Finance ‘a tremendous force for good’ though not without its dark sides
Wharton Professor Franklin Allen speaks at Cass
Finance is an important component for growth and innovation. It is the 'visible hand of resource allocation' and, on balance, 'a tremendous force for good'.
So argued Wharton Professor of Finance Franklin Allen in a Dean's Lecture at Cass earlier this week.
But it is not without its dark sides. Professor Allen referenced the problems of securitisation, LIBOR, underwriting standards, derivatives and lack of consumer protection that all contributed to the financial crisis of 2007.
However the finger cannot solely be pointed at financial services, according to Professor Allen. In a fascinating journey through the global financial crises of the last hundred years, he suggested real estate bubbles are at the heart of the problem.
One of the issues of financial economics, he stated, is that it is very hard to predict when and where housing prices will turn into unhealthy bubbles.
Professor Allen ended on a high point - referencing the key role the financial services industry plays in business development and not-for-profit ventures. For example, venture capital has played a key role in the development of leading innovative companies such as google, Facebook and Apple.
He concluded: 'Finance does have a dark side but we also have a very bright side. We can create innovation, support business and do a lot in the non-profit sector.'
Watch the lecture