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ECON 252 (2008) - Lecture 3 - Technology and Invention in Finance

econ 252: Financial Markets (2008)

Lecture 3 - Technology and Invention in Finance

Overview

Technology and innovation underlie finance. In order to manage risks successfully, particularly long-term, we must pool large amounts of risk among many, diverse people and overcome barriers such as moral hazard and erroneous framing. Inventions such as insurance contracts and social security, and information technology all the way from such simple things as paper, and the postal service to modern computers have helped to manage risks and to encourage financial systems to address issues pertaining to risk. The tax and welfare system is one of the most important risk management systems.