Applying Rawls’ Theory of Justice to the Practice of Finance
By: Hannah Sandal*
Do what is profitable. This monolithic commandment of finance has undermined the success and credibility of the financial industry. This article proposes ethics for finance founded on the philosophical contributions of John Rawls. The concepts of the social contract, social cooperation, and fair play provide a democratic and secular framework for ethical behavior.
The Problem
Recent public indignation against financiers indicates a sense that while obeying the laws, these professionals still behaved unethically. At the same time, financial professionals appear uncomfortable defining and teaching ethical behavior in finance because of the explicit assumption that profit maximization is the ethic. This ethic has been accepted in finance and beyond because of the dominance of free and efficient market ideology in the Anglo-Saxon world over the past quarter of a century.
In the larger, contemporary cultural context, society largely takes a relativistic and subjective approach to morality. Yet, the financial crisis of 2008 demonstrates that we need ethical principles that are generally acceptable to guide behavior when regulations and regulators cannot monitor every transaction.
One Answer: A Rawlsian Approach to Finance Ethics
The answer to these two conflicting considerations lies in Rawls’ Social Contract Theory and proposed duty of fair play.
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* Hannah Sandal graduated from the University of Kansas School of Law in 2011 and currently works as a legal aid attorney in The University of Kansas Medical Legal Partnership.
