In this chapter, one considers finance at its very foundations, namely, at the place where assumptions are being made about the ways to measure the two key ingredients of finance: risk and return. It is well known that returns for a large class of assets display a number of stylized facts that cannot be squared with the traditional views of 1960s financial economics (normality and continuity assumptions, i.e. Brownian representation of market dynamics). Despite the empirical counterevidence, normality and continuity assumptions (...) were part and parcel of financial theory and practice, embedded in all financial practices and beliefs. Our aim is to build on this puzzle for extracting some clues revealing the use of one research strategy in academic community, model tinkering defined as a particular research habit. We choose to focus on one specific moment of the scientific controversies in academic finance: the ‘leptokurtic crisis’ opened by Mandelbrot in 1962. The profoundness of the crisis came from the angle of the Mandelbrot’s attack: not only he emphasized an empirical inadequacy of the Brownian representation, but also he argued for an inadequate grounding of this representation. We give some insights in this crisis and display the model tinkering strategies of the financial academic community in the 1970s and the 1980s. (shrink)

This very short paper highlights some of my recent and forthcoming work on “good epistemic practices” in the financial services industry. It identifies some epistemic dimensions of risk management in banking and illustrates how managing for good epistemic practices might be helpful.

Epistemic practices are an important but underappreciated component of business ethics; good conduct requires making epistemically sound as well as morally principled judgments. Well-founded judgments are promoted by epistemic virtues, and for organizations, epistemic virtues are arguably achieved through organizational good epistemic practices. But how are such practices to be developed? This paper addresses this normative and practical challenge. The first half of the paper explains what organizational good epistemic practices are and outlines a means for their construction. The second (...) half of the paper demonstrates how specific good epistemic practices could be developed by considering a case of corporate epistemic failings: JPMorgan’s notorious 2012 ‘London Whale’ trading losses. Following this, the paper briefly surveys the institutional epistemic failings of the 2008 global financial crisis and the remedial actions that they suggest. Although the discussion is focused on the banking industry, the main ideas, and some of the epistemic practices, generalize to organizations in other industries. (shrink)

This paper responds to the Radical Behavioral Challenge to normative business ethics. According to RBC, recent research on bounded ethicality shows that it is psychologically impossible for people to follow the prescriptions of normative business ethics. Thus, said prescriptions run afoul of the principle that nobody has an obligation to do something that they cannot do. I show that the only explicit response to this challenge in the business ethics literature is flawed because it limits normative business ethics to condemning (...) practitioners’ behavior without providing usable suggestions for how to do better. I argue that a more satisfying response is to, first, recognize that most obligations in business are wide-scope which, second, implies that there are multiple ways of fulfilling them. This provides a solid theoretical grounding for the increasingly popular view that we have obligations to erect institutional safeguards when bounded ethicality is likely to interfere with our ability to do what is right. I conclude with examples of such safeguards and some advice on how to use the research findings on bounded ethicality in designing ethical business organizations. (shrink)

In the article I argue that intellectual arrogance can be an individual, collective and even corporate vice. I show that arrogance is in all these cases underpinned by defensive positive evaluations of epistemic features of the evaluator in the service of buttressing its illegitimate social dominance. Individual arrogance as superbia or as hubris stems from attitudes biased by the motive of self-enhancement. Collective arrogance is underpinned by positive defensive attitudes to a one’s social identity that seeks to maintain its unwarranted (...) social dominance. Finally, corporations are arrogant when their attitudes are the aggregation of the arrogant dispositions of its managers or when these corporations have inherited structures and policies that are defensive of its illegitimately dominant social status. (shrink)

This paper examines the flow of thoughts on ethics in finance both from academic experts and from published contributions that constitute an alternative view of the financial field from an ethical point of view. A Delphi method was used to achieve consensus about the perceptions and opinions academic experts hold about ethics in financial matters and in the research agenda. This approach permits the early detection of emerging lines, narrowing the research line and shortening subject selection time. An active research (...) map of researchers, countries and lines of investigation was drawn up, and recommendations made of areas that could be highlighted or moderated. (shrink)

This paper argues that some of the major theories in current business ethics fail to provide an adequate account of moral responsibility for the creation of systemic financial risk. Using the trading of credit default swaps during the 2008 financial crisis as a case study, I will formulate three challenges that these theories must address: the problem of risk imposition, the problem of unstructured collective harm and the problem of limited knowledge. These challenges will be used to work out key (...) shortcomings of stakeholder approaches and Integrative Social Contracts Theory. I will argue that pluralist connection models used in political theory can help to overcome these shortcomings. Adopting an approach based on these models shows that financial institutions incur obligations in five main areas: managing their own risk profile; remedying some of the harms caused by financial crises; supporting the development of better epistemic methods; curbing the transmission and amplification of initial losses; and instigating structural reforms. (shrink)

The paper examines connections between ontology and finance. The ontological debates concerning the role of finance are examined between two opposing schools of thought that can be labelled, very broadly, ‘instrumentalist’ and ‘realist’. These two schools of thought have had momentous repercussions in understanding what is a good society. Each school defines Nature in particular ways which can be explored using ontology and philosophical insight. Our theoretical investigation aims to accommodate Nature in community financial deliberations. A positive role for government (...) is advocated to finance environmental infrastructure initiatives. For example, precautionary strategies to address climate change must be funded. New roles for finance and government are proposed to align human relationships with Nature. Environmental precautionary principles must be developed in conjunction with finance theory to maintain decent standards of living for all. Reliance on impersonal market forces will not be enough to save the planet given the power of some over the many in the neoliberal arena. (shrink)

How can we make businesspeople more concerned about the truth of the information they spread or allow to circulate? In this age of ‘fake news’, ‘business bullshit’ and ‘post-truth,’ the issue is of the utmost importance, especially for business trustworthiness in the internet economy. The issue is related to a kind of epistemic responsibility, that consists in accounting for one’s own epistemic wrongdoings, such as making a third party believe something false. Despite growing interest in epistemic misbehavior in the literature (...) of business ethics, the question of epistemic responsibility has been neglected. The aim of this paper is therefore to address this gap, by proposing a notion of epistemic responsibility for business, that may help regulate undesirable epistemic behavior, such as the spreading of false information. To define this notion of epistemic responsibility, I have introduced the concept of epistemic fault. Being epistemically responsible consists in being disposed to account for alleged epistemic faults. This notion of epistemic fault relies on a theoretical framework which combines a typology of eight ‘epistemic values’, a normative stance regarding these values, and a dispositional approach to epistemic virtues and vices. I use this theoretical framework to integrate the various accounts of epistemic virtues and vices found in the literature into a single explanatory scheme. Combined with the notion of epistemic responsibility itself, such an integrative framework should facilitate the practical application of an operational epistemic ethics in business, i.e., the development of virtuous epistemic practices. (shrink)

In this paper, we explore the 2008 financial crisis in Iceland through the lens of Donaldson’s concept of normalization of questionable behavior. We study the report published by the Special Investigation Commission, an investigation initiated by the Icelandic Parliament near the end of 2008. The report provides a detailed and systematic account of the processes leading up to the crisis. Our aim is to determine the extent to which the behaviors of professionals in the Icelandic financial sector can be explained (...) as a gradual fading of moral concerns to the point that they perceived the sale of high-risk products to unassuming customers for their own short-term benefit to be morally unproblematic. In doing so, we consider both character and circumstance explanations of moral misbehavior. We expand on Donaldson’s initial description of normalization of questionable behavior by applying the concept of moral neutralization, which is defined by criminologists Sykes and Matza as the process of convincing oneself that an option that initially conflicted with one’s own moral beliefs is actually morally acceptable. We find indications that individuals in the Icelandic financial sector did engage in moral neutralization in their attempts to frame their own actions in an acceptable light. In our study, we identify one way of neutralizing away moral dissonance not captured in the original theoretical framework. Icelandic bankers justified their behavior by claiming that they did not break any relevant rules or regulations when they engaged in what were later labeled questionable activities. Our name for this kind of justification is claim of having breached no rule. (shrink)

The paper develops a responsibility-based account of professional ethics in banking. From this perspective, bankers have duties not only toward clients—the traditional focus of professional ethics—but also regarding the prevention of systemic harms to whole societies. When trying to fulfill these duties, bankers have to meet three challenges: epistemic challenges, motivational challenges, and a coordination challenge. These challenges can best be met by a combination of regulation and ethics that aligns responsibilities, recognition, and incentives and creates what Parsons has called (...) “integrated situations”. Professional associations play an important role for this purpose, especially as spaces in which peer recognition is earned. But financial incentives equally need to be brought in line, for example, through deferred bonuses or claw backs. Such measures can create a new culture of accountability in banking. (shrink)

This paper takes a social epistemology perspective on markets in general and trade deals in particular. Normatively, it is based on considerations of democratic accountability and contestation. Empirically, it is based on the assumption that all markets are embedded in institutional frameworks. Knowledge plays an important role in the institutional framework of markets: it matters both at the level of content – which knowledge has to be processed in what way, according to the market rules? – and at the level (...) of process – whose knowledge counts in setting the rules? While these considerations apply to both domestic and international markets, there are good reasons to allocate certain epistemic tasks to the frameworks of international markets, for example trade deals. While the TTIP and CETA negotiations fell short of democratic standards about transparency, the debate about them indicates growing public awareness of the importance of the institutional frameworks for international trade. (shrink)

Cloud computing is rapidly gaining traction in business. It offers businesses online services on demand (such as Gmail, iCloud and Salesforce) and allows them to cut costs on hardware and IT support. This is the first paper in business ethics dealing with this new technology. It analyzes the informational duties of hosting companies that own and operate cloud computing datacenters (e.g., Amazon). It considers the cloud services providers leasing ‘space in the cloud’ from hosting companies (e.g, Dropbox, Salesforce). And it (...) examines the business and private ‘clouders’ using these services. The first part of the paper argues that hosting companies, services providers and clouders have mutual informational (epistemic) obligations to provide and seek information about relevant issues such as consumer privacy, reliability of services, data mining and data ownership. The concept of interlucency is developed as an epistemic virtue governing ethically effective communication. The second part considers potential forms of government restrictions on or proscriptions against the development and use of cloud computing technology. Referring to the concept of technology neutrality, it argues that interference with hosting companies and cloud services providers is hardly ever necessary or justified. It is argued, too, however, that businesses using cloud services (banks, law firms, hospitals etc. storing client data in the cloud, e.g.) will have to follow rather more stringent regulations. (shrink)

This article applies philosophical work on epistemic injustice and cognate concepts to study gender and racial disparity in financial markets. Members of disadvantaged groups often receive inferior financial services. In most jurisdictions, it is illegal to provide discriminatorily disparate treatment to groups defined by gender and skin colour. Racial disparity in financial services is generally considered to be discriminatory. The standard view among most regulators is that gender disparity is not discriminatory, though. Through an analysis of various exemplary cases, I (...) propose testimonial injustice as a candidate explanation for some of the existing forms of racial disparity found in financial services. I show how prejudices about gender and finance decrease epistemic self-confidence, and how this leads to gender disparity. And I consider particularly intractable forms of self-fulfilling testimonial injustice. (shrink)

The artificial intelligence models with machine learning that exhibit the best predictive accuracy, and therefore, the most powerful ones, are, paradoxically, those with the most opaque black-box architectures. At the same time, the unstoppable computerization of advanced industrial societies demands the use of these machines in a growing number of domains. The conjunction of both phenomena gives rise to a control problem on AI that in this paper we analyze by dividing the issue into two. First, we carry out an (...) epistemological examination of the AI’s opacity in light of the latest techniques to remedy it. And second, we evaluate the rationality of delegating tasks in opaque agents. (shrink)

In his important recent book, Ethics and the Global Financial Crisis: Why Incompetence is Worse than Greed, Boudewijn de Bruin argues that a key element of the global financial crisis of 2007–2008 was a failure of epistemic virtue. To improve matters, then, de Bruin argues we need to focus on the acquisition and exercise of epistemic virtues, rather than to focus on a more ethical culture for banking per se. Whilst this is an interesting suggestion and it is indeed very (...) plausible that an increased focus on proper knowledge-related behaviour will be part of a solution, we are sceptical both about de Bruin’s overarching theoretical claims and about his practical suggestions for change. Instead we argue that change in this sector is best promoted by reconceiving of the relationship between financial institutions and the societies they serve, and that this is fundamentally not an epistemic but a moral issue. (shrink)

Can governments keep the pace of global markets? It is a defining characteristic of the present times, tested and measured within multiple studies, that we are living in an increasingly interconnected economy in which giant companies emerge and compete presenting new goods and products at a global scale. The competing environment of international markets produces quickly growing creatures that old nation-states struggle to understand, monitor and, consequently, regulate. In this regard, the selection process taking place in the market seems to (...) be far more effective and greedy than the selection process we apply to our governments. In this paper I discuss the basic theoretical mechanisms for the persistence of wealth concentration, introducing a general game-theoretical framework to connect governance, market economy, and wealth distribution, and to rethink democracy and fairness in policy-making, especially with the aim of global sustainability governance. (shrink)

Recognizing that truth is socially constructed or that knowledge and power are related is hardly a novelty in the social sciences. In the twenty-first century, however, there appears to be a renewed concern regarding people’s relationship with the truth and the propensity for certain actors to undermine it. Organizations are highly implicated in this, given their central roles in knowledge management and production and their attempts to learn, although the entanglement of these epistemological issues with business ethics has not been (...) engaged as explicitly as it might be. Drawing on work from a virtue epistemology perspective, this paper outlines the idea of a set of epistemic vices permeating organizations, along with examples of unethical epistemic conduct by organizational actors. While existing organizational research has examined various epistemic virtues that make people and organizations effective and responsible epistemic agents, much less is known about the epistemic vices that make them ineffective and irresponsible ones. Accordingly, this paper introduces vice epistemology, a nascent but growing subfield of virtue epistemology which, to the best of our knowledge, has yet to be explicitly developed in terms of business ethics. The paper concludes by outlining a business ethics research agenda on epistemic vice, with implications for responding to epistemic vices and their illegitimacy in practice. (shrink)

This article provides an overview of the field of business ethics.

The main goal of this thesis is to provide a clear basis for the analysis of alternative currencies, such as Bitcoin, LETS, Local currencies, the WIR or Carbon currencies. It attempts to determine whether alternative currencies might constitute just and workable alternatives, either in the form of small-scale experiments or in the form of more radical reforms. The first chapter proposes a new way to classify currencies. The second examines the case in favour of monetary plurality. The third analyses the (...) claims in favour of restricting the use of money locally, within a community, or to certain goods. The fourth studies the link between money and the market. Finally, a post-scriptum focuses on Bitcoin and cryptocurrencies. This thesis highlights that these currencies are drivers of several potential conflicts. Their widespread use might conflict with the adequate management of monetary policy, with social justice, and with liberal values. These conflicts are potential, for they would come into existence only if alternative currencies increased in scope. However, there is no reason to disregard potential conflicts when the case in their favour relies mostly on their potential benefits. (shrink)

The main goal of this thesis is to provide a clear basis for the analysis of alternative currencies, such as Bitcoin, LETS, Local currencies, the WIR or Carbon currencies. It attempts to determine whether alternative currencies might constitute just and workable alternatives, either in the form of small-scale experiments or in the form of more radical reforms. The first chapter proposes a new way to classify currencies. The second examines the case in favour of monetary plurality. The third analyses the (...) claims in favour of restricting the use of money locally, within a community, or to certain goods. The fourth studies the link between money and the market. Finally, a post-scriptum focuses on Bitcoin and cryptocurrencies. This thesis highlights that these currencies are drivers of several potential conflicts. Their widespread use might conflict with the adequate management of monetary policy, with social justice, and with liberal values. These conflicts are potential, for they would come into existence only if alternative currencies increased in scope. However, there is no reason to disregard potential conflicts when the case in their favour relies mostly on their potential benefits. (shrink)