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The Social Licence for Financial Markets

Abstract

The social licence for financial markets expresses a narrative about the relationship between markets and society. Narratives can appeal to hearts and minds and change behaviour. This one has the potential to help heal the finance-society relationship, strengthening positive reciprocity and injecting greater urgency in tackling humanity’s many challenges. How? By influencing behaviour in broadly three ways: making the wider desired ends of financial activity more salient, so increasing the likelihood that they will become a behavioural focus; providing a frame of reference for market decisions; and in forming market participants. This chapter considers each in turn. It goes on to look at how the narrative of the social licence also has the potential to influence the way written standards are applied.

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Notes

  1. 1.

    Address delivered by President Abraham Lincoln at the dedication of the Soldiers’ National Cemetery, Gettysburg, Pennsylvania, on 19 November 1863, from the version in Cornell University Library (http://rmc.library.cornell.edu/gettysburg/good_cause/transcript.htm).

  2. 2.

    Work in this area sometimes distinguishes between narratives and stories. Here, these expressions are used interchangeably.

  3. 3.

    Walter E. Fisher, Narration as a Human Communication Paradigm: The Case of Public Moral Argument, Communication Monographs, 1984, Vol. 51(1), 1–22, 2. There is no need to go as far as Fisher’s ‘narrative paradigm’ to recognise the narrative in the speech.

  4. 4.

    Karla Hoff and Joseph E. Stiglitz, Striving for Balance in Economics: Towards a Theory of Social Determination of Behavior, Journal of Economic Behaviour and Organization, 2016, Vol. 126, 25–57, 28.

  5. 5.

    Jerome Bruner, The Narrative Construction of Reality, Critical Inquiry, 1991, Vol. 18(1), 1–21, 21. The following is not intended to advance a ‘hard’ constructionist approach, but does recognise the significant extent to which social reality is socially constructed.

  6. 6.

    Donald E. Polkinghorne, Narrative Knowing and the Human Sciences (State University of New York Press 1988), 18.

  7. 7.

    Marya Schechtman, ‘The Narrative Self’, in The Oxford Handbook of the Self, ed. Shaun Gallagher (Oxford University Press 2011).

  8. 8.

    Polkinghorne, Narrative Knowing and the Human Sciences, 155. Again, the following is not intended to advance a ‘hard’ constructionist approach to a person’s identity.

  9. 9.

    Phillip L. Hammack, ‘Mind, Story and Society: The Political Psychology of Narrative’, in Warring with Words: Narrative and Metaphor in Politics, eds. Michael Hanne, William D. Crano and Jeffery Scott Mio (Psychology Press 2015).

  10. 10.

    David M. Boje, Storytelling Organizations (Sage Publications 2008); Yannis Gabriel, Storytelling in Organizations: Facts, Fictions and Fantasies (Oxford University Press 2000).

  11. 11.

    David Carr, Narrative and the Real World: An Argument for Continuity, History and Theory, 1986, Vol. 25(2), 117–131, 128.

  12. 12.

    Francesca Polletta, et al., The Sociology of Storytelling, Annual Review of Sociology, 2011, Vol. 37, 109–130, 114; David Boje, Storytelling Organizations; Gary Alan Fine, ‘The Storied Group: Social Movements as “Bundles of Narratives”, in Stories of Change: Narrative and Social Movements, ed. Joseph E. Davis (State University of New York Press 2002).

  13. 13.

    Polkinghorne, Narrative Knowing and the Human Sciences, 150 et seq.; Molly Andrews, Shaping History: Narratives of Political Change (Cambridge University Press 2007); Phillip L. Hammack, Narrative and the Politics of Meaning, Narrative Inquiry, 2011, Vol. 21(2), 311–318.

  14. 14.

    Carr, Narrative and the Real World: An Argument for Continuity, 130; Polletta, et al., The Sociology of Storytelling, 118.

  15. 15.

    Bruner, The Narrative Construction of Reality, 4.

  16. 16.

    Melanie C. Green and Timothy C. Brock, The Role of Transportation in the Persuasiveness of Public Narrative, Journal of Personality and Social Psychology, 2000, Vol. 79(5), 701–721; Rick Busselle and Helena Bilandzic, Measuring Narrative Engagement, Media Psychology, 2009, Vol. 12(4), 321–347.

  17. 17.

    Walter R. Fisher, Human Communication as Narration: Toward a Philosophy of Reason, Value, and Action (University of South Carolina Press 1987), 161.

  18. 18.

    Marshall Ganz, ‘Public Narrative, Collective Action, and Power’, in Accountability Through Public Opinion: From Inertia to Public Action, eds. Sina Odugbemi and Taeku Lee (World Bank 2011), 288.

  19. 19.

    See, for example, Phillip L. Hammack and Andrew Pilecki, Narrative as a Root Metaphor for Political Psychology, Political Psychology, 2012, Vol. 33(1), 75–103; Ralf Schmälzle, et al., Engaged Listeners: Shared Neural Processing of Powerful Political Speeches, Social Cognitive and Affective Neuroscience, 2015, Vol. 10(8), 1137–1143; Stefanie Hammer, The Role of Narrative in Political Campaigning: An Analysis of Speeches by Barack Obama, National Identities, 2010, Vol. 12(3), 269–290; Amy Skonieczny, Emotions and Political Narratives: Populism, Trump and Trade, Politics and Governance, 2018, Vol. 6(4), 62–72; Drew Westen, The Political Brain: The Role of Emotion in Deciding the Fate of the Nation (Public Affairs 2007).

  20. 20.

    Francesca Polletta, ‘Plotting Protest’, in Stories of Social Change: Narrative and Social Movements, ed. Joseph E. Davis (State University of New York Press 2002), 31; Ganz, Public Narrative, Collective Action, and Power.

  21. 21.

    Stephen Denning, The Secret Language of Leadership: How Leaders Inspire Action Through Narrative (Jossey-Bass 2007); John Marshall and Matthew Adamic, The Story Is the Message: Shaping Corporate Culture, Journal of Business Strategy, 2010, Vol. 31(2), 18–23; Michael S. Carriger, Narrative Approach to Corporate Strategy: Empirical Foundations, Journal of Strategy and Management, 2011, Vol. 4(4), 304–324.

  22. 22.

    For example, Jennifer Edson Escalas, Narrative Processing: Building Consumer Connections to Brands, Journal of Consumer Psychology, 2004, Vol. 14(1), 168–180; Chingching Chang, ‘Narrative Advertisements and Narrative Processing’, in Advertising Theory, eds. Shelly Rodgers and Esther Thorson (Routledge 2012).

  23. 23.

    Walter Hyll and Lutz Schneider, The Causal Effect of Watching TV on Material Aspirations: Evidence from the “Valley of the Innocent”, Journal of Economic Behavior and Organization, 2013, Vol. 86, 37–51; Peter Bönisch and Walter Hyll, Television Role Models and Fertility – Evidence from a Natural Experiment, SOE Paper No. 752, 2015, available at https://ssrn.com/abstract=2611597

  24. 24.

    See, for example, Edgar Schein, Organizational Culture and Leadership (4th edn, Jossey-Bass 2010), 73 et seq.

  25. 25.

    See, for example, Michael Dahlén, Fredrik Lange and Terry Smith, Marketing Communications: A Brand Narrative Approach (John Wiley & Sons Ltd 2010); Stephen Denning, The Leader’s Guide to Storytelling: Mastering the Art and Discipline of Business Narrative (revised edn, Jossey-Bass 2011), 109.

  26. 26.

    Colin Mayer, Prosperity: Better Business Makes the Greater Good (Oxford University Press 2018), 109–110.

  27. 27.

    See, for example, The Future of Narrative Reporting: Consulting on a New Reporting Framework, Department for Business, Innovation and Skills, September 2011.

  28. 28.

    See, for example, Thinking of Floating? Considerations for Private and Family Owned Businesses, PwC, https://www.pwc.co.uk/audit-assurance/assets/pdf/considerations-private-family-owned-businesses.pdf (accessed 12 October, 2019).

  29. 29.

    Robert J. Shiller, Narrative Economics: How Stories Go Viral & Drive Major Economic Events (Princeton University Press 2019), 37.

  30. 30.

    Ibid.

  31. 31.

    Kaushik Basu, Beyond the Invisible Hand: Groundwork for a New Economics (Princeton University Press 2011), preface.

  32. 32.

    Alasdair MacIntyre, After Virtue: A Study in Moral Theory (3rd edn, Bloomsbury 2007), 216.

  33. 33.

    Reservations have been expressed about aspects of Fisher’s ‘narrative paradigm’, including of ‘narrative fidelity’ (e.g. Barbara Warnick, The Narrative Paradigm: Another Story, Quarterly Journal of Speech, 1987, Vol. 73(2), 172–182). However, the basic distinction, used as a descriptive framework, provides a rough test for current purposes.

  34. 34.

    Fisher, Human Communication as Narration, 64.

  35. 35.

    Ibid., 64.

  36. 36.

    Ibid., 105.

  37. 37.

    Ibid., 109.

  38. 38.

    Francesca Polletta and Jessica Callahan, Deep Stories, Nostalgia Narratives and Fake News: Storytelling in the Trump Era, American Journal of Cultural Sociology, 2017, Vol. 5(3), 392–408, 394.

  39. 39.

    For example, Nomy Arpaly and Timothy Schroeder, In Praise of Desire (Oxford University Press 2014), 101–102, 126 et seq., 136; Peter Railton, ‘Learning as an Inherent Dynamic of Belief and Desire’, in The Nature of Desire, eds. Federico Lauria and Julien A. Deonna (Oxford University Press 2017), 249, 270.

  40. 40.

    See, for example, Samuel Bowles, Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions, Journal of Economic Literature, 1998, Vol. 36(1), 75–111; Margit Osterloh and Bruno S. Frey, ‘Motivation Governance’, in Handbook of Economic Organization: Integrating Economic and Organization Theory, ed. Anna Grandori (Edward Elgar 2013); Franz Dietrich and Christian List, Where Do Preferences Come from? International Journal of Game Theory, 2013, Vol. 42(3), 613–637.

  41. 41.

    See, for example, Ellen Peters, ‘The Functions of Affect in the Construction of Preferences’, in The Construction of Preference, eds. Sarah Lichtenstein and Paul Slovic (Cambridge University Press 2006).

  42. 42.

    Bowles, Endogenous Preferences; Hoff and Stiglitz, Striving for Balance in Economics.

  43. 43.

    Shalom H. Schwartz, Les Valeurs de Base de la Personne: Théorie, Mesures et Application, Revue Française de Sociologie, 2006, Vol. 47(4), 929–968, 953.

  44. 44.

    Ganz, Public Narrative, Collective Action, and Power, 278; see also Jesse J. Prinz and Shaun Nichols, ‘Moral Emotions’, in The Moral Psychology Handbook, eds. John M. Doris, et al. (Oxford University Press 2010), 131–132.

  45. 45.

    See, generally, Russell S. Cropanzano and Maureen L. Ambrose, The Oxford Handbook of Justice in the Workplace (Oxford University Press 2015).

  46. 46.

    See, for example, The Ethics of Pay in a Fair Society, What Do Executives Think? (PwC 2017), available at https://www.pwc.com/gx/en/people-organisation/pdf/pwc-fair-pay.pdf (accessed 12 October 2019).

  47. 47.

    Ruth Yeoman, et al., eds. Oxford Handbook of Meaningful Work (Oxford University Press 2019), 6; Brent D. Russo, Kathryn H. Dekas and Amy Wrzesniewski, On the Meaning of Work: A Theoretical Integration and Review, Research in Organizational Behavior, 2010, Vol. 30, 91–127, 117.

  48. 48.

    Understood as a calling towards activities that are morally, socially and personally significant: Russo, Dekas and Wrzesniewski, On the Meaning of Work, 99.

  49. 49.

    Amy Wrzesniewski, ‘Finding Positive Meaning in Work’, in Positive Organizational Scholarship: Foundations of a New Discipline, eds. Kim S. Cameron, Jane E. Dutton and Robert E. Quinn (Berrett-Koehler 2003).

  50. 50.

    Rosso, Dekas and Wrzesniewski, On the Meaning of Work, 96; Mark C. Bolino and Adam M. Grant, The Bright Side of Being Prosocial at Work, and the Dark Side, Too, The Academy of Management Annals, 2016, Vol. 10(1), 599–670; Eugene Tartakovsky and Eti Cohen, Values in the Bank: Value Preferences of Bank Frontline Workers and Branch Managers, European Journal of Work and Organizational Psychology, 2014, Vol. 23(5), 769–782.

  51. 51.

    Amy Wrzesniewski, Finding Positive Meaning in Work.

  52. 52.

    Bolino and Grant, The Bright Side of Being Prosocial at Work; Adam M. Grant, Relational Job Design and the Motivation to Make a Prosocial Difference, Academy of Management Review, 2007, Vol. 32(2), 393–417.

  53. 53.

    Jonathan E. Booth, Kyoung Won Park and Theresa M. Glomb, Employer-Supported Volunteering Benefits: Gift Exchange Among Employers, Employees, and Volunteer Organizations, Human Resource Management, 2009, Vol. 48(2), 227–249.

  54. 54.

    Adam M. Grant, Giving Time, Time After Time: Work Design and Sustained Employee Participation in Corporate Volunteering, The Academy of Management Review, 2012, Vol. 37(4), 589–615; Jessica B. Rodell, Finding Meaning Through Volunteering: Why Do Employees Volunteer and What Does It Mean for Their Jobs? Academy of Management Journal, 2013, Vol. 56(5), 1274–1294. However, the number who regard their work as ‘socially useless’ may be relatively small: Robert Dur and Max van Lent, Socially Useless Jobs, Industrial Relations, 2019, Vol. 58(1), 3–16.

  55. 55.

    https://www.bitc.org.uk/programmes/engage/engage-toolkit/employee-community-engagement/what-are-benefits-employees (accessed 12 October 2019).

  56. 56.

    Polletta, Plotting Protest, 36.

  57. 57.

    Denning, The Secret Language of Leadership, xxii.

  58. 58.

    Denning, The Secret Language of Leadership, 168–169.

  59. 59.

    Russo, Dekas and Wrzesniewski, On the Meaning of Work; Adam M. Grant, Leading with Meaning: Beneficiary Contact, Prosocial Impact, and the Performance Effects of Transformational Leadership, Academy of Management Journal, 2012, Vol. 55(2), 458–476.

  60. 60.

    B. Douglas Bernheim, A Theory of Conformity, Journal of Political Economy, 1994, Vol. 102(5), 841–877; Robert Akerlof, Value Formation: The Role of Esteem, Games and Economic Behavior, 2017, Vol. 102, 1–19.

  61. 61.

    But not necessarily a causal link: Rebecca Sanderson et al., Strangers in a Strange Land: Relations Between Perceptions of Others’ Values and Both Civic Engagement and Cultural Estrangement, Frontiers in Psychology, 2019, Vol. 10, Article 559.

  62. 62.

    Ryan D. Duffy, Jessica W. England and Bryan J. Dik, ‘Callings’, in The Oxford Handbook of Meaningful Work, eds. Ruth Yeoman, et al. (Oxford University Press 2019).

  63. 63.

    Bradley E. Wright, Public Service and Motivation: Does Mission Matter? Public Administration Review, 2007, Vol. 67(1), 54–64; Yousueng Han, Is Public Service Motivation Changeable? Integrative Modeling with Goal-Setting Theory, International Journal of Public Administration, 2018, Vol. 41(3), 216–225.

  64. 64.

    Anat Bardi and Shalom H. Schwartz, Values and Behavior: Strength and Structure of Relations, Personality and Social Psychology Bulletin, 2003, Vol. 29(10), 1207–1220.

  65. 65.

    Scott Sonenshein, Crafting Social Issues at Work, Academy of Management Journal, 2006, Vol. 49(6), 1158–1172.

  66. 66.

    David M. Mayer, et al., The Money or the Morals? When Moral Language Is More Effective for Selling Social Issues, Journal of Applied Psychology, 2019, Vol. 104(8), 1058–1076.

  67. 67.

    Russo, Dekas and Wrzesniewski, On the Meaning of Work, 104.

  68. 68.

    Arjun Appadurai, ‘The Capacity to Aspire: Culture and the Terms of Recognition’, in Culture and Public Action, eds. Vijayendra Rao and Michael Walton (Stanford University Press 2004).

  69. 69.

    Pamela Hanrahan, Corporate Governance, Financial Institutions and the “Social Licence”, Law and Financial Markets Review, 2016, Vol. 10(3), 123–126.

  70. 70.

    Speech by David Cameron, New Zealand House, London, 19 January 2012, https://www.newstatesman.com/uk-politics/2012/01/economy-capitalism-market (accessed 12 October 2019). The leader of the Labour opposition swiftly followed with his own version.

  71. 71.

    Undertaken on 27 August 2019.

  72. 72.

    Martin Tanis and Tom Postmes, A Social Identity Approach to Trust: Interpersonal Perception, Group Membership and Trusting Behaviour, European Journal of Social Psychology, 2005, Vol. 35, 413–424, 414; Ananthi Al Ramiah and Miles Hewstone, Intergroup Contact as a Tool for Reducing, Resolving and Preventing Intergroup Conflict: Evidence, Limitations and Potential, American Psychologist, 2013, Vol. 68(7), 527–542.

  73. 73.

    Hoff and Stiglitz, Striving for Balance in Economics, 38.

  74. 74.

    Daniel C. Batson, Altruism in Humans (Oxford University Press 2011), 12 et seq.

  75. 75.

    Batson, Altruism in Humans; Grant, Relational Job Design and the Motivation to Make a Prosocial Difference; Iris Bohnet and Bruno S. Frey, Social Distance and Other Regarding Behavior in Dictator Games: Comment, American Economic Review, 1999, Vol. 89(1), 335–339.

  76. 76.

    Grant, Leading with Meaning.

  77. 77.

    Batson, Altruism in Humans, 33 et seq.

  78. 78.

    Jamil Zaki, Niall Bolger and Kevin Ochsner, It Takes Two: The Interpersonal Nature of Empathic Accuracy, Psychological Science, 2008, Vol. 19(4), 399–404, provides experimental support at an individual level.

  79. 79.

    Vern L. Glaser et al., ‘Institutional Frame Switching: How Institutional Logics Shape Individual Action’, in How Institutions Matter! Research in the Sociology of Organizations, eds. Joel Gehman, Michael Lounsbury and Royston Greenwood (Emerald Group Publishing Limited 2017), Vol. 48A, 35–69.

  80. 80.

    Paul DiMaggio, Culture and Cognition, Annual Review of Psychology, 1997, Vol. 23, 263–287, 274.

  81. 81.

    Matteo M. Galizzi and Daniel Navarro-Martínez, On the External Validity of Social Preference Games: A Systematic Lab-Field Study, Management Science, 2019, Vol. 65(3), 976–1002.

  82. 82.

    Varda Liberman, Steven M. Samuels and Lee Ross, The Name of the Game: Predictive Power of Reputations Versus Situational Labels in Determining Prisoner’s Dilemma Game Moves, Personality and Social Psychology Bulletin, 2004, Vol. 30(9), 1175–1185.

  83. 83.

    Tore Ellingsen, et al., Social Framing Effects: Preferences or Beliefs? Games and Economic Behaviour, 2012, Vol. 76(1), 117–130; Elizabeth Bernold, et al., Social Framing and Cooperation: The Roles and Interaction of Preferences and Beliefs, (30 January 2015), available at SSRN: https://ssrn.com/abstract=2557927

  84. 84.

    Bernold, et al., Social Framing and Cooperation: The Roles and Interaction of Preferences and Beliefs.

  85. 85.

    Glaser, et al., Institutional Frame Switching, 37.

  86. 86.

    Urs Fischbacher, Simon Gächter and Ernst Fehr, Are People Conditionally Cooperative? Evidence from a Public Goods Experiment, Economics Letters, 2001, Vol. 71(3), 397–404.

  87. 87.

    Martin Dufwenberg, Simon Gächter and Heike Hennig-Schmidt, The Framing of Games and the Psychology of Play, Games and Economic Behavior, 2011, Vol. 73(2), 459–478. The first iteration of their experiment was in Germany where the use of the word ‘community’ had connotations of individualism. In that context, first- and second-order beliefs and contributions were less generous under the community frame than under the neutral frame. However, when the experiment was repeated in Switzerland (where ‘community’ did not have the same connotations), the effect was reversed.

  88. 88.

    Bernold, et al., Social Framing and Cooperation: The Roles and Interaction of Preferences and Beliefs.

  89. 89.

    Ibid., 22.

  90. 90.

    But there are likely to be limits. For example, positive framing alone may not solve so-called ‘tragedy of the commons’ situations: Elisabeth Thuestad Isaksen, Kjell Arne Brekke and Andries Richter, Positive Framing Does Not Solve the Tragedy of the Commons, Journal of Environmental Economics and Management, 2019, Vol. 95, 45–56.

  91. 91.

    Kathleen D. Vohs, Nicole L. Mead and Miranda R. Goode, Merely Activating the Concept of Money Changes Personal and Interpersonal Behavior, Current Directions in Psychological Science, 2008, Vol. 17(3), 208–212; Kathleen D. Vohs, Money Priming Can Change People’s Thoughts, Feelings, Motivations, and Behaviors: An Update on 10 Years of Experiments, Journal of Experimental Psychology: General, 2015, Vol. 144(4), e86–e93.

  92. 92.

    Eugene M. Caruso, Oren Shapira and Justin F. Landy, Show Me the Money: A Systematic Exploration of Manipulations, Moderators, and Mechanisms of Priming Effects, Psychological Science, 2017, Vol. 28(8), 1148–1159; Paul Lodder et al., A Comprehensive Meta-Analysis of Money Priming, Journal of Experimental Psychology: General, 2019, Vol. 148(4), 688–712; Doug Rohrer, Harold Pashler and Christine R. Harris, Discrepant Data and Improbable Results: An Examination of Vohs, Mead, and Goode (2006), Basic and Applied Social Psychology, 2019, Vol. 41(4), 263–271.

  93. 93.

    Andrew L. Molinsky, Adam M. Grant and Joshua D. Margolis, The Bedside Manner of Homo Economicus: How and Why Priming an Economic Schema Reduces Compassion, Organizational Behavior and Human Decision Processes, 2012, Vol. 119(1), 27–37.

  94. 94.

    Xin Ziqiang and Liu Guofang, Homo Economicus Belief Inhibits Trust, PLoS ONE, 2013, Vol. 8(10), E76671.

  95. 95.

    Joseph Henrich et al., In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies, American Economic Review, 2001, Vol. 91(2), 73–78.

  96. 96.

    Alain Cohn, Ernst Fehr and Michel André Maréchal, Business Culture and Dishonesty in the Banking Industry, Nature, 2014, Vol. 516, 86–89.

  97. 97.

    Jean-Michel Hupé, Shortcomings of Experimental Economics to Study Human Behavior: A Reanalysis of Cohn et al. 2014, Nature 516, 86–89, ‘Business Culture and Dishonesty in the Banking Industry’, SocArXiv, 22 March 2018, https://doi.org/10.31235/osf.io/nt6xk

  98. 98.

    Marek A.Vranka and Petr Houdek, Many Faces of Bankers’ Identity: How (Not) to Study Dishonesty, Frontiers in Psychology, 2015, Vol. 6, Article 302.

  99. 99.

    Karl Aquino, et al., Testing a Social-Cognitive Model of Moral Behavior: The Interactive Influence of Situations and Moral Identity Centrality, Journal of Personality and Social Psychology, 2009, Vol. 97(1), 123–141.

  100. 100.

    This book generally avoids the expressions ‘extrinsic’ and ‘intrinsic’ motivation. The distinction may be helpful analytically, but risks creating a false dichotomy; ultimately, motivation is the force that drives all goal-directed behaviour and may be influenced by a range of external factors.

  101. 101.

    Samuel Bowles and Sung-Ha Hwang, Social Preferences and Public Economics: Mechanism Design When Social Preferences Depend upon Incentives, Journal of Public Economics, 2008, Vol. 92(8–9), 1811–1820.

  102. 102.

    See, for example, Ernst Fehr and Armin Falk, Psychological Foundations of Incentives, Institute for Empirical Research in Economics, European Economic Review, 2002, Vol. 46(4), 687–724; Agnès Festré and Pierre Garrouste, Theory and Evidence in Psychology and Economics About Motivation Crowding Out: A Possible Convergence? Journal of Economic Surveys, 2015, Vol. 29(2), 339–356.

  103. 103.

    Uri Gneezy and Aldo Rustichini, A Fine Is a Price, Journal of Legal Studies, 2000, Vol. 29(1), 1–17.

  104. 104.

    Christopher Blattman, Julian C. Jamison and Margaret Sheridan, Reducing Crime and Violence: Experimental Evidence from Cognitive Behavioral Therapy in Liberia, American Economic Review, 2017, Vol. 107(4), 1165–1206.

  105. 105.

    Ola Kvaløy, Petra Nieken and Anja Schöttner, Hidden Benefits of Reward: A Field Experiment on Motivation and Monetary Incentives, European Economic Review, 2015, Vol. 76, 188–199.

  106. 106.

    Barbara Rogoff, The Cultural Nature of Human Development (Oxford University Press 2003).

  107. 107.

    Hoff and Stiglitz, Striving for Balance in Economics, 26, original emphasis.

  108. 108.

    Bowles, Endogenous Preferences, 80.

  109. 109.

    Transforming culture in financial services, speech by Andrew Bailey while Chief Executive of the Financial Conduct Authority, 19 March 2018 (emphasis added).

  110. 110.

    Mark Granovetter, Economic Action and Social Structure: The Problem of Embeddedness, American Journal of Sociology, 1985, Vol. 91(3), 481–510, 486.

  111. 111.

    Mind, Society, and Behavior, World Bank 2015, 13, talking of development activities, but the point has wider application.

  112. 112.

    Formation, formazione and formación respectively.

  113. 113.

    Ethics and finance—aligning financial incentives with societal objectives, speech by Christine Lagarde while Managing Director of the International Monetary Fund, 6 May 2015.

  114. 114.

    Trust and ethics—a regulator’s perspective, speech by Andrew Bailey while Chief Executive of the Financial Conduct Authority, 16 October 2018.

  115. 115.

    Stephen Stich, John M. Doris and Erica Roedder, ‘Altruism’, in The Moral Psychology Handbook, eds. John M. Doris, et al. (Oxford University Press 2010), 195, seems to be describing something of this sort in relation to the habituation of instrumental desires.

  116. 116.

    Charles Taylor, ‘To Follow a Rule’, in Philosophical Arguments (Harvard University Press 1995).

  117. 117.

    Simon Niklas Hellmich, Are People Trained in Economics “Different,” and if so, Why? A Literature Review, The American Economist, 2019, Vol. 64(2), 246–268.

  118. 118.

    Gerald Marwell and Ruth E. Ames, Economists Free Ride, Does Anyone Else? Experiments on the Provision of Public Goods, IV, Journal of Public Economics, 1981, Vol. 15(3), 295–310; John R. Carter and Michael D. Irons, Are Economists Different, and if so, Why? Journal of Economic Perspectives, 1991, Vol. 5(2), 171–177; Neil Gandal, et al., Personal Value Priorities of Economists, Human Relations, 2005, Vol. 58(10), 1227–1252.

  119. 119.

    Robert H. Frank, Thomas Gilovich and Dennis T. Regan, Does Studying Economics Inhibit Cooperation? The Journal of Economic Perspectives, 1993, Vol. 7(2), 159–171, but note Anthony M. Yezer, Robert S. Goldfarb and Paul J. Poppen, Does Studying Economics Discourage Cooperation? Watch What We Do, Not What We Say or How We Play, Journal of Economic Perspectives, 1996, Vol. 10(1), 177–186.

  120. 120.

    Long Wang, Deepak Malhotra and J. Keith Murnighan, Economics Education and Greed, Academy of Management Learning and Education, 2011, Vol. 10(4), 643–660.

  121. 121.

    Wang, Malhotra and Murnighan, Economics Education and Greed.

  122. 122.

    Frank, Gilovich and Regan, Does Studying Economics Inhibit Cooperation?; Björn Frank and Günther G. Schulze, Does Economics Make Citizens Corrupt?, Journal of Economic Behavior and Organization, 2000, Vol. 43(1), 101–113; Tobias Lundquist, et al., The Aversion to Lying, Journal of Economic Behavior and Organization, 2009, Vol. 70(1–2), 81–92.

  123. 123.

    Matthias P. Hühen, You Reap What You Sow: How MBA Programs Undermine Ethics, Journal of Business Ethics, 2014, Vol. 121(4), 527–541.

  124. 124.

    M. Lynnette Smyth and James R. Davis, Perceptions of Dishonesty Among Two-Year College Students: Academic Versus Business Situations, Journal of Business Ethics, 2004, Vol. 51(1), 63–73.

  125. 125.

    It is not feasible to go into all of the possible alternative explanations here, for example, to do with how the studies were undertaken or the operation of social stereotypes.

  126. 126.

    Examples of studies that suggest nature over nurture include Yezer, Goldfarb and Poppen, Does Studying Economics Discourage Cooperation?; Frank and Schulze, Does Economics Make Citizens Corrupt?; Bruno S. Frey and Stephan Meier, Are Political Economists Selfish and Indoctrinated? Evidence from a Natural Experiment, Economic Inquiry, 2003, Vol. 41(3), 448–462; Gandal et al., Personal Value Priorities of Economists; Yoram Bauman and Elaina Rose, Selection or Indoctrination: Why Do Economics Students Donate Less Than the Rest? Journal of Economic Behavior and Organization, 2011, Vol. 79(3), 318–327.

  127. 127.

    Hellmich, Are People Trained in Economics “Different,” and if so, Why?.

  128. 128.

    Gandal, et al., Personal Value Priorities of Economists; Amy Wrzesniewski, et al., Jobs, Careers, and Callings: People’s Relations to Their Work, Journal of Research in Personality, 1997, Vol. 31(1), 21–33.

  129. 129.

    Gandal, et al., Personal Value Priorities of Economists.

  130. 130.

    Donald MacKenzie, An Engine, Not a Camera: How Financial Models Shape Markets (The MIT Press 2006), 12. See also Gerald Faulhaber and William Baumol, Economists as Innovators: Practical Products of Theoretical Research, Journal of Economic Literature, 1988, Vol. 26, 577–600.

  131. 131.

    MacKenzie, An Engine, Not a Camera, 250.

  132. 132.

    Gerald F. Davis, Managed by the Markets: How Finance Re-shaped America (Oxford University Press 2009).

  133. 133.

    Bowles, Endogenous Preferences.

  134. 134.

    Frank Trentmann, The Empire of Things: How We Became a World of Consumers, from the Fifteenth Century to the Twenty-First (Allen Lane 2016).

  135. 135.

    Gneezy and Rustichini, A Fine Is a Price, 16.

  136. 136.

    Blattman, Jamison and Sheridan, Reducing Crime and Violence: Experimental Evidence from Cognitive Behavioral Therapy in Liberia.

  137. 137.

    Arpaly and Schroeder, In Praise of Desire, 126 et seq. It is not intended to suggest here that formation is limited to reinforcement.

  138. 138.

    Timothy D. Hackenberg, Token Reinforcement: Translational Research and Application, Journal of Applied Behavior Analysis, 2018, Vol. 51(2), 393–435.

  139. 139.

    Indeed, crypto currencies are sometimes described in terms of tokens. See, for example, Sabrina T. Howell, Marina Niessner and David Yermack, Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales, ECGI Finance Working Paper No. 564/2018, July 2018.

  140. 140.

    The following is no more than a summary of features of Bourdieu’s concept of habitus that are useful in the current context. It is based largely on how he approaches it in his book The Logic of Practice. A wider assessment of habitus and of Bourdieu’s theory of practice more generally for the recognition of a social licence lies outside the current exercise.

  141. 141.

    Pierre Bourdieu, Le Sens Pratique (Les Éditions Minuit 1980). Quotations taken from the English language edition, The Logic of Practice, translated by Richard Nice (Polity Press 1990), 53.

  142. 142.

    Ibid., 54.

  143. 143.

    Ibid., 56.

  144. 144.

    Pierre Bourdieu, Esquisse d’une Théorie de la Pratique: Précédé de Trois Études D’ethnologie Kabyle (Librairie Droz 1972). Quotations taken from the English language edition, Outline of a Theory of Practice, translated by Richard Nice (Cambridge University Press 1977) 79.

  145. 145.

    Ibid., 77.

  146. 146.

    Bourdieu, The Logic of Practice, 66.

  147. 147.

    Ibid., 68.

  148. 148.

    Ibid., 69. Discussion of ‘adaptive preferences’ seems to pick up on something of this sort in highlighting how social context affects the goals it is possible for a person to conceive of, even where the goal concerns what is just: Jessica Begon, What Are Adaptive Preferences? Exclusion and Disability in the Capability Approach, Journal of Applied Philosophy, 2015, Vol. 32(3), 241–257; Dale Dorsey, Adaptive Preferences Are a Red Herring, Journal of the American Philosophical Association, 2017, Vol. 3(4), 465–484. See also Arjun Appadurai, The Capacity to Aspire: Culture and the Terms of Recognition. Schwartz, Les Valeurs de Base de la Personne: Théorie, Mesures et Application, 949–950, also highlights the way in which values may adapt to life circumstances.

  149. 149.

    See, for example, Hazel Rose Markus and Shinobu Katayama, Cultures and Selves: A Cycle of Mutual Constitution, Perspectives on Psychological Science, 2010, Vol. 5(4), 420–430.

  150. 150.

    Andrea Bender and Sieghard Beller, Cognition is … Fundamentally Cultural, Behavioural Sciences, 2013, Vol. 3(1), 42–54; Andrew D. Wilson and Sabrina Golonka, Embodied Cognition Is Not What You Think It Is, Frontiers in Psychology, 2013, Vol. 4, Article 58.

  151. 151.

    See, for example, Kyle S. Smith and Ann M. Graybiel, Habit Formation, Dialogues in Clinical Neuroscience, 2016, Vol. 18(1), 33–43. On the impact of culture on cognition, see Margaret Wilson, The Re-tooled Mind: How Culture Re-engineers Cognition, Social Cognitive and Affective Neuroscience, 2010, Vol. 5(2–3), 180–187.

  152. 152.

    Clare Carlisle, On Habit (Routledge 2014), 21 et seq.

  153. 153.

    Ibid., 69–70. Jerome Bruner, Life as Narrative, Social Research, 2004, Vol. 71(3), 691–710, also makes a connection between narratives and the structuring of people’s lives.

  154. 154.

    Cheryl Hardy, ‘Hysteresis’, in Pierre Bourdieu: Key Concepts, ed. Michael Grenfell (2nd edn, Routledge 2014).

  155. 155.

    Bourdieu, The Logic of Practice, 60.

  156. 156.

    Bourdieu, Outline of a Theory of Practice, 168.

  157. 157.

    The possibility of forming this sort of behavioural predisposition in financial markets is posited by Nava Ashraf and Oriana Bandiera, Altruistic Capital, American Economic Review, 2017, Vol. 107(5), 70–75. The possibility that large-scale cultural changes may be caused by large-scale, more or less simultaneous frame switches by many interdependent actors is recognised by Paul DiMaggio, Culture and Cognition, 280.

  158. 158.

    Again, this resonates with work in the fields of psychology and neurology. See Bruce E. Wexler, Brain and Culture: Neurobiology, Ideology, and Social Change (MIT Press 2006).

  159. 159.

    Bourdieu, The Logic of Practice, 62.

  160. 160.

    Samuel Bowles and Sandra Polanía-Reyes, Economic Incentives and Social Preferences: Substitutes or Complements, Journal of Economic Literature, 2012, Vol. 50(2), 368–425.

  161. 161.

    Cass R. Sunstein, On the Expressive Function of Law, University of Pennsylvania Law Review, 1996, Vol. 144(5), 2021–2053; Kaushik Basu, The Republic of Beliefs: A New Approach to Law and Economics (Princeton University Press 2018); Geoffrey Brennan, et al., Explaining Norms (Oxford University Press 2016), 156 et seq.

  162. 162.

    Oren Bar-Gill and Chaim Fershtman, Law and Preferences, The Journal of Law, Economics, and Organization, 2004, Vol. 20(2), 331–352.

  163. 163.

    Robert M. Cover, Nomos and Narrative, Harvard Law Review, 1983, Vol. 97(1), 4–68; Michael Hanne and Robert Weisberg, Narrative and Metaphor in the Law (Cambridge University Press 2018). See also Timothy Macklem, Law and Life in Common (Oxford University Press 2015). Written standards can also become part of and define a national, institutional or personal narrative (e.g. Magna Carta) so shaping a behaviour in the present, as to which, see below.

  164. 164.

    Cover, Nomos and Narrative, 4, 5.

  165. 165.

    Joanna Benjamin, The Narratives of Financial Law, Oxford Journal of Legal Studies, 2010, Vol. 30(4), 787–814.

  166. 166.

    These expressions are used loosely. See discussion of public and private law in Chap. 5.

  167. 167.

    David Howarth, Law as Engineering: Thinking About What Lawyers Do (Edward Elgar 2013); MacKenzie, An Engine, Not a Camera.

  168. 168.

    Sections 1B, 1E and 2H, Financial Services and Markets Act 2000.

  169. 169.

    See, for example, Recital 164 of Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments (‘MiFID’) which states that the purpose of the directive is ‘creating an integrated financial market in which investors are effectively protected and the efficiency and integrity of the overall market are safeguarded’.

  170. 170.

    Ronald Dworkin, Law’s Empire (Belknap Press of Harvard University Press 1986), 229.

  171. 171.

    Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.

  172. 172.

    Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments.

  173. 173.

    Council Directive 93/22/EEC on investment services in the securities field.

  174. 174.

    Markets in Financial Instruments Directive (MiFID): Frequently Asked Questions, EU Commission, 29 October 2007, MEMO/07/439.

  175. 175.

    MacKenzie, An Engine, Not a Camera.

  176. 176.

    Sections 1B, 1E and 2H, Financial Services and Markets Act 2000.

  177. 177.

    Richard K. Sherwin, The Narrative Construction of Legal Reality, Vermont Law Review, 1994, Vol. 18, 681–719.

  178. 178.

    John Kay, Other People’s Money: Masters of the Universe or Servants of the People (Profile Books 2015) 119. The opinion was obtained by ISDA and is not available to the public.

  179. 179.

    Howarth, Law as Engineering; John C. Coffee, Gatekeepers: The Professions and Corporate Governance (Oxford University Press 2006).

  180. 180.

    Patrick S. Atiyah, The Rise and Fall of Freedom of Contract (Clarendon Press Oxford 1979).

  181. 181.

    Benjamin, The Narratives of Financial Law, 793.

  182. 182.

    Elliott Ash, Daniel L. Chen and Suresh Naidu, Ideas Have Consequences, ETH Zurich, Centre for Law and Economics, Working Paper Series No. 04/2019; see also Robert Cooter, Do Good Laws Make Good Citizens? An Economic Analysis of Internalized Norms, Virginia Law Review, 2000, Vol. 86(8), 1577–1601, 1599.

  183. 183.

    Robert J. Rhee, A Legal Theory of Shareholder Primacy, Minnesota Law Review, 2018, 1951–2017.

  184. 184.

    A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment, October 2005 (the ‘Freshfields Report’), 13.

  185. 185.

    The Kay Review of UK Equity Markets and Long-Term Decision Making, Final Report, July 2012, 13.

  186. 186.

    Fiduciary Duties of Intermediaries Report, Law Commission of England and Wales, 1 July 2014.

  187. 187.

    “Is it always about the money?” Pension trustees’ duties when setting an investment strategy: Guidance from the Law Commission, Law Commission of England and Wales, 1 July 2014.

  188. 188.

    Letter from Guy Opperman MP, Minister of Pensions to Mary Creagh MP, Chair, Environmental Audit Committee, House of Commons, 15 February 2018, available at https://www.parliament.uk/documents/commons-committees/environmental-audit/180215-Guy-Opperman-to-Chair-Green-Finance.pdf (accessed 30 September 2019).

  189. 189.

    https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 (accessed 30 September 2019).

  190. 190.

    Melvin A. Eisenberg, Corporate Law and Social Norms, Columbia Law Review, 1999, Vol. 99, 1253–1292, especially 1278 et seq.

  191. 191.

    On the impact of individual behaviours on that of groups, and legal vehicles such as companies, see Chap. 2. An assessment of Bourdieu’s broader work on the force of law is beyond the scope of the current exercise. The following is not intended to address the debate on rule following, provoked by Ludwig Wittgenstein in his Philosophical Investigations and elaborated upon by Saul Kripke, Wittgenstein on Rules and Private Language: An Elementary Exposition (Harvard University Press 1982).

  192. 192.

    Taylor, To Follow a Rule.

  193. 193.

    Ibid., 179.

  194. 194.

    Ibid., 176.

  195. 195.

    Ibid., 178.

  196. 196.

    Ibid., 178.

  197. 197.

    Zahid Amadxarif, et al., The Language of Rules: Textual Complexity in Banking Reforms, Staff Working Paper No. 834, Bank of England 2019.

  198. 198.

    Currently Article 24 of Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.

  199. 199.

    See, in particular, the Financial Conduct Authority’s statutory objectives in sections 1B to 1G and the Prudential Regulation Authority’s statutory objectives in sections 2B and 2C of the Financial Services and Markets Act 2000, and the over-arching regulatory principles of each regulator.

  200. 200.

    Donald Nicholson, Making Lawyers Moral? Ethical Codes and Moral Character, Legal Studies, 2005, Vol. 25(4), 601–626. Legal formalism has been described as ‘a theory of adjudication according to which (1) the law is rationally determinate, and (2) judging is mechanical. It follows from (1), that (3) legal reasoning is autonomous, since the class of legal reasons suffices to justify a unique outcome; no recourse to non-legal reasons is demanded or required’ (Brian Leiter, Positivism, Formalism, Realism: ‘Legal Positivism in American Jurisprudence,’ Anthony Sebok (book review), Columbia Law Review, 1999, Vol. 99(4), 1138–1164).

  201. 201.

    Brian Farrell, Deirdre Cobbin and Helen Farrell, Codes of Ethics—Their Evolution, Development and Other Controversies, Journal of Management Development, 2002, Vol. 21(2), 152–163; Gael McDonald, An Anthology of Codes of Ethics, European Business Review, 2009, Vol. 21(4), 344–372.

  202. 202.

    Stocktake of Efforts to Strengthen Governance Frameworks to Mitigate Misconduct Risks, Financial Stability Board, May 2017.

  203. 203.

    Mollie Painter-Morland, Triple Bottom-Line Reporting as Social Grammar: Integrating Corporate Social Responsibility and Corporate Codes of Conduct, Business Ethics: A European Review, 2006, Vol. 15(4), 352–364.

  204. 204.

    EG 2.8, Financial Conduct Authority Handbook.

  205. 205.

    Christian F. Rostbøll, Preferences and Paternalism: On Freedom and Deliberative Democracy, Political Theory, 2005, Vol. 33, 370–396.

  206. 206.

    In relation to ‘nudges’, see Cass R. Sunstein, The Ethics of Influence: Government in the Age of Behavioural Science (Cambridge University Press 2016).

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Rouch, D. (2020). Behaviour—Change in Practice. In: The Social Licence for Financial Markets. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-40220-4_6

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