How should we view financial instruments? Saviors or socially useless? There are equities (shares) and bonds. These instruments have been around for years and are well understood. Then there are derivatives. The major types are options, swaps, futures, and forwards. These instruments are traded daily, in large volume, and they too are more or less well understood. We do not question their existence because these financial instruments serve a purpose. They may help people to save or raise money (equities and bonds) or to manage risk (derivatives). What of financial instruments that seem to serve no purpose except to enrich those who speculate in them? What about those instruments that go above and beyond the usual purpose of savings and investments and actually help build social services that benefit society?
The first two articles in this issue of Moral Cents discuss two different forms of financial instruments. The first article by Anna Kimbrell, describes an innovative, emerging financial instrument called the Social Impact Bond (SIB). The other article by Maja Cvjetanovic, focuses on a familiar, much derided, financial instrument, the Collateralized Debt Obligation or CDO, infamous for its role in the Global Financial Crisis of 2007. Is the former a savior while the latter socially useless at best, destructive at worst?
In another article in this issue, Calvin Benedict asks if conduct costs (fines incurred for wrongdoing) will change the behavior of banks. Kanksha Mahadevia Ghimere offers a model for restructuring the personal vs. public gain relationship. Amir Khoury thinks inverse moral rights is the concept that may resolve thorny social issues that pit freedom of speech against freedom of religious practice. Finally, Helena Wong applies Rawlsian distributive justice to support a change in the structure of Hong Kong’s property market in order to bring greater income equality to former British colony.
Moral Cents: The Journal of Ethics in Finance is published by
Seven Pillars Institute for Global Finance and Ethics