Capital Failure

Adam Smith's 'invisible hand' relied on the self-interest of individuals to produce good outcomes. Economists' belief in efficient markets took this idea further by assuming that all individuals are selfish. This belief underpinned financial deregulation and the theories on incentives and performance which supported it. However although Adam Smith argued that although individuals may be self-interested he argued that they also have other-regarding motivations including a desire for the approbation of others. This book argues that the trust-intensive nature of financial services makes it essential to cultivate such other-regarding motivations and it provides proposals on how this might be done.