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The financial crisis has fuelled a heated debate about the responsibility of financial economists. Critics such as Paul Krugman, Robert Shiller or David Colander argue that financial economists have developed useless or even harmful theories. This is an important debate, but it suffers from the fact that the role of financial theories remains unclear. In this paper we enter the field of philosophy of science to clarify this issue. In particular we emphasize the research interests and the various philosophical assumptions of three alternative views on financial theories. We analyze the widespread positivistic conception of financial theories and contrast it with a postmodern perspective. We conclude that both positions have limitations. As an alternative, we outline a constructivist conception of financial theories. In the final section, we use these insights from philosophy of science to clarify the responsibility of financial economists. Financial economists have to critically reflect the problems in practice that need to be addressed and to keep their theories closely tied to these original problems. We show how, in the case of the “efficient market hypothesis,” the misunderstanding of the role of financial theories led financial economists to neglect this responsibility.
Billions of dollars are annually transferred to poor nations to help them adapt to the effects of climate change. This Element examines how the discourses on adaptation finance of many developing country negotiators, environmental groups, development charities, academics and international bureaucrats have renewed a specific vision of aid, that of an aid intended to respond to international injustices and to fuel a regular transfer of resources between rich and poor countries. By reviewing manifestations of this normative vision of aid in key contemporary debates on adaptation finance, the author shows how these discourses have contributed to the significant financial mobilisation of developed countries towards adaptation in the Global South. But there remains a stark contrast between the many expectations associated with these discourses and today's adaptation finance landscape.
Public Finance remains the premier textbook on the normative theory of government policy, with the third edition propelling into the twenty-first century its examination of what government ought to be doing instead of what it is doing. The welfare aspects of public economics receive extensively renewed examination in this third edition. With four new chapters and other significant revisions, it presents detailed and comprehensive coverage of theoretical literature, empirical work, environmental issues, social insurance, behavioral economics, and international tax issues. With increased emphasis on the European Union, it is rigid enough for use by PhDs while being accessible to students less well trained in math. Moves skillfully from explaining normative theory to applying it in mathematically compact and precise terms Adds new chapters on social insurance, medical care, social security pensions, behavioral public economics, and international public finance Includes new pedagogical supplements, including end-of-chapter questions and answers Emphasizes European examples
Featuring a general equilibrium framework that is both cohesive and versatile, the Second Edition of Public Finance: A Normative Theory brings new and updated information to this classic text. Through its concentration on the microeconomic theory of the public sector in the context of capitalist market economics it addresses the subjects traditionally at the heart of public sector economics, including public good theory, theory of taxation, welfare analysis, externalities, tax incidence, cost benefit analysis, and fiscal federalism. Its goal of providing a foundation, rather than attempting to present the most recent scholarship in detail, makes this Second Edition both a valuable text and a resource for professionals. * Second edition provides new and updated information * Focuses on the heart of public sector economics, including public expenditure theory and policy, tax theory and policy, cost benefit-analysis, and fiscal federalism * Features a cohesive and versatile general equilibrium framework
This book conveys analyses, perspectives and interpretations of the normative foundation of the unique 'Nordic welfare state model' which are relevant across the globe.
Most people use money almost every day, and financial assets have become so important to modern life that they determine our fate both as individuals and as societies. Yet we seldom stop to think about what all of this means, how it works, and how it ought to work. How can a small piece of paper in your wallet have value? How can so much power be vested in the numbers that roll across bankers' computer screens? What role should financial assets and financial institutions play in our lives and in society? The philosophy of money and finance inquires into these types of questions, and takes a look 'under the hood' of money and finance, to address issues concerning the nature of money and the normative foundations of financial systems. Although philosophical theorizing about money and finance dates back to antiquity, the topic has only recently emerged as a central research focus. Economic globalization, technological innovation, the events of the 2008 financial crisis, and the Covid pandemic, have brought new urgency to a broad array of questions in this field. The Philosophy of Money and Finance presents sixteen original chapters providing a comprehensive introduction to this exciting new field. The book is divided into four parts, covering metaphysics, epistemology, ethics, and political philosophy. Within each part, questions that are central to the topic are presented and discussed by leading scholars. The essays are written in a clear and straightforward manner and without presupposing any background in either philosophy or finance.
The purpose of this book is to give a sound economic foundation of finance. Finance is a coherent branch of applied economics that is designed to understand financial markets in order to give advice for practical financial decisions. This book argues that for a sound economic foundation of finance the famous general equilibrium model which in its modern form emphasizes the incompleteness of financial markets is well suited. The aim of the book is to demonstrate that financial markets can be meaningfully embedded into a more general system of markets including, for example, commodity markets. The interaction of these markets can be described via the well known notion of a competitive equilibrium. We argue that for a sound foundation this competitive equilibrium should be unique. In a first step we demonstrate that this essential goal cannot of be achieved based only on the rationality principle, i. e. on the assumption utility maximization of some utility function subject to the budget constraint. In particular we show that this important lack of structure is disturbing as well for the case of mean-variance utility functions which are the basis of the Capital Asset Pricing Model, one of the cornerstones of finance. The final goal of our book is to give reasonable restrictions on the agents' utility functions which lead to a well determined financial markets model.
Does competitive process constitute an autonomous societal value or is it a means for achieving more meritorious goals: welfare, growth, integration, and innovation? The hypothesis of The Normative Foundations of European Competition Law is that the former is the case. This insightful book analyses the phenomenon of competition from philosophical, legal and economic perspectives demonstrating exactly why competitive process should not be viewed only as an instrument. It consolidates various normative theories of freedom, market and competition, and explains how exactly they can be operationalized effectively in the matrix of the EU competition policy.
Taken from: Foundations of Finance: The Logic and Practice of Financial Management, Ninth Edition by Arthur J. Keown, John D. Martin and J. William Petty.