This is a joint book talk with the Oxford Martin School and The Institute for New Economic Thinking at the Oxford Martin School
Financial firms were once organisations which helped their clients to do well, and earned fees from doing so. They have become organisations which look for people from whom to make money. As a result, people who work in finance are now very different from doctors; and they are no longer trusted. How did this happen? What can we do to make financial corporations, once again, institutions that are useful to society? Professor Vines, Director of Ethics and Economics at INET Oxford, will provide some answers to these questions in his talk, and will provide particular examples of what needs to be done.
The book talk will be followed by a book signing
This event will also be live webcast on YouTube: https://www.youtube.com/watch?v=yTdrJbFX554
About the Speaker
David Vines is Director, Ethics & Economics, The Institute for New Economic Thinking at the Oxford Martin School; Professor of Economics, and a Fellow of Balliol College, at the University of Oxford. He is also Adjunct Professor of Economics at the Australian National University, and a Research Fellow of the Centre for Economic Policy Research.
From 2008 to 2012 he was the Research Director of the European Union’s Framework Seven PEGGED Research Program, which analysed Global Economic Governance within Europe. Professor Vines received a BA from Melbourne University in 1971, and subsequently an MA and PhD from Cambridge University. From 1985 to 1992 he was Adam Smith Professor of Political Economy at the University of Glasgow.
His research interests are in macroeconomics, including financial frictions, fiscal and monetary interactions, and financial crisis. His recent books include: The Leaderless Economy: Why the World Economic System Fell Apart and How to Fix It (Princeton University Press, 2013, with Peter Temin); The IMF and its Critics: Reform of Global Financial Architecture (Cambridge University Press, 2004, with Christopher Gilbert); The Asian Financial Crisis: Causes, Contagion and Consequences (Cambridge University Press, 1999, with Pierre-Richard Agénor, Marcus Miller, and Axel Weber) and his latest book Capital Failure: Rebuilding Trust in Financial Services (Oxford University Press, 2014, with Nicholas Morris).
About the Book
Adam Smith's 'invisible hand' relied on the self-interest of individuals to produce good outcomes. Economists' belief in efficient markets took this idea further by assuming that all individuals are selfish. This belief underpinned financial deregulation, and the theories on incentives and performance which supported it. However, although Adam Smith argued that although individuals may be self-interested, he argued that they also have other-regarding motivations, including a desire for the approbation of others. This book argues that the trust-intensive nature of financial services makes it essential to cultivate such other-regarding motivations, and it provides proposals on how this might be done.
Trustworthiness in the financial services industry was eroded by deregulation and by the changes to industry structure which followed. Incentive structures encouraged managers to disguise risky products as yielding high returns, and regulation failed to curb this risk-taking, rent-seeking behaviour. The book makes a number of proposals for reforms of governance, and of legal and regulatory arrangements, to address these issues. The proposals seek to harness values and norms that would reinforce 'other-regarding' behaviour, so that the firms and individuals in the financial services act in a more trustworthy manner.