What is it about?

Many contemporary societies are financialised and societal financialisation has been studied by scholars from diverse disciplines . By financialisation is understood the increasing importance of financial actors, markets; practices, measurements, and narratives at various scales, which result in the structural transformations of households, firms, states, economies, and even democratic societies. Societal financialisation has had several consequences. For instance, in recent decades financial activities have become the primary source of profits, and many organisations are now managed as though their only appropriate goal is to maximise the wealth of their owners/shareholders. This study shows that the financialization of societies is actively promoted in financial economic theory developed by Irving Fisher at the beginning of the 20th century. This theory was later relaunched by Franco Modigliani and Merton Miller in 1958. Indeed, several developments from this theory have won Nobel prizes in economics. Nevertheless, this study shows that this theory undeniably supports societal financialization because It advocates that organizations exist to maximize their owners’ shareholders’ wealth, a ‘perfect markets fallacy’, and the elimination of taxes and regulations. Furthermore, it contends an unverified separation theorem between financial and productive sectors, or among financial, investing, and operating decisions.

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Why is it important?

The study exhibits that financial economic theory, rather than being a neutral observer of society is instead an active promoter of societal financialization. Hence, questions must be raised regarding the contribute of economic and business schools, where this theory is uncritically delivered to thousands of students each year, to financialization processes.


I hope that the demonstration done in this paper could help us better understand some impacts that economic theory has on contemporary societies.

Dr Tiago Cardao-Pito
ISEG, University of Lisbon

Read the Original

This page is a summary of: Fisher-Modigliani-Miller organisational finance theory and the financialisation of contemporary societies, European Journal of the History of Economic Thought, November 2020, Taylor & Francis,
DOI: 10.1080/09672567.2020.1840604.
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