Theory Of Finance
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Part 1 - Putting a Price Tag on Life: Today, companies and governments often use Jeremy Bentham’s utilitarian logic under the name of “cost-benefit analysis.” Sandel presents some contemporary cases in which cost-benefit analysis was used to put a dollar value on human life. The cases give rise to several objections to the utilitarian logic of seeking “the greatest good for the greatest number.” Should we always give more weight to the...more
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Professor Shapiro guides the class through some practical applications of his theory of democratic justice. As applied to governing children, a sphere in which power-based hierarchy is inevitable, he circumscribes the role of the state as the fiduciary over children's basic interests and the role of parents as the fiduciaries over children's best interests. In other words, the state ensures the provision of the resources necessary for...more
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Part 1 - The Good Citizen: Aristotle believes the purpose of politics is to promote and cultivate the virtue of its citizens. The telos or goal of the state and political community is the “good life”. And those citizens who contribute most to the purpose of the community are the ones who should be most rewarded. But how do we know the purpose of a community or a practice? Aristotle’s theory of justice leads to a contemporary debate about...more
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The next and final Enlightenment tradition to be examined in the class is that of John Rawls, who, according to Professor Shapiro, was a hugely important figure not only in contemporary political philosophy, but also in the field of philosophy as a whole. The class is introduced to some of the principal features of Rawls's theory of justice, such as the original position and the veil of ignorance, two of Rawls's most important...more
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Philosophers and theologians have railed against interest for thousands of years. But that is because they didn't understand what causes interest. Irving Fisher built a model of financial equilibrium on top of general equilibrium (GE) by introducing time and assets into the GE model. He saw that trade between apples today and apples next year is completely analogous to trade between apples and oranges today. Similarly he saw that in a...more
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Professor Shapiro dives more deeply into Robert Nozick's theory of the minimal, or night watchman, state. This formulation is not redistributive, nor does it consider rights as goals, but rather as side-constraints on what we can do. In other words, Nozick's is a deontological, not teleological, approach. However, the Achilles' heel of this formulation is the incorporation of independents, based on a system of compensation. Some people...more
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The mature Rawls departed quite a bit from his earlier theory of justice, choosing instead an overlapping consensus, or political, not metaphysical approach. Professor Shapiro argues that this is a significant departure from the Enlightenment tradition. In a wrap-up of the class's examination of the Enlightenment, Professor Shapiro charts its evolution from Locke to Bentham to Mill to Marx to contemporary theorists. As for the...more
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Marxism is the second Enlightenment tradition upon which the course will focus. Contrary to popular belief, Marx did not hate capitalism but derived from economic analysis that it would self-destruct and lead to socialism. It is also a myth that Marx did not care about freedom; he was only egalitarian in the sense that he wanted everyone to have freedom. Ergo, Professor Shapiro asserts that Marx's dialectical materialism is as committed...more
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This lecture begins a series describing the development of organic chemistry in chronological order, beginning with the father of modern chemistry, Lavoisier. The focus is to understand the logic of the development of modern theory, technique and nomenclature so as to use them more effectively. Chemistry begins before Lavoisier's "Chemical Revolution," with the practice of ancient technology and alchemy, and with discoveries like those of...more
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This lecture begins with the second half of the discussion on social psychology. Students will learn about several important factors influencing how we form impressions of others, including our ability to form rapid impressions about people. This discussion focuses heavily upon stereotypes, including a discussion of their utility, reliability, and the negative effects that even implicit stereotypes can incur. The second half of the...more
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In order to understand the precise predictions of the Leverage Cycle theory, in this last class we explicitly solve two mathematical examples of leverage cycles. We show how supply and demand determine leverage as well as the interest rate, and how impatience and volatility play crucial roles in setting the interest rate and the leverage. Mathematically, the model helps us identify the three key elements of a crisis. First, scary bad news...more
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Edmund Burke was an English politician who wrote his Reflections on the Revolution in France to express his disdain for the destructive havoc wrought by the French Revolution. As a traditionalist-conservative, he thinks about social change in a cautious and incremental way and characterizes the social contract as binding on those who are living, those who are dead, and those who are yet to be born. Studying the anti-Enlightenment differs...more
