Would we have had this crisis if women had been running the financial sector?

Abstract

The two main ethical approaches, utilitarianism and deontology, have not been able to prevent some of the behaviours underlying the financial crisis. A third ethics, the ethics of care, might have been more effective than the other two in preventing the last financial crisis. The ethics of care is a feminist ethical theory concerned with relationships. It can be applied to a wide variety of relationships and has been tested in experimental settings, suggesting that women tend to behave more in ways that can be understood in terms of relationships, whereas men tend to behave more in terms of rules. Using these ethical theories, we analyse the crisis pointing at what are its causal behavioural attitudes and institutions.

Keywords:

• deontology
• ethics and economics
• ethics of care
• financial crisis
• utilitarianism
• women

Acknowledgements

This paper is part of a larger one. Irene van Staveren wrote her part during her stay at the Netherlands Institute for Advanced Study in the Humanities and Social Sciences in Wassenaar, in 2010 and she presented it there at a seminar on 17 June 2010. Then, the paper was also presented in a Seminar at the IAE, Universidad Austral, Buenos Aires, on 20 July 2010 and at the Annual Conference of the International Association for Feminist Economics (IAFFE), Buenos Aires, 22?24 July 2010. We owe thanks to the participants in the discussions after all these presentations, to Jeffrey Friedman and to one anonymous referee.

Notes

In a paper about the candidate hypotheses for the explanation of the crisis, Crespo et al. (2010) discarded, through an abductive process, all the candidates supposing rational expectations.

For a detailed review of regulatory failures, see Nothwehr and Manning (2009). For an interesting and detailed analysis of the behavior of some specific private banks, see Blundell-Wignall et al. (2008).

It is interesting to consider the list of possible causes consigned by Jickling (2009): imprudent mortgage lending, housing bubble, global imbalances, securitization, lack of transparency and accountability in mortgage finance, rating agencies, mark-to-market accounting, deregulatory legislation, shadow banking system, non-bank runs, off-balance sheet finance, government-mandated subprime lending, failure of risk management systems, financial innovation, complexity, human frailty, bad computer models, excessive leverage, relaxed regulation of leverage, credit default swaps, over-the-counter derivatives, fragmented regulation, no systemic risk regulator, short-term incentives, tail risk and black swan theory.

There is a whole meta-ethical discussion about the nature of moral terms that we will not consider here. However, it is clear that some terms denote a moral consideration of the concerned subject.

As Daron Acemoglu (2009) states, ‘when unchecked by the appropriate institutions and regulations, it [greed] will degenerate into rent-seeking, corruption and crime’. Jickling (2009) speaks about ‘rising rates of delinquency and foreclosures’ delivering a sharp shock to financial institutions.

Not only most economists but also political philosophers tend to limit themselves to standard utilitarianism. For them, this is because rule-utilitarianism, like other refinements of this theory of ethics ‘… does not take seriously the distinction between persons’, as John Rawls (1971, p.27) has formulated it.

The Dutch government has obliged banks since 1 January 2010 to follow the guidance of a ‘Care Duty’, which implies taking care of your customers' well-being when you provide them with financial services, through providing adequate information about risks involved.