#yalelecture

Summary

This lecture gives a brief history of the young field of financial theory.

It shows the multiple factors which played a part in the financial crisis of 2007-09. It explains how some people were able to predict that there would be a crisis. By describing what the housing market collapse in 2006 and 2007 had to do with the crisis you could start to see how a lot of factors influence other factors.

Next, it describes the kinds of questions standard financial theories answer and explains how they work. It also introduces the leverage cycle as a critique of standard financial theory and as an explanation of the crisis.

It goes on discussing the reasons you could study finance. It gave the example of questions directors may ask when a company is in crisis. And that when you have studied finance you will be able to give a calculated and well substantiate answer.

The lecture ends with a class experiment illustrating a situation in which the efficient market hypothesis works surprisingly well. 

Why is this relevant?

This lecture was relevant because it gave me a more expanded knowledge of the economic crisis and which factors played a role. I don’t think that the lecture had any direct relevance to my study, but I am convinced that more expanded knowledge of the world around you and everything that is happing benefits you in your life and business choices.

In this Yale lecture, Sterling Professor of Political Science Ian Shapiro talks about the effect the enlightenment has had on the moral foundation of politics. He starts off his lecture with the subjects of the enlightenment. “Enlightenment is the idea of basing our theories of politics on science instead of religion, tradition, superstition and natural law” he says. Science is the core of politics and individual freedom is the most important political good. The enlightenment revolves around the question: “How do you scientifically design a society to maximize individual freedom?

The enlightenment has three traditions: the utilitarian tradition, the Marxist tradition and the social contract. The utilitarian tradition is the way in which you create a scientifically organized society is you maximize the greatest happiness of the greatest number. The Marxist tradition is based on the idea that we can have impersonal scientific principles that give us the right answer for the organization of society. In the ideal society, politics will be replaced by administration because moral disagreement will have faded. Even though Karl Marx is often described as someone who wanted equality, he still is an enlightened thinker. This is because he wanted everyone to be equally free, which is the core of enlightenment. The third is the social contract. This contract is described as the way we get a scientific theory of society is to think about what agreement people would make if they were designing society for the first time.