The Purpose of Finance

By David Pitt-Watson | 5 October 2023

Cambridge University now presents an award-winning Masters in Finance course inspired by the principles of CORE Econ.

The central discipline of finance is microeconomics. And as CORE Econ notes, traditionally its study begins with learning techniques. The Purpose of Finance course, which is part of the Masters in Finance offered at Cambridge University, takes a different approach. It begins by asking what the purpose of this industry is, how well the industry fulfils that purpose, and how helpful traditional techniques can be in doing so.

This novel approach closely reflects CORE’s pedagogy, which teaches students how to be economists:

  • Start with a question, and look at the evidence.
  • Build a model that helps you understand what you see.
  • Critically evaluate the model: does it provide insight into the question, and explain the evidence?

A modern economy simply cannot work without a successful financial system, and the financial system has an enormous influence on every aspect of business management.

At its best, finance is essential for global wellbeing, especially as we contemplate the many issues facing the world in the 21st century such as climate crisis, poverty, and inequality. These problems will not be solvable without an effective finance industry. At its worst, finance is inefficient. Many believe it is overly focused on short-term profit. As students will learn, there is (sometimes unexpected) evidence to support all these perspectives.

Purpose of Finance is a course aimed at future business decision-makers—not just analysts. They need to understand how the financial system really works; what makes it function well, and what creates failure. They need to understand its influence in the company they work for, and the world in which they live. Any business person who wants to understand how capitalism works needs an understanding of how the financial system works, and why it fails. Yet perhaps surprisingly these topics are often missing from business school curricula. This course aims to fill the gap.

The course has been of particular interest to those who have a wider world view and who wish to challenge convention, develop critical thinking skills, and respond constructively to the considerable criticism the industry currently faces. For those contemplating a career within finance it addresses the essential question of “the Purpose” of the industry to which they intend to devote their professional life. For those outside finance, it is informative as to how modern capitalist economies actually work.

The course is led by David Pitt-Watson, former Pembroke Visiting Professor and a pioneer in the field of responsible investment, and Dr Ellen Quigley, who is a Principal Research Associate and Special Adviser (Responsible Investment) to the Chief Financial Officer at the University of Cambridge.

There has been strong support for the course, as indicated by its guest speakers – senior economists, investors, writers, advocates, and practitioners. Last year these included Andy Haldane, former chief economist at the Bank of England; Fiona Reynolds, who then headed the $100-trillion Principles for Responsible Investment; Professor Mette Morsing, who runs the UN Principles for Responsible Management Education; and Jon Lukomnik, who ran the $100-billion New York City pension fund.

In 2020, the course won the Page Prize for incorporation of sustainability into the business curriculum—the first time it has been awarded to a UK University.

The syllabus of The Purpose of Finance is available online