Etica En El Mundo Financiero

Duvvuri Subbarao: Ethics and the world of finance
Keynote address by Dr Duvvuri Subbarao, Governor of the Reserve Bank of India, at the Conference on “Ethics and the World of Finance”, organised by Sri Sathya Sai University, Prasanthi Nilayam, Andhra Pradesh, 28 August 2009.
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Thank you for inviting me to participate in this unique conference on “Ethics and the World of Finance”. Thistopic would have been relevant at any time. But it is particularly so, given the current financial crisis which has called into question the ethical foundation of the financial world. It is also fitting that we are discussing ethics and the world of finance at Sri Sathya Sai University. The worlds of faith and economic development are profoundly intertwined, in both precept and practice. At heart, thestrongest link is the aim to foster greater social justice.
Ethics and the world of finance – the canvas
I must admit I have not thought about ethics and the world of finance deeply or systematically before confronting the challenge of addressing this conference. And as I tried to collect my thoughts, several questions came to mind. How do we, as individuals, approach issues of ethics andvalues? Are our approaches different in our personal and professional lives? Are issues of ethics different in the financial sector? What are the ethical issues thrown up by the current crisis? Has economics, as an academic discipline, lost its value base? Is that the root cause for the malaise in the financial sector? How do we in the Reserve Bank interpret our mandate towards ethical standards andvalues in all that we do? These questions cover a fairly large canvas; and my scholarship and experience are clearly not adequate to cover that entire canvas. But I will address some of these questions in my limited capacity and time.
The power of context
We – all of us – confront ethical issues and dilemmas every day and we deal with them by our own standards. All of us know it is a constantstruggle between sticking to the straight and narrow path of ethical virtue and succumbing to temptation. As individuals and families we manage this struggle in our own different ways, drawing the line for ourselves as we weigh the trade-offs.
A follow on question is, are our ethical standards of honesty, sensitivity, fair play and values absolute or do they change depending on the context? We allknow that some people are more honest than others. But the question is, is an honest person honest all the time, or does her sense of honesty depend on the trade-offs in the specific context of a dilemma? Empirical psychology tests show that there is not a tight circle of honest people and another tight circle of dishonest people.
In his best-selling book, “The Tipping Point”, Malcolm Gladwellargues that something like honesty is not a fundamental trait, but is considerably influenced by the situation. There are specific situations so powerful that they can overwhelm our inherent predisposition. To buttress this argument, Gladwell cites a landmark set of behaviour experiments by two New York based researchers, Hugh Hartshorne and M.A. May. Hartshorne and May administered several types oftests to eleven thousand school children over the course of several months, all designed to measure honesty. The tests varied by subject, design, level etc. and the results are therefore quite robust. Some of the test results are obvious. A few children never cheat, and a few always do. Less intelligent children cheat more than smart children. Older children cheat more than younger ones. Girlscheat about as much as boys. Some test results though are less obvious. For example, performance of children varied as between class-room exams and take home exams. Some children cheat in arithmetic but not in
BIS Review 103/2009 1
spelling tests. The surmise of this extensive behaviour experimentation was that between the binary extremes of a few who never cheat and a few who always do, there is...