Sach at The Compulsive Theorist looks at the case for behavioral reform in financial markets, and argues that fixing balance sheets without fixing norms and culture is unlikely to provide a permanent solution to the problems these markets face:
Why the culture of the financial sector has to change, the Compulsive Theorist: I want to say a little about business and cultural norms in the financial sector, how they affect tangible outcomes we all care about, and why they need to change. Norms are inherently less tangible than items on balance sheets, so it can be hard to see the role they play. I want to focus on norms in the financial sector, but to bring them out of the background I’ll start with a comparison to another field.
Doctors and bankers are alike in that they can inflict enormous damage by doing a bad job, doctors with a flick of the scalpel, bankers with a click of the mouse. Both are therefore subject to regulation which tries to trade-off costs of enforcement against risk of damage. But there’s a huge difference in the way doctors and bankers view their work. ... [...continue reading...]