Abstract
The paper examines connections between ontology and finance. The ontological debates concerning the role of finance are examined between two opposing schools of thought that can be labelled, very broadly, ‘instrumentalist’ and ‘realist’ (analytic-interpretivist). These two schools of thought have had momentous repercussions in understanding what is a good society. Each school defines Nature in particular ways which can be explored using ontology and philosophical insight. Our theoretical investigation aims to accommodate Nature in community financial deliberations. A positive role for government is advocated to finance environmental infrastructure initiatives. For example, precautionary strategies to address climate change must be funded. New roles for finance and government are proposed to align human relationships with Nature. Environmental precautionary principles must be developed in conjunction with finance theory to maintain decent standards of living for all. Reliance on impersonal market forces will not be enough to save the planet given the power of some over the many in the neoliberal arena.
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Notes
We use the term ‘analytic-interpreters’ and ‘environmental realism’ to refer to the ideas of Dreyfus, Gadamer, Nussbaum and Taylor.
Pražák (2018) summaries the CAPM as assuming a particular form of utility functions (in which only first and second moments matter, that is risk is measured by variance which is the distribution around the mean). CAPM shows that the cost of equity capital is determined only by beta. In a quadratic utility asset returns whose probability distributions are completely described by the first two moments. For example, the normal distribution and zero transaction costs which is necessary for diversification to eliminate idiosyncratic risk). He states: “[r]isk is often represented by the quantity beta (β) in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset.”
The language of time preference reflects utilitarian ad hominem frameworks which involve the maximisation of people’s happiness. On the other hand, apodeictic forms of liberalism assume that a decision-structure can be developed and applied to social and ecological problems as they arise.
This section develops work on Prigogine and Stengers (1984) from Lehman (2015). The aim is to explore how thermeodynamics is characterised by non-equilibrium whereas finance works with equilibria. This gap between dissipative structures and financial equilibria is critical to our understanding how to tackle climate change (non-equilibria) in a world of half-understood structural domination.
Norton (2014) is sufficiently post-modernist to argue that ‘truth, as well as value, will be measured against a dynamic criterion of adaptability, rather than against a timeless, realist criterion of objective truth’.
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