John Linarelli
Luck, Justice and Systemic Financial Risk
Linarelli, John
Authors
Abstract
Systemic financial risk is one of the most significant collective action problems facing societies. The Great Recession brought attention to a tragedy of the commons in capital markets, in which market participants, from the first-time homebuyer to Wall Street financiers, acted in ways beneficial to themselves individually, but which together caused substantial collective harm. Two kinds of risk are at play in complex chains of transactions in financial markets: ordinary market risk and systemic risk. Two moral questions are relevant in such cases. First, from the standpoint of interactional morality, does a person have a moral duty to avoid risk of harm to others if their financial transactions contribute in some way, however small, to the loss or harm? This article identifies the conditions in which persons are morally responsible in such cases. Second, from the standpoint of institutional morality, how should society distribute the risk of harm associated with massively complex financial markets? This question is considered in the context of the home mortgage credit market. Luck egalitarianism, in particular a Dworkinian insurance scheme to allocate risks and resources relating to mortgage credit and private home ownership, offers substantial promise.
Citation
Linarelli, J. (2017). Luck, Justice and Systemic Financial Risk. Journal of Applied Philosophy, 34(3), 331-352. https://doi.org/10.1111/japp.12148
Journal Article Type | Article |
---|---|
Acceptance Date | Jul 14, 2015 |
Online Publication Date | Aug 5, 2015 |
Publication Date | May 1, 2017 |
Deposit Date | Jul 14, 2015 |
Publicly Available Date | Aug 5, 2017 |
Journal | Journal of Applied Philosophy |
Print ISSN | 0264-3758 |
Electronic ISSN | 1468-5930 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 34 |
Issue | 3 |
Pages | 331-352 |
DOI | https://doi.org/10.1111/japp.12148 |
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Copyright Statement
This is the accepted version of the following article: Linarelli, J. (2017), Luck, Justice and Systemic Financial Risk. Journal of Applied Philosophy, 34(3): 331-352, which has been published in final form at https://doi.org/10.1111/japp.12148. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
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