The Spillover of Systemic Ethical BehaviourReport as inadecuate

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Forum on Public Policy Online, v2010 n3 2010

The current financial crisis not only brought us high levels of unemployment, abrupt international disruption in economic growth, disinflation of assets prices and a dry up in the credit markets, among many other things; but it also brought us a crisis in the theory of economics and finance. Even though, a discussion concerning a crisis in the theory of finance seems very interesting, it will miss the point. The real crisis is an ethical crisis that involves all the economic subjects that utilize any financial theory. The paper argues that the current financial crisis is a result of a spillover of systemic ethical behaviour that replicates the systemic risk of a financial system. In the international financial system, banks, as well as human beings, copy other banks; they expose themselves to similar risks by making the same type of decisions. Similarly, economic agents, who are human beings, emulate other economic agents by making similar economic decisions. What is safe for one economic agent becomes dangerous if all of them do the same thing, which is even more problematic when those financial decisions are ethically questionable. The paper argues that to solve future financial crises the role of the university is essential. Universities should highlight the importance of ethical responsibility in any human field, especially in economics and finance. (Contains 3 footnotes.)

Descriptors: Economic Progress, Ethics, Banking, Risk, Decision Making, College Role, Citizenship Responsibility, Finance Occupations, Money Management, World Problems

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Author: Canadas, Alejandro


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