Reciprocity as a Foundation of Financial Economics

Abstract

This paper argues that the subsistence of the fundamental theorem of contemporary financial mathematics is the ethical concept ‘reciprocity’. The argument is based on identifying an equivalence between the contemporary, and ostensibly ‘value neutral’, Fundamental Theory of Asset Pricing with theories of mathematical probability that emerged in the seventeenth century in the context of the ethical assessment of commercial contracts in a framework of Aristotelian ethics. This observation, the main claim of the paper, is justified on the basis of results from the Ultimatum Game and is analysed within a framework of Pragmatic philosophy. The analysis leads to the explanatory hypothesis that markets are centres of communicative action with reciprocity as a rule of discourse. The purpose of the paper is to reorientate financial economics to emphasise the objectives of cooperation and social cohesion and to this end, we offer specific policy advice.

How Pro-social Framing Affects the Success of Crowdfunding Projects: The Role of Emphasis and Information Crowdedness

“…There is a general interest in studies of business ethics concerning whether the emergence of crowdfunding-a new form of fundraising in which citizens provide financing to projects directly through the Internet-could improve the ethical standards of entrepreneurial finance (Fassin and Drover 2017;Johnson 2015). The expectations that crowdfunding could provide a step towards a more ethical entrepreneurial finance are based on two reasons.…”

“…The expectations that crowdfunding could provide a step towards a more ethical entrepreneurial finance are based on two reasons. First, crowdfunding enables direct contact between entrepreneurs and citizens, and thus it by-passes the traditional providers of finance, such as banks and venture capitalists, whose investment decisions are usually profit-oriented with little consideration for the social or ethical goals that entrepreneurs might have (Drover et al 2014;Johnson 2015). While the traditional financial sector is seen as alienating investors from their investments, crowdfunding is greeted as an opportunity for investors to engage directly with entrepreneurial projects and to actively select investment goals and opportunities (Johnson 2015, p. 61).…”

A Research Agenda for Management and Organization Studies

“…Unlike such disciplines as strategy, marketing and leadership, which make a currency of their ambiguity, accounting has a technical dimension (and a long historical extension of this technicality) that makes it combine ambiguity with the apparent functionality of the technique. 2 People have performed accounting calculations for centuries and, since the Renaissance, have calculated interest in a way that differentiates it from usury (Johnson, 2015). So any attempt to speculate on the future of accounting cannot disregard how ethical issues of worth and value require not only alternative modes of reflective representation and transparency, but will also have to be translated into a new aest-ethics for accounting techniques.…”

Vulnerable Populations in Prosocial Crowdfunding: Does the Framing Matter for Female and Rural Entrepreneurs?

“…The purposeful individual selection of entrepreneurial projects and investment goals in crowdfunding [73] set the growing expectation that this alternative financial tool could offer the early stages of a more ethical entrepreneurial financing dynamic ( [35]; [46]; [73]). However, evidence suggests that crowdfunding institutions may be increasingly seeking clients who are easiest to access, such as those living in urban rather than rural areas ( [116]; [120]); those involved in businesses with rapid turnover such as retail, instead of agriculture ( [37]; [65]); and the "better-off" of the poor ( [26]; [44]).…”