Epistemic Injustice in Finance

This article applies philosophical work on epistemic injustice and cognate concepts (such as epistemic self-confidence) to study gender and racial disparity in financial markets. Members of disadvantaged groups often receive inferior financial services (they pay higher interest rates on loans, their loan applications are more likely to be rejected, etc.). In most jurisdictions, it is illegal to provide discriminatorily disparate treatment to groups defined by gender and skin colour. Racial disparity in financial services is generally considered to be discriminatory (and therefore illegal). The standard view among most regulators is that gender disparity is not discriminatory, though. Through an analysis of various exemplary cases, I propose testimonial injustice as a candidate explanation for some of the existing forms of racial disparity found in financial services. I show how prejudices about gender and finance decrease epistemic self-confidence, and how this leads to gender disparity. And I consider particularly intractable forms of self-fulfilling testimonial injustice

Knowledge attribution, socioeconomic status, and education:New results using the Great British Class Survey

This paper presents new evidence on the impact of socioeconomic status (SES) and education on knowledge attribution. I examine a variety of cases, including vignettes where agents have been Gettiered, have false beliefs, and possess knowledge (according to orthodoxy). Early work investigated whether SES might be associated with knowledge attribution (Weinberg et al. in Philos Top 29(1–2):429–460, 2001; Seyedsayamdost in Episteme 12(1):95–116, 2014). But these studies used college education as a dummy variable for SES. I use the recently developed Great British Class Survey (Savage et al. in Sociology 47(2):219–250, 2013) to measure SES. The paper reports evidence against an association between SES and patterns of knowledge ascription, and reports mixed evidence about education effects. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s11229-021-03131-6

Epistemic Corporate Culture: Knowledge, Common Knowledge, and Professional Oaths

This Article does not assume that professional oaths accomplish what they are intended to do. Yet, I believe that oaths can fulfill important functions once they are crafted as part of carefully designed, more comprehensive approaches to managing ethical culture. Or better, I believe that by investigating more closely what an oath really is and what its preconditions are, we may gain insights that will help to change corporate culture for the better, even if companies do not wish to adopt oaths to manage ethics. Methodologically, this Article is grounded in various strands of philosophical research. In particular, I build on work from political philosophy on the value of freedom, and on work from epistemology (the philosophical theory of knowledge) on the value of knowledge and common knowledge (which borrows from economics to some extent). I strive to keep technicalities to a minimum to make my argument accessible to a wide range of interested readers and to highlight the main idea of this Article. However, a disclaimer must be made that philosophy is a conceptual rather than an empirical discipline, and as a result it has its own style of researching and writing that distinguishes it, sometimes starkly, from social science and legal scholarship

Impermissible Self‑Rationalizing Pessimism:In Defence of a Pragmatic Ethics of Belief

We present an argument against a standard evidentialist position on the ethics of belief. We argue that sometimes a person merits criticism for holding a belief even when that belief is well supported by her evidence in any relevant sense. We show how our argument advances the case for anti-evidentialism (pragmatism) in the light of other arguments presented in the recent literature, and respond to a set of possible evidentialist rejoinders

Stakes Sensitivity and Credit Rating:A New Challenge for Regulators

The ethical practices of credit rating agencies (CRAs), particularly following the 2008 financial crisis, have been subject to extensive analysis by economists, ethicists, and policymakers. We raise a novel issue facing CRAs that has to do with a problem concerning the transmission of epistemic status of ratings from CRAs to the beneficiaries of the ratings (investors, etc.), and use it to provide a new challenge for regulators. Building on recent work in philosophy, we argue that since CRAs have different stakes than the beneficiaries of the ratings in the ratings being accurate, what counts as knowledge (and as having ‘epistemic status’) concerning credit risk for a CRA may not count as knowledge (as having epistemic status) for the beneficiary. Further, as it stands, many institutional investors (pension funds, insurance companies, etc.) are bound by law to make some of their investment decisions dependent on the ratings of officially recognized CRAs. We argue that the observation that the epistemic status of ratings does not transmit from CRAs to beneficiaries makes salient a new challenge for those who think current regulation regarding the CRAs is prudentially justified, namely, to show that the harm caused by acting on a rating that does not have epistemic status for beneficiaries is compensated by the benefit from them acting on a CRA rating that does have epistemic status for the CRA. Unlike most other commentators, therefore, we offer a defeasible reason to drop references to CRAs in prudential regulation of the financial industry

Finance and Financial Economics:A Philosophy of Science Perspective

In this chapter, we introduce topics in finance and financial economics that should be of interest to philosophers of science and philosophers of economics, in particular. The chapter is divided in two parts. In the first part, we briefly discuss key elements of modern finance: the joint hypothesis problem as a problem of underdetermination and event studies as a method to cope with it; the relation between science and ideology; the performativity of financial models; and the role of models in finance as benchmarks or normative guidelines. In the second part, we delve deeper into the practice-oriented role of models. We focus on the influential model by Franco Modigliani and Merton Miller on the cost of capital to suggest that values held by modelers can often be the driving force of their model building and of the models’ potential relevance. Thus, values, we suggest, should be part of the philosophical appraisal of models, as opposed to the much narrower attention to their explanatoriness

Epistemically Virtuous Risk Management:Financial Due Diligence and Uncovering the Madoff Fraud

The chapter analyses how Bernard Madoff’s Ponzi scheme was uncovered by Harry Markopolos, an employee of Rampart Investment Management, LLC, and the contribution of so-called epistemic virtues to Markopolos’ success. After Rampart had informed the firm about an allegedly highly successful hedge fund run by Madoff, Markopolos used qualitative and quantitative methods from financial due diligence to examine Madoff’s risks, returns and strategy, ultimately to conclude that Madoff was running a large Ponzi scheme. Other actors in the financial industry may likely have done the same financial due diligence, but when they reached the same perplexing outcomes that Markopolos had found (alpha of 0.009 and beta of 0.06, for instance), they blamed the maths. Madoff’s impeccable reputation at the time was sufficient to make them doubt the maths and cease their financial due diligence. Markopolos, by contrast, exercised epistemic virtues such as openmindedness, epistemic temperance and justice, which led him to continue his financial due diligence and uncover the fraud. Financial due diligence, the chapter ultimately shows, has to be complemented by epistemic virtues if it is to be an effective shield against fraud and financial crime

Epistemic vice predicts acceptance of Covid-19 misinformation

Why are mistaken beliefs about Covid-19 so prevalent? Political identity, education and other demographic variables explain only a part of individual differences in the susceptibility to Covid-19 misinformation. This paper focuses on another explanation: epistemic vice. Epistemic vices are character traits that interfere with acquiring, maintaining, and transmitting knowledge. If the basic assumption of vice epistemology is right, then people with epistemic vices such as indifference to the truth or rigidity in their belief structures will tend to be more susceptible to believing Covid-19 misinformation. We carried out an observational study (US sample, n = 998) in which we measured the level of epistemic vice of participants using a novel Epistemic Vice Scale. We also asked participants questions eliciting the extent to which they subscribe to myths and misinformation about Covid-19. We find overwhelming evidence to the effect that epistemic vice is associated with susceptibility to Covid-19 misinformation. In fact, the association turns out to be stronger than with political identity, educational attainment, scores on the Cognitive Reflection Test, personality, dogmatism, and need for closure. We conclude that this offers evidence in favor of the empirical presuppositions of vice epistemology