The Anthropocene and the self-sabotaging innovativeness of modern finance theory and practice

Tarim, Emre (2017) The Anthropocene and the self-sabotaging innovativeness of modern finance theory and practice. In: The 24th Nordic Academy of Management Conference, 2017-08-23, Nord University. (Unpublished)

Abstract

In this paper, I provide a critical review of modern finance theorisation and practice since the 1970s and their role in the exponential growth of adverse anthropogenic processes and outcomes since then. The Anthropocene as a geological epoch has come to be defined in terms of the variability within the Earth systems’ operations as measured through various markers such as surface temperatures and CO2 emissions. These variations are argued to be generated by human activity; characterized by catastrophic processes and outcomes such as famines, floods and extinctions; and beyond any previous natural variability. While the Anthropocene as a new geological epoch is marked by human activity, the role of contemporary financial scholarship and practice in this new epoch of constant environmental degradation and crises has been overlooked. The convergence of modern finance theory and practice since the 1970s has provided a scientifically legitimized core driver for the deregulation and integration of national financial systems. In this contemporary financial integration period, modern finance theory and practice have relied on elegant mathematical models of the parsimonious theories on human rationality and market behaviour. While this has been key to their success in shaping the actual financial systems and their functions in the contemporary era of transnational politics, economies and markets, it has also sustained and generated externalities or overflows in the form of individual and systemic financial failures and adverse anthropogenic process and outcomes such as climate change and soil degradation. Although modern finance theory and practice are capable of generating alternative organisings to alleviate the anthropogenic processes and outcomes (i.e., socially and environmentally responsible investing and abatement/elimination markets), these alternatives and the theory and practice are prone to suffer from the self sabotaging innovativeness or creative self-destruction of global financial capitalism.