You are all welcome to attend this Friday's (July 24, 2009) 25th meeting of the Philosophical Foundations of Law and Finance (6.00-8.00pm, Room 501, 309 Regent St), on "Ponzi Schemes - The Nominalist Agenda of the US Securities Regulations", where Joe proposes to continue our investigations of US securities law by looking at the phenomena of Ponzi Schemes.
Philosophically, if we generalize the features of a Ponzi Scheme, we see that it is a belief system of groups and societies based on fraudulent entrepreneurship. The "get rich quick" scheme has a built-in religious zeal where the defrauded "cannot believe" that their saviours are shysters. Ponzi schemes are relatively universal and they have the essential features of a continuous social communications network, where the totality of the perceived risk is shifted to the charismatic leader until all hell breaks loose.
For the law, you will find enclosed South Cherry St v Hennesse Group, 2nd Circuit, July 14, 2009, which shows how it is much more difficult since the PSLRA (1995) a la Tellabs v. Makor [(June 21, 2007)http://www.supremecourtus.gov/opinions/06pdf/06-484.pdf] to get beyond the complaint for securities fraud violations.
Also, here is an interesting article sent by John Flood by Lynn Stout, one of the doyennes of corporate governance in the US, looking at the question of the deregulation of derivatives: http://blogs.law.harvard.edu/corpgov/2009/07/21/how-deregulating-derivatives-led-to-disaster/
Joe will explain a bit about the long (2,500 year old) debate between the nominalists and realists in class, which is one of the fundamental debates in philosophy. This debate spills over in how we should build models about reality. For an apocalyptic and therefore, very amusing, view of how modern finance theory is a complete fraud that helped induce the mother of all Ponzi Schemes, please see, Pablo Triana's (2009) Lecturing Birds on Flying.
Finally, here is a very nice clip on the credit crisis - from a micro-economist perspective.
As always, we'll continue discussions from 8pm at Vapiano's on Great Portland Street over some drink and food.
Joe and Chiara