Reciprocity as a foundation of financial economics

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This paper argues that the subsistence of the fundamental theorem of contemporary financial mathematics is the ethical concept ‘reciprocity’. The argument is based on identifying an equivalence between the contemporary, and ostensibly ‘value neutral’, Fundamental Theory of Asset Pricing with theories of mathematical probability that emerged in the seventeenth century in the context of the ethical assessment of commercial contracts in a framework of Aristotelian ethics. This observation, the main claim of the paper, is justified on the basis of results from the Ultimatum Game and is analysed within a framework of Pragmatic philosophy. The analysis leads to the explanatory hypothesis that markets are centres of communicative action with reciprocity as a rule of discourse. The purpose of the paper is to reorientate financial economics to emphasise the objectives of cooperation and social cohesion and to this end, we offer specific policy advice.
Original languageEnglish
Pages (from-to)43-67
Number of pages24
JournalJournal of Business Ethics
Issue number1
Early online date9 Jul 2014
Publication statusPublished - 2015


  • Financial Economics
  • Reciprocity
  • Communicative Action
  • Pragmatism

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • General Mathematics
  • History and Philosophy of Science
  • Cultural Studies
  • Economics, Econometrics and Finance (miscellaneous)


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