In Martin Scorsese’sThe Wolf of Wall Street, Mark Hanna initiates novice Jordan Belfort over lunch into the rites of brokering, the profession Belfort has recently joined. Belfort’s illusions are quickly dispelled. Brokers know as little about the stock market as their clients. ‘You know what fugazi is?’, Hanna asks. Belfort knows the slang. ‘Fugazi. It’s fake.’ That is how Hanna explains the trade. Brokers do not work for their clients. Their aim is to pocket the commissions.

The scene is as hilarious as it is worrying. What are these people doing if they are only interested in getting rich? Their excessive desire to become rich is certainly disgraceful. What worries me more, however, is their acknowledgement of incompetence – or better, the fact that there seems to be no need for competence on Wall Street in the first place. That we pay people whose sole motive is to become rich is something we may resent. That we pay people for faking services is utterly disturbing. I am afraid the dialogue would hardly fit any other sector better than finance. Doctors, lawyers, carpenters, architects, fishermen, engineers – imagine them describing their work as fugazi, their expertise as fake, their skills as useless. You will not be able to do that. But our imagination effortlessly populates the financial services industry solely with egoistic buzzards.

In the course of this book we have seen that this is not entirely groundless. There are serious questions to be asked about the informational value provided by credit rating agencies or stock market analysts. Regulators have shown little interest in uncovering financial crime. Clients did not bother to look into the terms of their mortgages. Loan officers are often more interested in their own career prospects than in monitoring their clients. At the same time it cannot be denied, however, that banks, insurance companies and pension funds deliver services that we need, but that are hard or impossible for individuals to obtain without professional assistance. It is likely that my amateur portfolio of shares will occasionally beat the results of professionals, for mere statistical reasons. On the stock market I may be as good as any ‘professional’ – fugazi, nothing more. But unless I am rich enough to shoulder the risks, I desperately need health insurance. The same holds for a bank account and retirement plan. We just cannot do without finance, and we cannot do it ourselves.

The simple view, according to which finance practitioners work with complex concepts and use impenetrable jargon only to obfuscate the absence of any serious intellectual inquiry, is dangerous for two reasons. First, as I have just said, a lot of intellectual work is needed if a bank or insurance company is to do well what it has to do. Secondly, because the simple view is so easily set aside as a caricature, one might forget that the extent to which it is true is perhaps greater than one might think. I am sure that the simple view is at the back of the minds of quite a few people working for supervisory authorities around the world. You will not, however, find them actually treating finance correspondingly. In the end, regulators do not really believe the simple view when they regulate, and we do not believe the simple view when we take out insurance or save money in a bank account.

This book has made a start at investigating the applications of epistemic ethics to finance. Most virtue epistemologists have advocated views of epistemic virtue that emphasize the intrinsic value of gaining knowledge, wisdom and understanding. This has led to enormous progress in epistemology and ethics, and the present book could not have been written had these theories not been developed over the past two or three decades. Most people in finance are not very interested in such intrinsically valuable epistemic goods most of the time, though. One contribution of this book is to have shown that this is not the end of epistemic virtue. It is rather the beginning.

The book’s conclusions can be summed up in the following two claims, paralleling the remarks from the previous paragraphs. First, if a particular practice in finance has true informational value, epistemic virtues are called for. We have seen that epistemic virtues are indispensable for clients if they are to be more effective decision makers who assume responsibility for meeting their needs and satisfying their desires, in line with the argument for liberty that has figured in the background of the book. I have shown that financial due diligence is unlikely to work in the hands of people who lack epistemic courage, sobriety, open-mindedness and an inexhaustible degree of inquisitiveness or love of knowledge. At the corporate level, corporate epistemic virtues are needed. Managers must hire employees who have the epistemic virtues required by the job; they have to match virtues to functions. Managers, moreover, must provide organizational support for the practice of virtue. If your job requires you to weigh ingredients carefully and accurately, you need a pair of scales and sufficient time to use them, and you need colleagues who do not poke fun at your precision but recognize your scalesmanship as instrumental to the firm’s goals. And if individual virtue cannot be developed further or is just plain absent, managers must introduce clever strategies to remedy vice. We have seen some examples of this, including an intricate probabilistic rotation scheme among loan officers that countered their tendency to monitor the creditworthiness of their clients in epistemically unsoberminded ways.

Secondly, however, we must also acknowledge that recommending epistemic virtue is sometimes totally senseless. We should not recommend epistemic virtue where knowledge has little chance of being produced. Astrology was the pet example. In finance, we must ask ourselves whether the world is going to be better if stock market analysts or credit raters embrace temperance and other epistemic virtues. I believe the answer is negative. This has important practical repercussions. I have argued that regulators should avoid outsourcing epistemic responsibility to sources of knowledge that do not deserve our trust. Policymakers turning credit rating agencies into official spokespeople of credit risk do not do what they should do.

This book can only be the beginning of an attempt at interdisciplinary research on epistemic virtue. An awful lot still has to be done to develop its ideas further. Philosophers and behavioural researchers have to team up. Following the Groningen style, which resists armchair navel-gazing as much as unreflectively frivolous experimentation performed in isolation from conceptual research, one way to progress is to return to the common roots of philosophy and the social sciences. This is not to deny the importance of decent experimental and conceptual work, but I think the most revealing ways to make sense of the world around us combine philosophical and empirical research.

A research agenda? Although I am quite confident that most of the links I have forged between epistemic virtue and social scientific research are plausible, we need to know much more. So far I have only been able to make use of research findings the relevance of which to epistemic virtue theory was accidental. The research had not been carried out with virtue epistemological questions in mind. Rather than sketching an agenda let me give a brief example of how I think we should proceed. It shows how philosophical questions stimulate new empirical research.

In Chapter 3 I discussed the concept of financial literacy. People are financially literate to the extent that they know the difference between bonds and shares, real and nominal value, simple and compound interest, and more. Research into financial literacy is claimed to have great social relevance. The more people know, the better their decisions are. Or so it seems. I agree that this claim is plausible. But there is hardly any empirical evidence for it. Why?

I think the obvious reason is that empirical researchers hesitate to address an issue that is normative through and through. What is it that determines whether someone’s decisions are ‘better’? Social scientists become uneasy and move on to more neutral or descriptive terrains, which is a shame. Philosophers can help. They can show how to analyse normative concepts that social scientists can subsequently operationalize. This is what we need to understand what ‘better’ financial planning means. This is also what we need to deepen our understanding of a host of things discussed in this book. Some examples are, at the individual level: racism and sexism among loan officers; at the corporate level: the relation between individual dishonesty and corporate epistemic injustice; at the regulatory level: the dangers of outsourcing epistemic responsibility. Epistemic virtues do not offer a foolproof all-in warranty against false or incomplete beliefs and other forms of epistemic mishap. Cases illustrating this fact abound. We looked into the Financial Services Authority’s failures to communicate with British citizens in understandable ways, and we saw that even fully virtuous citizens were likely to misunderstand the authority’s explanation of the difference between defined-contribution and defined-benefit retirement plans. Yet epistemic virtue certainly helps.