A social science research agenda on the financial crisis

Abstract

There is a need to develop a social science research agenda on finance, financialisation and the financial crisis. The financial crisis was not anticipated by most social scientists. Indeed, the development of new financial instruments was supposed to manage risks effectively. Yet, financialisation has led to devastating effects on the economy and society, creating a deep and widespread recession, with sharp drops in gross domestic product, share prices and house prices, and sharp increases in unemployment and poverty. A new social science research agenda on this topic has much to offer society. It is necessary to consider why the social sciences did not predict the financial crisis, and identify the risks of over-financialisation. It is necessary to involve all the social sciences, not only the specific expertise of those in finance and economics. In particular, it is necessary to go beyond the limitations of the perspectives limited to individual rational agency, and the flawed assumptions of perfect, self-balancing, self-regulating and equilibrating markets. It is necessary to understand the connections of finance to society, no longer treating it as something separate from society, and to extend and deepen institutional analysis and its interconnection of finance with other social domains.