Lecture Notes On Financial Institutions and Practices

Lecture Notes On Financial Institutions and Practices -...

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Finance 365 – Real Estate Principles Lecture Notes/Outline Financial Institutions, Economic Facts, and Commercial Practices I. How do we assess policy proposals to reform financial institutions and practices, and how sure can we be of our views? For example, “Would more regulation of loan origination prevent future financial crises?” How could we know this? A. First view: Policy-making in social science subjects, like economics and finance, is the same as natural science: 1. Formulate laws and conditions and deduce predictions (Deductive explanation). Both social and natural science use explanation by means of prediction. 2. Deductive nomo-logical explanation 3. High level of certainty about predictions B. Second view: Social science explanation is different from natural science 1. Relies on different methods of explanation 2. Includes psychological causation, i.e. the reason for action is the
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Unformatted text preview: same as the cause of the agents social, political, or economic act 3. Less accurate predictions, but more accurate description after the fact C. If A, one will tend to favor highly regulated practices and institutions If B, one will think regulation is a waste of time because human acts and motivations vary too much. II. What establishes or grounds the financial institutions practices, and, what makes people respect or accept the acts of banks, agents, money, and other practices/institutions? A. Answer: collective intentionality and status functions (See, E.g. John Searle, The Construction of Social Reality , 1995) B. There are collectively established rules and practices, like lending regulations, and there are individual intentions and plans within them. C. Institutional facts...
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