For all of their focus on asset prices, financial economists rarely ask
if assets are priced ethically--that is, if their prices are
compatible with the public good. Yet in a world facing major, possibly
catastrophic problems--global warming, for instance, and growing
inequality--it is now more important than ever that we allocate capital
to projects that will benefit society as a whole, not just today but far
into the future. In this book, Christian Gollier develops a powerful
method for transforming our societal goals of collective prosperity into
the cornerstone of our financial decision making.
Ethical Asset Valuation and the Good Society starts by stating
transparent moral principles and, from these, derives simple rules that
can be used to evaluate saving and investment decisions in terms of the
public good. Rather than trying to explain observed asset prices,
Gollier derives what these prices ought to be in order to direct capital
toward socially desirable investments. He focuses especially on the two
prices that drive most financial decisions--the price of time as
reflected in the interest rate and the price of risk--and explores the
role these play in our long-term planning. If investment projects in
renewable energy could be financed at a lower interest rate than those
linked to fossil fuels, for instance, the energy transition would be
easier to accomplish. Building on criticism of the short-term thinking
of financial markets, Gollier suggests ways to shift investment toward
the future through the discounting of the valuation of assets and
investments with long-term benefits. In this sophisticated but
accessible work, Gollier builds a bridge between welfare economics and
finance theory to provide a framework for ethical valuation capable of
establishing what asset prices should be on the basis of our shared
moral values.
