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- From Moral to Market Sentiments Transcript
Why have financial values come to be considered more important than human ones?
- Adam Smith (2 mighty books): 2/2 – WoN: :The most purchased, often cited, and arguably least read book in economics)
- Smith believed that we form our norms or values by wishing to be loved and lovely. That is, to be well thought of or well regarded… So moral sentiments are not inherent. To use the modern terminology of Richard Dawkins, they’re social memes that are learned, imitated and passed on.
- The market is becoming the organising framework, not only for economies, but also increasingly for broader human relations with its reach extending well into civic and family life. In parallel, the social constraints on unbridled capitalism, religion and the tacit social contract have been steadily eased.
- cognitive capture: such trust dictated that the only solutions proposed to market failures were to add more markets or to reduce regulation further.
- tragedies of the horizon
- The most profound set of risks arise from the drift from moral to market sentiments.
- the undercutting of the social foundations of the market,
- Values of trust, integrity and fairness are critical to effective market functioning, and these values have increasingly been taken for granted.
- Milton Friedman’s classic pion to shareholder value includes the following caveat: A corporate executive’s responsibility is to make as much money as possible, while conforming to the basic rules of society, both those embedded in law and in ethical custom.
- In short, in moving from a market economy to a market society, are we consuming the social capital necessary to create economic and human capital?
- it could engage in such hypocritical window dressing by calling this social responsibility lest it, and I quote, “Harm the foundations of the free market to admit that this fraud was all in the pursuit of profit alone.”
- the corrosion of values arising from pricing of goods, services and civic virtues, that have been traditionally outside the market,
- A moral error of many mainstream economists is to treat civic and social virtues as scarce commodities. This ignores the extensive evidence that civic virtue and public spirit atrophy with disuse would grow like muscles with regular exercise. As Aristotle observed, virtue is something we cultivate with practice, we become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts.
- There is extensive evidence of a commercialisation effect. When people are engaged in an activity that they see as intrinsically valuable, offering them money weakens their motivation. By depreciating, we’ve been crowding out the intrinsic interest or commitments. In these ways, the spread of the market can undermine community, one of the most important determinants of happiness.
- KF: Commercialization of the self: the spread of the market can undermine a sense of self, a self that is inherently precious even if it is not immediately marketable.
- “This encourages bringing more goods and activities into markets, a process that can affect perceptions of their value.”
- the flattening of values by forcing decisions to be made according to utilitarian calculations.
- the undercutting of the social foundations of the market,
Today, the subjective approach to value has spread widely. Market value is taken to represent intrinsic value, and if a good or activity is not in the market, it is not valued. We’re approaching the extremes of commodification as commerce expands deep into the personal and civic realms
2. From Credit Crisis to Resilience Transcript
- To build a sense of responsibility for the system as a whole, business ultimately needs to be seen as a vocation, an activity with high ethical standards which, in turn, conveys certain responsibilities. Having a sense of vocation begins by asking the right question: whom does finance serve? Itself, the real economy, society, and to whom is the financier responsible?
- The answers start from recognising that financial capitalism is not an end in itself but a means to promote investment, innovation, growth and prosperity.
- How does this gel with the “greed is good mentality?”
3. From Covid Crisis to Renaissance
- Last year’s Reith lecturer, Lord Jonathan Sumption, even argued that we have developed an irrational horror of death, leading us to protect lives at exorbitantly high cost that previous generations didn’t contemplate.
- Staying at home during a lockdown or wearing a mask following government guidance is part of the Hobbesian bargain: obedience in exchange for protection. Many are willing to comply with decrees of a legitimate and trusted power, but such state legitimacy must be continually earned.
- At the beginning of the pandemic, many said that this tragedy underscored our common humanity. Put another way, we – we are all in the same storm. It quickly became apparent, however, that we were in very different boats. COVID is fundamentally unequal in its impact and it has exposed deep inequalities in our society.
- 14:12 ~ To Schelling, the intangible qualities associated with life weren’t that different from other consumer goods. Now, I disagree and there’s four reasons why the value of life is radically different
- I’m unlikely to catch COVID working online but those who deliver my packages, prepare my food and provide me with healthcare are consistently and constantly exposed. The path to herd immunity runs directly through the inequalities in our society.
- This isn’t about picking winners, it’s a reaction to COVID choosing losers.
- In recent decades, suddenly but relentlessly, we’ve been moving from a market economy to a market society. Increasingly, to be valued, an asset or activity has had to be in the market, and this crisis could help reverse that so that public values help shape private value.
- KF: similarly, to be valued (or even seen) as an individual for younger peeople increasingly requires the commodification of the self through self-branding and self-promotion on socal media.
- In this crisis, we know we need to act as an interdependent community, not as independent individual.
4. From Climate Crisis to Real Prosperity
- Human frailties create a tragedy of the horizon. That means the catastrophic impacts of climate change will fall largely on future generations. The current generation with our horizon fixated on the current 3 news, business and political cycles, has few direct incentives to solve the issue, even though the sooner we act, the less costly it will be; for an issue that can only be solved in the present, we have to value the future.
- Market failures create the tragedy of the commons, and this arises when individuals acting in their own self-interest, undermine the common good by depleting a shared resource.
- And this points to the third issue, the flattening of values. We’ve been trading off the planet against profit, living for today and leaving it to others to pay tomorrow.
- However, we don’t yet have commercial technology to cut around 25 percent of man-made greenhouse gas emissions. We need greater investment and innovation in critical technologies, such as hydrogen, carbon capture and storage, and sustainable aviation fuels
- in short order
- “You’ve stolen my dreams and my childhood with your empty words and yet I am one of the lucky ones, people are suffering, people are dying, entire ecosystems are collapsing, we are in the beginning of a mass extinction and all you can talk about is money and fairy tales of eternal economic growth. How dare you. We will not let you get away with this, right here, right now, is where we draw the line. The world’s waking up and change is coming whether you like it or not.”
- Since what gets measured gets managed, every major company should disclose how climate change affects its current business and how it could affect their strategies. Large companies should also develop and disclose their plans to move to net zero.
- Now the gold standard for this reporting has been created by something called the TCFD (Task Force on Climate-related Financial Disclosures), which is a private sector standard now backed by financial institutions, controlling 150 trillion dollars of assets. And that sounds like a lot and it is a lot. It’s time for the G20 to make the TCFD mandatory for all large companies
- KF:UBC Climate Action Plan
- “separate from society?”
- KF:UBC Climate Action Plan
- Ask not what the climate is doing to your country, but what your country can do for the climate.
- A market in the transition to net zero is now being built on these foundations of reporting risk management and returns. It’s turning an existential risk into one of the greatest commercial opportunities of our time.