Learning from mistakes: can the Global Financial Crisis translate into social progress?

Abstract

In this essay, I take position against the idea that contemporary societies necessarily learn from mistakes. Drawing on a constellation of different though converging theoretical templates, I first criticize the claim that the Global Financial Crisis will somehow inevitably translate into progress in the field of finance practice, through a plethora of measures such as a more effective and constraining regulatory environment. Learning from mistakes constitutes, and will always constitute, a fragile endeavour. Yet, in spite of the difficulties involved, I also maintain that some progress can be made, for instance when people are rendered more aware of the difficulties involved in realizing social change, and of the key issues and risks they face, individually and collectively, on the shorter and longer run. In this respect, I argue that the core of finance research has played a significant role in lessening society's ability to learn from mistakes – since finance's lack of diversity in research styles translates into a body of knowledge which is not particularly meaningful when trying to make sense of infrequent yet highly significant events unfolding in the political economy. Although I am aware of the underlying obstacles, there is a need for finance academics to increase their commitment to the ideal of research diversity and engage more thoroughly in the examination of finance in action.

Keywords:

• finance research
• Global Financial Crisis
• progress
• regulation
• research diversity
• tension between social change and reproduction

Acknowledgement

I benefited from the comments made by Sylvain Durocher, Bertrand Malsch and Jean-Hubert Smith-Lacroix. I also gratefully acknowledge the financial support of the Social Sciences and Humanities Research Council of Canada.

Notes

1. The author reportedly is a partner in a financial services firm.

2. In spite of appearances, the Sarbanes-Oxley Act of 2002 has been criticized for having failed to address the most substantive and problematic issues in the field of public accounting (Wyatt 2004), and for not having engendered deep-level transformations within corporate governance circles (Tremblay and Gendron 2011).

3. How such a dubious arrangement historically developed and became legitimized constitutes an interesting question which, however, is beyond the purpose of this essay.

4. Diversity has not been, and is still not emphasized in core finance journals. According to Ardalan (2000), the vast majority of finance journals (established and newer ones) advocate traditional positivist research. In a follow-up article, Ardalan (2003) deplores the marginalization of non-positivist paradigms in finance research. The domination of traditional epistemologies did not decrease in the aftermath of the Global Financial Crisis. Indeed, using the Ebsco database, I searched for qualitative articles, published between January 2010 and June 2013 in the Journal of Finance, Journal of Financial and Quantitative Analysis and Journal of Financial Economics, through an abstract-based search using terms such as ‘qualitative’, ‘field study’, ‘case study’, ‘context’, ‘ethnography’ and ‘ethnographical’. No qualitative article was found.