Financial services should be an essential force for good
Opinion Contributed to The Globe and Mail / Published Monday, Aug 1, 2017
The philosopher John Locke observed the human tendency to err in “taking words for things.” He noticed that when concepts are dignified by words, they start to seem “so suited to the nature of things that they perfectly correspond with their real existence.” People maintain in their minds certain stereotypes of how one should behave. They remain attached to traditional forms, even when presented with logical arguments that they are not ideal. These biases can be reduced if we introduce new words, and new units of measurement, to help shift patterns of thinking. Such seemingly inconsequential matters as changes in wording are a key part of how innovation proceeds.
Nick Silver understood this when he founded the Climate Bonds Initiative, working to mobilize the $100-trillion bond market for climate-change solutions. In his new book, Finance, Society and Sustainability – How to Make the Financial System Work for the Economy, People and Planet, he has taken the next step: joining a growing choir of authors in describing the pressing need to reassert and promote public awareness of the social utility of the financial sector.
His starting point is a depiction of finance as social technology that allocates economic surplus by allowing people to manage risk, smooth lifetime consumption and efficiently allocate savings. He illustrates how finance has been a powerful catalyst for expanding opportunity. He also describes how self-serving, rent-seeking behaviour has led to failures of the financial system to innovate in ways that contribute to economic growth or development.