Ethics and Finance

Abstract

Discussing the role of morals and ethics in economics and finance is not new but several developments including the financial crisis of 2007–2008 and its aftermath have led to a debate about the need to consider the role of ethics and morality in the economic and financial workings of contemporary capitalism. Financial scandals, crimes, and unethical practices by financial institutions leading to financial repression are being noticed and the moral failure of capitalism is being discussed. Gradually, attention is being paid to the most fundamental change—the erosion of morality. In addition, repeated failure of governance, regulations, and accountability are considered a sign of deteriorating ethics in financial markets. Finally, new evidence is emerging on a widening gap in income and wealth, and reduced opportunities for the poor to share growth and prosperity, which raises ethical questions. All these developments call for a deeper understanding of the strong roots of ethics in finance, which has been mostly ignored by mainstream research.