'Cognitive and hermeneutic dimensions of responsibility in the use of models and theories' by Emmanuel Picavet
17:30 CET, 5 October 2023 - Phinance Online Seminars
© Image: Jean-Paul Bois-Margnac
The 2008 financial crisis has often been interpreted because of greed (anti-liberal version) or “bad luck” (liberal version). However, the causes are not so simple. In particular, the dangerous use of mathematical models of financial risk that were not fully understood and not properly managed led to disastrous decisions on the credit markets. Who is responsible? The scientists? Financial practitioners? The board members of financial companies? The regulator? Who is to blame for the epistemic error? Was there intentional wrongdoing or epistemic wrongdoing without malice? Emmanuel Picavet and Christian Walter address the issue regarding the utilization of models presented in this puzzle.
Models and theories are used in various ways in financial regulation and for the structuring of information in financial and extra-financial reporting. They induce possibilities and impossibilities in the treatment of information. Their epistemic value owes much to their insertion in the partly autonomous development of science. The adequate or sensible use of models and theories is a difficult issue whenever the collective consequences of a careless kind of use are serious. Facing this challenge, shouldn't we develop operational models of cognitive responsibility in corporate and institutional contexts?
Interpretation is also an important ingredient in the collective use of models or theories for regulatory purposes, in institutional dialogue or in reporting activities. To grasp the nature and value of the “order” which is longed for in regulatory activities, individuals need information, and they need useful normative shared references (which enable them to give significance and legitimacy to the enforced or proposed norms. For example, they need information about the reasons for the unsatisfactory state of society or social routines. The kind of shared normative references they need may comprise relevant principles and values which make a certain kind of social order desirable. This gives reason to deal with a rich picture of the individual and her/his motivations, at a good distance from the simplified models which deal with probability assessments and pre-determined interests only.
Furthermore, hermeneutic tasks are involved in the connection between collective goals or models on the one hand, and individual action on the other hand. Ideally, the proposed rules should be understood as adequately correlated with collective aspirations, both causally (how are they conducive to the desired states of affairs?) and hermeneutically (are the rules followed adequately and are the rules and their expected effect expressive of correctly interpreted justificatory principles of values in the first place?). In addition, the resulting situation should be identified as belonging to the looked-for kind of orderly situation, which also calls for interpretative effort.
These elements enable collective guidance to make sense for individuals and they play a role in the legitimacy – or at least the acceptability - of constraints. Through European examples, we will examine how they connect with ongoing discussions and projects about the presentation, use and appropriation of information in financial and extra-financial reporting.
The meeting is followed by an open debate.
‘Cognitive and hermeneutic dimensions of responsibility in the use of models and theories’ by Emmanuel Picavet & Christian Walter
17:30 CET, 5 October 2023
Phinance Online Seminars are organized by Phinance, the Philosophy & Finance Network
17:30 Emmanuel Picavet (Université Paris 1 Panthéon-Sorbonne), Cognitive and hermeneutic dimensions of responsibility in the use of models and theories
18:20 Debate
Chair: Emiliano Ippoliti (Sapienza University of Rome)