, and it is also less pronounced after firms accomplish the split share reform. Further, this effect is more pronounced for firms with greater financial risks and poorer performance. Our paper contributes to the growing literature on the determinants of stock price crash risk and the economic consequences of corporate philanthropy. It also offers useful guidance to firms that are seeking to reduce stock price crash risk in emerging markets. (shrink)

ABSTRACT Imagine, as most economists do, that financial-market participants understand the basic structure of the world: While they cannot predict the future with certainty, they are endowed with knowledge of the possible outcomes of their actions and the probability that each of those outcomes will occur. Given these assumptions, if bankers, regulators, investors, and rating agencies were rational, we may conclude that the financial crisis was caused by poor incentives: These actors must have knowingly jeopardized their institutions and (...) the global economy to pursue private gain. Alternatively, market participants, caught up in the mania of crowds, may have irrationally ignored risks of which they were aware and of which they knew the correct probability. Neither of these explanations for the financial crisis stands up to the evidence, since both explanations assume that the participants knew the U.S. housing market was about to crash. A fresh look at the data five years later suggests that they were ignorant of this fact, and that they acted rationally (or at least reasonably) in light of what they (thought that they) knew. This allows a more nuanced understanding of how financial institutions ended up in bedlam, why credit markets collapsed, and why they took so long to recover. (shrink)

Using the promulgation of Green Credit Guidelines in China as the research setting, this paper exploits a quasi-natural experiment to examine the impact of green credit policy on the stock price crash risk of heavy-polluting firms. The results show that green credit policy significantly increases the risk of stock price crash of heavy-polluting firms. Such impact is transmitted through increased financial constraints and reduced information transparency. In addition, we find that the impact of green credit policy on (...) the stock price crash risk is more pronounced in firms with weak external governance and a small size. Our findings provide policy implications for mitigating corporate risks and promoting corporate sustainability. (shrink)

The author analyzes the successful strategy of overcoming financial breakdown in the case study of Iceland. The aim of the article is to verify a hypothesis that the Icelandic model could become a panacea for future crises? A document analysis method is applied to present essential indicators such as GDP and trade balance. With the use of a source analysis method, the collapse of the financial sector is determined as the main cause of the slump. The systematization of (...) crisis events is introduced and deepened by the social and political situation. Changes in the state’s condition after the crash are provided and future forecasts about economic development are discussed. As a summing up, the author disapproves of the hypothesis that the Icelandic model of overcoming the financial breakdown as a panacea for future crises, pointing out that it is only applicable for specific cases and cannot be seen as a magical remedy for every kind of crisis. (shrink)

The aim of this article is to show how the critically acclaimed and award winning film Margin Call may be used in business ethics teaching. Set in a fictional investment bank at the dawn of the financial crisis, the film zooms in on the motivations and decision-making of people who had much to lose from the crash of the hitherto very profitable mortgage-backed securities market. The film offers rich material for analysis of behaviours that contributed to the crisis. (...) The article will set out topics for classroom discussion, including the impact of incentives and power structures, contextual factors that distance people from the consequences of their actions, and considerations of how the banking industry may be transformed. (shrink)

Financial theory is in trouble. Market crashes and high volatility are only too familiar to everyone, although the standard theories predict that they hardly ever occur. According to the well-known and (partly due to its simplicity) still widely used random-walk model, the probabilities for price changes of, say, stocks should result in a Gaussian distribution. However, experience tells us that large changes occur far more often than ‘allowed’ by a Gaussian distribution. New models are needed which lead to realistic (...) probability distributions. ‘Econophysicists’ are particularly active in this field by constructing microscopic models of financial markets on the basis of various ideas and tools from physics. But in which sense do these models contribute scientific explanations? In this paper I will investigate what and how one exemplary econophysics model explains. (shrink)

"Of all the economic bubbles that have been pricked," the editors of The Economist recently observed, "few have burst more spectacularly than the reputation of economics itself." Indeed, the financial crisis that crested in 2008 destroyed the credibility of the economic thinking that had guided policymakers for a generation. But what will take its place? In How the Economy Works, one of our leading economists provides a jargon-free exploration of the current crisis, offering a powerful argument for how economics (...) must change to get us out of it. Roger E. A. Farmer traces the swings between classical and Keynesian economics since the early twentieth century, gracefully explaining the elements of both theories. During the Great Depression, Keynes challenged the longstanding idea that an economy was a self-correcting mechanism; but his school gave way to a resurgence of classical economics in the 1970s-a rise that ended with the current crisis. Rather than simply allowing the pendulum to swing back, Farmer writes, we must synthesize the two. From classical economics, he takes the idea that a sound theory must explain how individuals behave-how our collective choices shape the economy. From Keynesian economics, he adopts the principle that markets do not always work well, that capitalism needs some guidance. The goal, he writes, is to correct the excesses of a free-market economy without stifling entrepreneurship and instituting central planning.Recent events have shown that we cannot afford to treat economics as an ivory-tower abstraction. It has a direct impact on our lives by guiding regulators and policymakers as they make decisions with far-reaching practical consequences. Written in clear, accessible language, How the Economy Works makes an argument that no one should ignore. (shrink)

The view from inside improves our understanding on market failure and regulation failure in financial market. The EMH fails to understand the causes of financial bubbles and crashes. Behavioral finance introduces insight from psychology. The heuristic and biases approach studied behavioral asymmetry in static environment that leads to market irrationality and information distortion. The fast and frugal thinking in decision-making further explore more complex situation under changing environment. They argue that soft-paternalistic regulation is needed under information overload. The (...) most critical issue is information uncertainty and complexity. Lacking information in frequency domain is the main barrier in managing business cycles. Data form inside reveals current limitations of financial data mainly in the short-term price changes. Microstructure studies show that pricing process is shaped by trading rules. Quantitative analysis reveals severe instability in high frequency trading and derivative market. Feasible regulation should aim to encourage new technology and sustainable growth, rather than protect obsolete technology and short-term speculation. The most fundamental challenge to sustainable economic order is the excessive size of the derivative markets that crowding out investment in real economy. This is a more severe issue than the climate change. (shrink)

The financial crash of 2008 following the selling of fictitious derivatives was a crisis of both rationality and values whose aftermath has thrown the legitimation of deregulated markets, and governments, into question. This paper critiques the Becker metaphor of human capital and submits that human value is central to and the fulcrum of both economic and social values. It illustrates that Hume and Adam Smith directly countered the Hobbesian hypothesis that human nature is based only on self-interest, distinguishes (...) market values from social values, explicit from implicit values and parallels Sen in adopting an ordinal ranking of what people value rather than a search for cardinality. It draws on cognitive psychology, neural research, revealed preference theory and a principle of implicit verification. It also outlines implications for what Adam Smith centrally valued as concern for the welfare of the whole of society. (shrink)

Concern about the role and the limits of modeling has heightened after repeated questions were raised regarding the dependability and suitability of the models that were used in the run-up to the 2008 financial crash. In this book, Lawrence Boland provides an overview of the practices of and the problems faced by model builders to explain the nature of models, the modeling process, and the possibility for and nature of their testing. In a reflective manner, the author raises (...) serious questions about the assumptions and judgments that model builders make in constructing models. In making his case, he examines the traditional microeconomics-macroeconomics separation with regard to how theoretical models are built and used and how they interact, paying particular attention to the use of equilibrium concepts in macroeconomic models and game theory and to the challenges involved in building empirical models, testing models, and using models to test theoretical explanations. (shrink)

Free and weakly interacting particles are described by a second-quantized nonlinear Schrödinger equation, or relativistic versions of it. They describe Gaussian random walks with collisions. By contrast, the fields of strongly interacting particles are governed by effective actions, whose extremum yields fractional field equations. Their particle orbits perform universal Lévy walks with heavy tails, in which rare events are much more frequent than in Gaussian random walks. Such rare events are observed in exceptionally strong windgusts, monster or rogue waves, earthquakes, (...) and financial crashes. While earthquakes may destroy entire cities, the latter have the potential of devastating entire economies. (shrink)

In Theoretical Times, Steve Redhead describes the post-crash economic, environmental, political and cultural condition we live in today. As the rise of the international right - Donald Trump, Brexit, Marine Le Pen - swarms the globe, a new global battle within the right is developing: the globalists and neo-liberals versus the economic nationalists and protectionists. What then are the prospects for a resurrected theoretical politics of the left? Theoretical Times considers the work of theorists such as Alain Badiou, Slavoj (...) Žižek, Jean Baudrillard and Paul Virilio, in this innovative reinvention of theory and the politics of theory. After the global financial crash the world is being hollowed out and we find ourselves in what Žižek calls a desperate state of hopelessness, the "new dark ages". Accelerated culture sees us digitally entertaining ourselves to death but leaves us exhausted and frightened waiting for World War Three. Theoretical Times offers new theoretical resources as a way out of the quicksand. (shrink)

This paper seeks to analyse the effects on Economics of Research Assessment Systems, such as the Research Assessment Exercise (or RAE) which was carried out in the UK between 1986 and 2008. The paper begins by pointing out that, in the 2008 RAE, economics turned out to be the research area which was accorded the highest valuation of any subject in the UK, even though economists were then under attack for failing to predict the global financial crash which (...) had occurred a few months earlier. One aim of the paper is to explain this economics anomaly in research assessment. The paper goes on to point out a key difference between economics and the natural sciences. Most areas of the natural sciences are dominated for most of the time by a single, generally accepted, paradigm, whereas there are always in economics different schools of thought which have different and highly conflicting paradigms. Given this situation, it is argued that the effect of research assessment systems in economics is to strengthen the majority school in the subject (whatever that is), and weaken the minority schools. This conclusion is supported by empirical data collected by Frederic Lee for the UK. It is then shown that the greater the dominance of the majority school, the higher the overall valuation of the subject is likely to be, and this is used to explain the anomaly noted earlier. It is argued that research in economics flourishes better in a situation in which there are a number of different schools treated equally, than in one in which a single school dominates. The conclusion is that research assessment systems have a negative effect on research in economics and give misleading results. Instead of such systems, an attempt should be made to encourage pluralism in the subject. (shrink)

Thomas Edison's incandescent lamp was one of four that were displayed at the first international exhibition of electricity in Paris in 1881. By the end of the exhibition, most observers believed that Edison had taken a clear lead over his rivals: Maxim, Swan, and Lane-Fox. In reality, his victory was a narrow one that owed much to the skilful management of public opinion by his aides in Paris. Nevertheless, it reinforced Edison's view of Paris as the natural starting point for (...) the implantation of his system in continental Europe. Almost immediately, however, the three companies that he established for the purpose in Paris were in difficulties as the financial crash of January 1882 hardened into sustained recession. Quickly Edison's favour turned to Milan and, more particularly, Berlin, leaving the once central Parisian venture to become a minor element in his European strategy. (shrink)

Current mathematical models are notoriously unreliable in describing the time evolution of unexpected social phenomena, from financial crashes to revolution. Can such events be forecast? Can we compute probabilities about them? Can we model them? This book investigates and attempts to answer these questions through GOdel's two incompleteness theorems, and in doing so demonstrates how influential GOdel is in modern logical and mathematical thinking. Many mathematical models are applied to economics and social theory, while GOdel's theorems are able to (...) predict their limitations for more accurate analysis and understanding of national and international events. This unique discussion is written for graduate level mathematicians applying their research to the social sciences, including economics, social studies and philosophy, and also for formal logicians and philosophers of science. (shrink)

Twenty-five years after the end of the Cold War, a new Cold War is being waged in our societies. During the Cold War a theoretical model of man was developed by economists and the military, an egotistical being interested only in his own benefit and in duping his opponents to achieve his ends: a modern homo oeconomicus. After his career in the Cold War ended, he was not scrapped but adapted to the needs of the twenty-first century. He became the (...) ringmaster of a new era of information capitalism. He sought to read, control and influence thoughts; to predict, price and eliminate risks. Today stock-market trading is guided by him. He uses computer algorithms and Big Data to build up detailed pictures of our preferences and then suggest and sell goods to us. The model has become a self-fulfilling prophecy. We are no longer the masters of our own fate. The Game of Life runs without us. Schirrmacher traces the progress of this extreme rationalization of social life from the Cold War games of the 1950s Rand Corporation to the stock-market trading techniques that brought about the financial crash of 2008, showing how these developments were interwoven with the rise of game theory, rational choice theory and neoliberal economics. The state and politics increasingly submitted themselves to the logic of computerized game theory and an economistic view of the world, evading real decision-making in the process. In this brave new world individuals, alone in front of their computers, may think they are constructing a reality of their own choosing, but in fact they are being manipulated all along by others who are setting the rules of the game. This international bestseller by one of Germanys most distinguished journalists is a powerful indictment of a way of thinking that has become pervasive and threatens to undermine not only parliaments and constitutions but also the sovereignty of the individual to be the person he or she wants to be. (shrink)

Numerous U.S. cities suffered immense fiscal strain following the subprime mortgage crisis and financial crash of 2007–8. Diminished revenues, tightened credit, and speculative financing that went bad in the aftermath fueled widespread fiscal distress on the local scale. Although the current moment resembles fiscal crises that crested in cities in the 1970s–90s, two factors distinguish the current period. First, municipal affairs have become thoroughly financialized—dominated by speculative securities and volatile debt arrangements—such that local crisis can no longer be (...) understood apart from financial market instability. Second, local fiscal politics have become increasingly removed from democratic oversight and control. This de-democratization hinders the capacity of political communities to reregulate markets and rebuild urban communities. An analytic model derived from the work of Hyman Minsky and Karl Polanyi emphasizes how cities become ensnared in a “financial instability” cycle and how communities seek to protect themselves by way of the “double movement.”. (shrink)

Since the emergence of neoliberalism in the early 1980s, the interests of the working class have become progressively more marginalized within mainstream politics in the United Kingdom. Years of austerity politics following the financial crash of 2008 deepened popular disenchantment with the political class, paving the way for the 2016 Brexit referendum result. This, Brian Elliot argues, has precipitated a crisis of British democracy. -/- Does the current wave of populism constitute a threat to or promise for democracy? (...) What has led to the emergence of populism and to what extent can populism be shaped into a program of progressive reform of democracy today? In this timely new book, Brian Elliott takes a long view on populism, tracing its history back to the struggles waged by the British workers’ movement of the nineteenth century to gain general enfranchisement. -/- Countering the depiction of populism as a degradation of liberal democratic political culture into a xenophobic rejection of pluralism, internationalism and multiculturalism, Elliott argues that the populist sentiment contains the promise of a renewal of democratic political culture. Identifying and examining the contemporary challenges of work, Elliott outlines a new working-class politics to overturn the neoliberal logic that has come to dominate mainstream political thinking over the last forty years. (shrink)

Train crashes cause, on average, a handful of deaths each year in the UK. Technologies exist that would save the lives of some of those who die. Yet these technical innovations would cost hundreds of millions of pounds. Should we spend the money? How can we decide how to trade off life against financial cost? Such dilemmas make public policy is a battlefield of values, yet all too often we let technical experts decide the issues for us. Can philosophy (...) help us make better decisions? Ethics and Public Policy: A Philosophical Inquiry is the first book to subject important and controversial areas of public policy to philosophical scrutiny. Jonathan Wolff, a renowned philosopher and veteran of many public committees, such as the Gambling Review Body, introduces and assesses core problems and controversies in public policy from a philosophical standpoint. Each chapter is centred on an important area of public policy where there is considerable moral and political disagreement. Topics discussed include: Can we defend inflicting suffering on animals in scientific experiments for human benefit? What limits to gambling can be achieved through legislation? What assumptions underlie drug policy? Can we justify punishing those who engage in actions that harm only themselves? What is so bad about crime? What is the point of punishment? Other chapters discuss health care, disability, safety and the free market. Throughout the book, fundamental questions for both philosopher and policy maker recur: what are the best methods for connecting philosophy and public policy? Should thinking about public policy be guided by an ‘an ideal world’ or the world we live in now? If there are ‘knock down’ arguments in philosophy why are there none in public policy? Each chapter concludes with ‘Lessons for Philosophy’ making this book not only an ideal introduction for those coming to philosophy, ethics or public policy for the first time, but also a vital resource for anyone grappling with the moral complexity underlying policy debates. (shrink)

The article presents a verbal and mathematical model of medium-term business cycles (with a characteristic period of 7–11 years) known as Juglar cycles. The model takes into account a number of approaches to the analysis of such cycles; in the meantime it also takes into account some of the authors' own generalizations and additions that are important for understanding the internal logic of the cycle, its variability and its peculiarities in the present-time conditions. The authors argue that the most important (...) cause of cyclical crises stems from strong structural disproportions that develop during economic booms. These are not only disproportions between different economic sectors, but also disproportions between different societal subsystems; at present these are also disproportions within the World System as a whole. The proposed model of business cycle is based on its subdivision into four phases: – recovery phase (which could be subdivided into the start sub-phase and the acceleration sub-phase); – upswing/prosperity/expansion phase (which could be subdivided into the growth sub-phase and the boom/overheating sub-phase); – recession phase (within which one may single out the crash/bust/acute crisis subphase and the downswing sub-phase); – depression/stagnation phase (which we could subdivide into the stabilization subphase and the breakthrough sub-phase). The article provides a detailed qualitative description of macroeconomic dynamics at all the phases; it specifies driving forces of cyclical dynamics and the causes of transition from one phase to another (including psychological causes); a special attention is paid to the turning point from the peak of overheating to the acute crisis, as well as to the turning point from the downswing to recovery. The proposed mathematical model of Juglar cycle takes into account the following effects that are typical for the market economy: • positive feedbacks between various economic processes; • presence of a certain inertia, time lags in reactions of the economic subsystem to the change in conditions; • amplification by the financial subsystem of positive feedbacks and time lags in the economic subsystem; • excessive reaction to changing conditions during the acute crisis sub-phase. The authors suggest that the current crisis turns out to be rather similar to classical Juglar crises; however, there is also a significant difference, as the current crisis occurs at a truly global scale. Yet, due to this truly global scale of the current crisis, the possibilities of regulation with the national state's measures have turned out to be ineffective,whereas the suprastate regulation of financial processes hardly exists. It is shown that all these have led to the reproduction of the current crisis according to a classical Juglar scenario. (shrink)

The economic crash of 2008 demonstrated the fragility of financial systems throughout the world; COVID-19, as the first pandemic in over a century to wreak global havoc, has demonstrated the fragility of healthcare systems. At the time of writing, the virus has been with us for a little over a year, and concerted vaccination efforts have begun. At the same time, several variants (some significantly more infectious than others) of SARS-CoV2, the virus that causes COVID-19, have emerged in (...) different countries, sparking a new wave of border closures and local lockdowns, and a new wave of debates over the right way for governments and individuals alike to respond to the pandemic. The response of governments around the world has been far from synchronised over the last year, but almost without exception, they have made significant efforts to reduce the public health impact of the pandemic – overall, the preservation of life and health has been prioritised at the cost of material and financial goods and other widely used metrics of socio-political success. In this chapter, I suggest that a taking a care ethics perspective allows us to elucidate the important place of caring duties and caring relationships in ethical evaluation of pandemic management strategies. Government action and public attitudes alike demonstrate that care – concern for the wellbeing of others – has had significant normative force in motivating decision-making and shaping ethical responses to COVID-19. (shrink)

Whether causing flash crashes in financial markets, purchasing illegal drugs, or running over pedestrians, AI is increasingly engaging in activity that would be criminal for a natural person, or even an artificial person like a corporation. We argue that criminal law falls short in cases where an AI causes certain types of harm and there are no practically or legally identifiable upstream criminal actors. This Article explores potential solutions to this problem, focusing on holding AI directly criminally liable where (...) it is acting autonomously and irreducibly. Conventional wisdom holds that punishing AI is incongruous with basic criminal law principles such as the capacity for culpability and the requirement of a guilty mind. -/- Drawing on analogies to corporate and strict criminal liability, as well as familiar imputation principles, we show how a coherent theoretical case can be constructed for AI punishment. AI punishment could result in general deterrence and expressive benefits, and it need not run afoul of negative limitations such as punishing in excess of culpability. Ultimately, however, punishing AI is not justified, because it might entail significant costs and it would certainly require radical legal changes. Modest changes to existing criminal laws that target persons, together with potentially expanded civil liability, are a better solution to AI crime. (shrink)

When confronted with an ethical dilemma, most of us like to think we would stand up for our principles. But we are not as ethical as we think we are. In Blind Spots, leading business ethicists Max Bazerman and Ann Tenbrunsel examine the ways we overestimate our ability to do what is right and how we act unethically without meaning to. From the collapse of Enron and corruption in the tobacco industry, to sales of the defective Ford Pinto, the downfall (...) of Bernard Madoff, and the Challenger space shuttle disaster, the authors investigate the nature of ethical failures in the business world and beyond, and illustrate how we can become more ethical, bridging the gap between who we are and who we want to be. Explaining why traditional approaches to ethics don't work, the book considers how blind spots like ethical fading--the removal of ethics from the decision--making process--have led to tragedies and scandals such as the Challenger space shuttle disaster, steroid use in Major League Baseball, the crash in the financial markets, and the energy crisis. The authors demonstrate how ethical standards shift, how we neglect to notice and act on the unethical behavior of others, and how compliance initiatives can actually promote unethical behavior. They argue that scandals will continue to emerge unless such approaches take into account the psychology of individuals faced with ethical dilemmas. Distinguishing our "should self" from our "want self", the authors point out ethical sinkholes that create questionable actions. Suggesting innovative individual and group tactics for improving human judgment, Blind Spots shows us how to secure a place for ethics in our workplaces, institutions, and daily lives. (shrink)

When confronted with an ethical dilemma, most of us like to think we would stand up for our principles. But we are not as ethical as we think we are. In Blind Spots, leading business ethicists Max Bazerman and Ann Tenbrunsel examine the ways we overestimate our ability to do what is right and how we act unethically without meaning to. From the collapse of Enron and corruption in the tobacco industry, to sales of the defective Ford Pinto, the downfall (...) of Bernard Madoff, and the Challenger space shuttle disaster, the authors investigate the nature of ethical failures in the business world and beyond, and illustrate how we can become more ethical, bridging the gap between who we are and who we want to be. Explaining why traditional approaches to ethics don't work, the book considers how blind spots like ethical fading--the removal of ethics from the decision--making process--have led to tragedies and scandals such as the Challenger space shuttle disaster, steroid use in Major League Baseball, the crash in the financial markets, and the energy crisis. The authors demonstrate how ethical standards shift, how we neglect to notice and act on the unethical behavior of others, and how compliance initiatives can actually promote unethical behavior. They argue that scandals will continue to emerge unless such approaches take into account the psychology of individuals faced with ethical dilemmas. Distinguishing our "should self" from our "want self", the authors point out ethical sinkholes that create questionable actions. Suggesting innovative individual and group tactics for improving human judgment, Blind Spots shows us how to secure a place for ethics in our workplaces, institutions, and daily lives. (shrink)

Artificial Neural Networks have reached “grandmaster” and even “super-human” performance across a variety of games, from those involving perfect information, such as Go, to those involving imperfect information, such as “Starcraft”. Such technological developments from artificial intelligence (AI) labs have ushered concomitant applications across the world of business, where an “AI” brand-tag is quickly becoming ubiquitous. A corollary of such widespread commercial deployment is that when AI gets things wrong—an autonomous vehicle crashes, a chatbot exhibits “racist” behavior, automated credit-scoring processes (...) “discriminate” on gender, etc.—there are often significant financial, legal, and brand consequences, and the incident becomes major news. As Judea Pearl sees it, the underlying reason for such mistakes is that “... all the impressive achievements of deep learning amount to just curve fitting.” The key, as Pearl suggests, is to replace “reasoning by association” with “causal reasoning” —the ability to infer causes from observed phenomena. It is a point that was echoed by Gary Marcus and Ernest Davis in a recent piece for theNew York Times: “we need to stop building computer systems that merely get better and better at detecting statistical patterns in data sets—often using an approach known as ‘Deep Learning’—and start building computer systems that from the moment of their assembly innately grasp three basic concepts: time, space, and causality.” In this paper, foregrounding what in 1949 Gilbert Ryle termed “a category mistake”, I will offer an alternative explanation for AI errors; it is not so much that AI machinery cannot “grasp” causality, but that AI machinery (qua computation) cannot understand anything at all. (shrink)

Substantially increased international financial mobility and internal financial reforms in many countries have led to apparently increased volatility of their financial markets. This heightened volatility has sometimes been associated with rapid increases or decreases in asset values that many observers suspect contain elements of speculative bubbles and their associated crashes, not justified by rational expectations of underlying fundamentals. In addition, these possible bubbles may coincide with nonlinear dynamics beyond basic ARCH effects, thus being nonlinear speculative bubbles.

Penguins jumping off a cliff, economic forecasters and financial advisors speculating against a currency, and farmers using traditional methods in India are all practising social learning. Such learning from the behavior of others may and does lead to herds, crashes, and booms. These issues have become, over the last ten years, an exciting field of research in theoretical and applied economics, finance, and in other social sciences. This book provides both an informal introduction and in-depth insights into the subject. (...) Each chapter is devoted to a separate issue: individuals learn from the observations of actions, the outcomes of these actions, and from what others say. They may delay or make an immediate decision; they may compete against others or gain from cooperation; they make decisions about investment, crop choices, and financial investments. The book highlights the similarities and the differences between the various cases. (shrink)

In this paper I attempt to contribute to the developing field of “political philosophy of mind.” To render concrete the notion of “affective frame,” a social situation which pre-selects for salience and valence of environmental factors relative to a subject’s life, I conduct a case study of a deleterious socially instituted affective frame, which, during the early days of the COVID-19 pandemic in the United States, produced individuated circumstances that came crashing down on “essential workers” who were forced into a (...) double bind. We saw here an untenable and ultimately fatal situation that forced a choice between, on the one hand, increasing the risk of their failing to provide financial support for their family if they quit their job or reduced their hours, and on the other, increasing their risk of contracting the virus by continuing to work. The case study will thus be itself an affective frame that will bring to the fore for its readers a nexus of harmful social practices of contemporary American society. Form is reinforced by content here, as this particular affective frame brings forth a further emphasis on affect when we focus on workers simultaneously socialized into roles as breadwinners and as members of the caring professions. For those people, quitting work becomes even more difficult as they come to affirm their self-identity of being providers of affective labor for those in their care at work and of being the affective anchor of family life at home, the one who financially helps keep a roof over the heads of their loved ones as well as being the emotional backbone of the family. Hence the affective frame of “essential workers in Covid times” renders salient and affirmatively valenced their affectively laden self-image as caring helpers of those in need, at home and at work. (shrink)

Experimental research by social and cognitive psychologists has established that cooperative groups solve a wide range of problems better than individuals. Cooperative problem solving groups of scientific researchers, auditors, financial analysts, air crash investigators, and forensic art experts are increasingly important in our complex and interdependent society. This comprehensive textbook--the first of its kind in decades--presents important theories and experimental research about group problem solving. The book focuses on tasks that have demonstrably correct solutions within mathematical, logical, scientific, (...) or verbal systems, including algebra problems, analogies, vocabulary, and logical reasoning problems.The book explores basic concepts in group problem solving, social combination models, group memory, group ability and world knowledge tasks, rule induction problems, letters-to-numbers problems, evidence for positive group-to-individual transfer, and social choice theory. The conclusion proposes ten generalizations that are supported by the theory and research on group problem solving. Group Problem Solving is an essential resource for decision-making research in social and cognitive psychology, but also extremely relevant to multidisciplinary and multicultural problem-solving teams in organizational behavior, business administration, management, and behavioral economics. (shrink)

What is the difference between a gambler and a speculator? Is there a readily identifiable line separating the two? If so, is it possible for us to discourage the former while encouraging the latter? These difficult questions cut across the entirety of American economic history, and theperiodic failures by regulators to differentiate between irresponsible gambling and clear-headed investing have often been the proximate causes of catastrophic economic downturns. Most recently, the blurring of speculation and gambling in U.S. real estate markets (...) fueled the 2008 global financialcrisis, but it is one in a long line of similar economic disasters going back to the nation's founding. In Speculation, author Stuart Banner provides a sweeping and story-rich history of how the murky lines separating investment, speculation, and outright gambling have shaped America from the 1790s to the present. Regulators and courts always struggled to draw a line between investment and gambling,and it is no easier now than it was two centuries ago. Advocates for risky investments have long argued that risk-taking is what defines America. Critics counter that unregulated speculation results in bubbles that always draw in the least informed investors-gamblers, essentially. Financial chaos isthe result. The debate has been a perennial feature of American history, with the pattern repeating before and after every financial downturn since the 1790s. The Panic of 1837, the speculative boom of the roaring twenties, and the real estate bubble of the early 2000s are all emblematic of thedifficulty in differentiating sober from reckless speculation. Even after the recent financial crisis, the debate continues. Some, chastened by the crash, argue that we need to prohibit certain risky transactions, but others respond by citing the benefits of loosely governed markets and the dangersof over-regulation. These episodes have generated deep ambivalence, yet Americans' faith in investment and - by extension - the stock market has always rebounded quickly after even the most savage downturns. Indeed, the speculator on the make is a central figure in the folklore of Americancapitalism. Engaging and accessible, Speculation synthesizes a suite of themes that sit at the heart of American history - the ability of courts and regulators to protect ordinary Americans from the ravages of capitalism; the periodic fallibility of the American economy; and - not least - the moral conundruminherent in valuing those who produce goods over those who speculate, and yet enjoying the fruits of speculation. Banner's history is not only invaluable for understanding the fault lines beneath the American economy today, but American identity itself. (shrink)

ABSTRACT Asset‐market bubbles occur dependably in laboratory experiments and almost as reliably throughout economic history—yet they do not usually bring the global economy to its knees. The Crash of 2008 was caused by the bursting of a housing bubble of unusual size that was fed by a massive expansion of mortgage credit—facilitated, in turn, by the longest sustained expansionary monetary policy of the past half century. Much of this mortgage credit was extended to people with little net wealth who (...) made slender down payments, so that when the bubble burst and housing prices declined, their losses quickly exceeded their equity. These losses were transmitted to the financial system—including banks, investment banks, insurance companies, and the institutional and private investors who provided liquidity to the mortgage market through structured securities. It seems that many of these institutions became insolvent; it is certain that they became illiquid. Liquidity loss and solvency fears created a feedback cycle of diminished financing, reduced housing demand, falling housing prices, more borrower losses, and further damage to the financial system and eventually the stock market and the real economy. There are important parallels with the housing and financial‐market booms that led up to the Crash of 1929 and the Great Depression. (shrink)

How and why did comparative political economy lose sight of the sources of growing macroeconomic and political instability, a problem that encompassed a growing financial bubble and then a crash in the housing market, a period of sluggish growth that plausibly constitutes secular stagnation, and a crisis of political legitimacy manifesting itself in the rise of antisystem “populist” parties? A gradual shift in CPE’s research agenda from macroeconomic to microeconomic concerns, and from demand-side to supply-side explanations, diminished its (...) ability to analyze adequately the central economic and political problems of the past twenty years. This article traces CPE’s evolution through successive “supermodels” that constituted its core research foci. To understand the current crisis, CPE needs to revisit and update its original roots in Keynes, macroeconomics, and the demand side. This shift is already happening at the margins, as CPE scholars struggle to understand the current crisis. (shrink)