Financial markets and institutional purposes: The normative issues

There is a pressing need for an adequate general normative account or “theory” of financial markets, and for adequate special normative “theories” of particular financial markets, e.g. equity markets. This chapter discusses various currently influential normative theories of markets and market-based institutions, and rejects them (Section 4.2). The chapter goes on to elaborate the author’s own normative teleological account of social institutions (Section 4.3) and apply it to financial markets, specifically the banking sector, retirement savings schemes, and capital markets (Section 4.4). The chapter identifies manifest deficiencies in these financial markets and mentions various proposed remedies, arguing that these deficiencies and the remedies for them must be principally viewed in the light of the (normatively understood) institutional purposes of these financial markets and market-based institutions.