Chapter 7: Amartya Sen on Financial Capabilities

This chapter discusses Amartya Sen’s capability approach in relation to financial capabilities. It zooms in on the behavioural dimensions behind the financial crisis, but also on why consumers do not yet trust banks today. The chapter uses survey data of Dutch bankers to show that the regulation after the crisis has not helped bankers to use their moral compass. This is, paradoxically, due to a lack of autonomy. Bankers are generally not irresponsible persons but the pressure of targets, the detailed compliance procedures, and the lack of moral leadership in banks constrain them in using their moral compass. Also, at the consumers’ side, capabilities are lacking. Consumers tend to suffer from decision-making stress in combination with widely available credit and insufficient financial knowledge. The capabilities of some disadvantaged groups may, for example, be strengthened with earning opportunities in the community economy and community currency systems.