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How much does finance benefit society?

Author

Listed:
  • Giancarlo Bertocco

    (University of Insubria)

  • Andrea Kalajzic

Abstract

The financial crisis that erupted in 2007 has generated feelings of deep aversion towards finance among the public. Zingales (2015) urges the economics profession not to underestimate these feelings, noting that economists tend to overestimate the benefits of finance and to ignore that the 'best form of finance' is accompanied by a 'bad type of finance'. The problem with these statements is that the macroeconomic theory elaborated over the last decades is unable to provide a satisfactory explanation for the coexistence of these two forms of finance. The aim of this work is to present a sound explanation of the distinction between good and bad finance, based on: i) Keynes's distinction between enterprise and speculation; ii) Schumpeter analysis of the role of bank money in a capitalist economy.

Suggested Citation

  • Giancarlo Bertocco & Andrea Kalajzic, 2018. "How much does finance benefit society?," PSL Quarterly Review, Economia civile, vol. 71(287), pages 419-437.
    • Handle: RePEc:psl:pslqrr:2018:43
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    File URL: https://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/14067/pdf
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    References listed on IDEAS

    as
    1. Mariana Mazzucato & L. Randall Wray, 2015. "Financing the Capital Development of the Economy: A Keynes-Schumpeter-Minsky Synthesis," Economics Working Paper Archive wp_837, Levy Economics Institute.
    2. Ben S. Bernanke, 2012. "Some Reflections on the Crisis and the Policy Response : a speech at the Russell Sage Foundation and The Century Foundation Conference on \"Rethinking Finance,\" New York, New York, April 13, 2012," Speech 639, Board of Governors of the Federal Reserve System (U.S.).
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    4. repec:rnp:ecopol:09111 is not listed on IDEAS
    5. Gorton, Gary B., 2012. "Misunderstanding Financial Crises: Why We Don't See Them Coming," OUP Catalogue, Oxford University Press, number 9780199922901.
    6. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
    7. Eckhard Hein, 2012. "The Macroeconomics of Finance-Dominated Capitalism – and its Crisis," Books, Edward Elgar Publishing, number 14931.
    8. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111, December.
    9. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
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    Cited by:

    1. Stefano Di Bucchianico, 2020. "A note on financialization from a Classical-Keynesian standpoint," Department of Economics University of Siena 824, Department of Economics, University of Siena.

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    More about this item

    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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