Moral imagination or heuristic toolbox? Events and the risk assessment of structured financial products in the financial bubble

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Fisher, C. and Malde, S. ORCID: 0000-0002-7898-5933, 2011. Moral imagination or heuristic toolbox? Events and the risk assessment of structured financial products in the financial bubble. Business Ethics: A European Review, 20 (2), pp. 148-158. ISSN 1467-8608

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Official URL: http://dx.doi.org/10.1111/j.1467-8608.2011.01615.x

Abstract

The paper uses the example of the failure of bankers and financial managers to understand the risks of dealing in structured financial products, prior to the financial collapse, to investigate how people respond to crises. It focuses on whether crises cause people to challenge their habitual frames by the application of moral imagination. It is proposed that the structure of financial products and their markets triggered the use of heuristics that contributed to the underestimation of risks. It is further proposed that such framing heuristics are highly specialised to specific contexts, and are part of a wider set of heuristics that people carry in their cognitive ‘adaptive tool boxes’. Consequently, it is argued, when a crisis occurs the heuristics are not challenged, but are simply put away, and other more appropriate heuristics put to use until a sense of normality returns, and the use of the old heuristics is resumed.

Item Type:

Journal article

Publication Title:

Business Ethics: A European Review

Creators:

Fisher, C. and Malde, S.

Publisher:

Wiley-Blackwell

Place of Publication:

Chichester

Date:

2011