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Reflections on Finance and the Good Society

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Abstract

After the financial crisis that began in 2007 many have expressed renewed doubts about the basic goodness of the financial sectors, doubts related to deeply-held moral principles and traditions of larger society. We need to reconcile these doubts with financial practice. We must acknowledge the important principle of reciprocity. We must understand that there are natural human tendencies towards aggression and hoarding, which no financial institutions and codes of ethics can completely eliminate. We must appreciate the important role of professional organizations in moderating these tendencies. When these principles are made part of financial education we can expect better public acceptance of the important role that finance plays in our society.

Suggested Citation

  • Robert J. Shiller, 2013. "Reflections on Finance and the Good Society," Cowles Foundation Discussion Papers 1894, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:1894
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    File URL: http://cowles.yale.edu/sites/default/files/files/pub/d18/d1894.pdf
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    References listed on IDEAS

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    1. Ernst Fehr & Simon G├Ąchter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Karl E. Case & Robert J. Shiller & Anne K. Thompson, 2012. "What Have They Been Thinking? Homebuyer Behavior in Hot and Cold Markets," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 265-315.
    3. Alvin E. Roth, 2007. "Repugnance as a Constraint on Markets," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 37-58, Summer.
    4. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153.
    5. Claire A. Hill, 1997. "Securitization: A Low-Cost Sweetener For Lemons," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(1), pages 64-71.
    6. Robert J. Shiller, 2012. "Finance and the Good Society," Economics Books, Princeton University Press, edition 1, number 9652.
    7. Kuran, Timur, 1996. "The Discontents of Islamic Economic Morality," American Economic Review, American Economic Association, vol. 86(2), pages 438-442, May.
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    More about this item

    Keywords

    Business ethics; Religion; Reciprocity; Aggression; Hoarding; Repugnance; Speculation; Professional organizations; Dodd-Frank Act; Teaching; Business education;

    JEL classification:

    • G0 - Financial Economics - - General

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