For all of their focus on asset prices, financial economists rarely ask if assets are priced ethically—that is, if their prices are compatible with the public good. Yet in a world facing major, possibly catastrophic problems—global warming, for instance, and growing inequality—it is now more important than ever that we allocate capital to projects that will benefit society as a whole, not just today but far into the future. In this book, Christian Gollier develops a powerful method for transforming our societal goals of collective prosperity into the cornerstone of our financial decision making.
Ethical Asset Valuation and the Good Society starts by stating transparent moral principles and, from these, derives simple rules that can be used to evaluate saving and investment decisions in terms of the public good. Rather than trying to explain observed asset prices, Gollier derives what these prices ought to be in order to direct capital toward socially desirable investments. He focuses especially on the two prices that drive most financial decisions—the price of time as reflected in the interest rate and the price of risk—and explores the role these play in our long-term planning. If investment projects in renewable energy could be financed at a lower interest rate than those linked to fossil fuels, for instance, the energy transition would be easier to accomplish. Building on criticism of the short-term thinking of financial markets, Gollier suggests ways to shift investment toward the future through the discounting of the valuation of assets and investments with long-term benefits. In this sophisticated but accessible work, Gollier builds a bridge between welfare economics and finance theory to provide a framework for ethical valuation capable of establishing what asset prices should be on the basis of our shared moral values.
About the Author: Christian Gollier is a professor at the Toulouse School of Economics and a visiting professor at Columbia University. He is the author of The Economics of Risk and Time (2004) and Pricing the Planet’s Future: The Economics of Discounting in an Uncertain World (2012) and a lead author of the fourth and fifth reports of the Intergovernmental Panel on Climate Change. Learn more about the book here.
Kenneth J. Arrow Lecture Series: Kenneth J. Arrow’s work has so deeply shaped the course of economics for the past sixty years that, in a sense, every modern economist is his student. His ideas, style of research, and breadth of vision have been a model for generations of the boldest, most creative, and most innovative economists. His work has yielded such seminal theorems as general equilibrium, social choice, and endogenous growth, proving that simple ideas have profound effects. The Kenneth J. Arrow Lecture Series highlights economists, from Nobel laureates to groundbreaking younger scholars, whose work builds on Arrow’s scholarship as well as his innovative spirit. The books in the series are an expansion of the lectures that are held in Arrow’s honor at Columbia University.
The lectures are supported by Columbia University Press, the Program for Economic Research, and the Center on Global Economic Governance, with past support from the Initiative for Policy Dialogue and the Committee on Global Thought.
