We discuss the role of fiduciary duty in financial economics. We first demonstrate that there are different levels of depth of engagement with the content of the definition of fiduciary duty in the financial literature. Most contributors tacitly presume a narrow definition of fiduciary duty or merely mention it in passing. Only some authors provide more detailed definitions. And very few authors explicitly discuss the values at play in different definitions of fiduciary duty. The concept of fiduciary duty, while a key normative assumption underlying investment practice, seems to hide in plain sight in the current debates. We argue that deeper engagement with the concept of fiduciary duty is desirable. Such deeper engagement improves conceptual clarity, comparability across analyses, and transparency about normative assumptions. Doing so also contributes to responsible financial economics understood as the obligation to make normatively consequential assumptions explicit.
In the 'division of labor model', experts are supposed to base their recommendations on value judgments provided by the political sphere, taken as 'given', so as not to override the values of citizens and their representatives. In this paper, we argue that experts, when issuing their recommendations, have to make many methodological choices that imply value judgments, beyond - and potentially inconsistent with - those provided by the citizens' representatives. This value-ladenness stems from two features: underdetermination and policy-orientedness, and applies to a vast range of choices made by the experts. We suggest practical ways of mitigating this problem, such as promoting reflexivity about the value judgments implied by methodological choices, and fostering better communication between experts and policymakers, but argue that these improvements probably cannot fully salvage the division of labor model and raise the question of whether more fundamental revisions might be required.
The dissemination of economic models and predictions can affect social outcomes; this is roughly what has been called the 'performativity of economics.' For example, consider an economist's prediction of a bank failure, which may turn into a self-fulfilling prophecy contributing to a bank run. Recent contributions have argued that economists have responsibility towards the performative effects they cause. We argue that a more complex picture emerges once we make explicit widely acknowledged conditions for moral responsibility that are currently only implicitly alluded to in the literature. Towards this aim, we highlight four factors relevant for assessing the responsibility of economists, and systematically explore the impact of their different conceptualizations and specifications for assigning moral responsibility for performative effects: 1. the foreseeability of the performative effect in question, 2. its causal strength, 3. the degree to which causal control is distributed, and 4. how we conceptualize the social role of economists.
