Virtue ethics and epistemology of financial modelling

You will find on this page the LINKS with my works developing epistemic ethics in finance: the application of the epistemology of financial modelling to ethics of finance.

What is epistemic ethics ? From Nick Shackel’s Post :

  1. « Epistemic ethics takes belief as the nexus of its concern, just as ethics takes action as the nexus of its concern. Believers and beliefs are the objects of epistemically ethical evaluation. The epistemically ethical standing of a believer bears a complex relation to their beliefs, to how they were sensitive to the epistemically ethically relevant facts in coming to their beliefs and to their general inclinations to believe.
  2. Epistemic ethics is concerned not only with such purely philosophical issues. It is also concerned with the issues of the specific epistemic duties had by us all, had by special classes of us (such as experts, journalists and politicians), had by us with respect to specific questions of belief, and had by us with respect to different arenas, such as private belief and public knowledge.
  3. Epistemic ethics includes the epistemic side of issues in the wider world such as medicine, the economy, the climate, the relation of science and policy, and more generally, the epistemic roles, rights and duties of social institutions concerned with knowledge such as think tanks, research institutes, schools and universities. »

Some of my works explore epistemic ethics in finance after the 2008 financial meltdown to complete the current analyses of the crisis with an insight on the cognitive dimension of this crisis. This research program is in progress.

At the end of my article « The financial Logos: The framing of financial decision-making by mathematical modelling« , I introduced the ethical triangle.

I define the financial Logos as a structuring discourse embedded in management tools and beliefs of financial practices. I hypothesize that this discourse contains a specific representation of risk mathematically modelled by probability measures. Next I use a performativity based approach to describe the concrete action of the financial Logos on financial practices: the framing of financial decision-making by mathematical modelling. I argue that it is not possible to think of a given financial practice without epistemologically and sociologically thinking of the contribution of the mathematical modelling to this practice.

Triangle éthique

I conclude with consequences for ethics of finance: extending ethics of action to epistemic ethics, I suggest that, in finance, any preference in mathematical modelling is also a preference in ethics.

This last statement raises the issue of competence in finance. Boudewijn De Bruin addressed this issue in his remarkable Ethics and the Global Financial Crisis: Why Incompetence Is Worse than Greed (Cambridge University Press, 2015). De Bruin examines the ethical ‘blind spots’ that lay at the heart of the global financial crisis. He argues that the most important moral problem in finance is not the ‘greed is good’ culture, but rather the epistemic shortcomings of bankers, clients, rating agencies and regulators.


With Boudewijn De Bruin, we apply this framework to enter an epistemological puzzle in financial modelling: the domination of the Brownian paradigm during almost 50 years, although this hypothesis was falsified in all empirical examinations: « Research Habits in Financial Modelling: The Case of Non-normality of Market Returns in the 1970s and the 1980s », in Ippoliti and Chen (Eds): Methods and Finance. A Unifying View on Finance, Mathematics and Philosophy, Springer, 2017.