Finance and Its Fundamental Problems

Abstract

This chapter explores the fundamental features of finance based on the right role of finance in social science as well as the right role of social science in our society, which is necessary for better understanding and solving financial problems. The main findings include, there are descriptive disciplines and decisional disciplines in social science, which is one of the most important differences between social science and natural science; finance belongs to the decisional discipline rather than descriptive discipline, which implies that finance should focuses on solving decisional problems rather than describing and explain phenomena; the basic method in finance is valuation, or quantitative trade off between return and risk; which is the main differences between finance and other quantitative disciplines as well as other decisional disciplines. Naturally, the insights revealed in this chapter are the ideological foundations to solve so many tough financial problems. In this sense, this chapter is on the top in importance in the whole book.