Financial Services, Economic Growth and Well-Being

Indian Journal of Finance, Vol. 9, No. 1 (January 2015), pp. 9-22

49 Pages Posted: 11 Oct 2013 Last revised: 21 Sep 2015

See all articles by Ravi Kashyap

Ravi Kashyap

Gain Knowledge Group; Estonian Business School; City University of Hong Kong (CityU) - Department of Economics & Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 2, 2013

Abstract

The primary topic of consideration here is the relationship between the Financial Sector and Economic Growth. This is, of course, a natural extension of studies that focus on various variables that influence economic growth and falls under the wider category of beneficial factors and policies aimed at increasing the welfare or well-being to society. It is worth considering this wider goal, at the outset, since the effective functioning of the financial sector is critically dependent on obtaining a deeper understanding of these factors. These factors will be broadly classified into what we refer to as the four prongs and will be elaborated upon in subsequent sections.

The four prongs are like the four directions for an army general looking for victory and any attempt at financial service reform that does not consider all the four prongs will prove to be insufficient and will be incomplete at best.

We need to consider all the four prongs because the first one tells us about the limitation of any relationships we uncover; the second tells us about what is the overriding need of the financial sector and whether we are deviating from the intended goals; the third tells us that keeping complexity in check is important for accomplishing our objectives; and the fourth one tells us where unintended growth, that will provide no real benefit, can result, despite the care we take to adhere to the stipulations of the first three. Just like the four directions, we need to be aware that there is a degree of interconnectedness in the below four prongs.

1. The Uncertainty Principle of the Social Sciences 2. The Responsibilities of Fiscal Janitors 3. The Need for Smaller Organizations 4. Redirecting Growth that Generates Garbage

It is also important to gain a quick, yet more profound, comprehension of welfare and delineate its components into those that result from an increase in goods and services, and hence can be attributed to economic growth, and into those that are not related to economic growth but lead to a better quality of life. The reasoning here being that economic growth alone is an inadequate indicator of well-being.

Hand in hand with a better understanding of the characteristics of welfare, comes the need to consider the measures or metrics we currently have that gauge economic growth and supplement those with factors that capture well-being more holistically. This is important because, there would be little sense in pursuing policies aimed at increasing some widely used metric like Gross Domestic Product, GDP, if such policies do not lead to an increase in welfare and worse still, if they lead to an unintentional decrease in well-being; on a lighter note, it is worth pondering about which meaning of gross is applicable in the context of GDP. With this, we would look to either constructing new metrics all together or looking at ways to improve or supplement existing ones.

The ensuing discussion, with the use of several illustrative analogies, is meant to intuitively demonstrate the validity of the four prongs. A formal approach towards proving these will be outlined in the subsequent sections and augmented or amended in later versions of this study.

Note: This version includes Appendix with Research Questions and sketch of Methodology.

Keywords: Financial, Service, Small, Organization, Redirect, Growth, Generate, Garbage, Uncertainty, Principle, Responsibility, Fiscal, Janitor, Four, Prong, Social, Science, Study, Need, Economic, Well-Being, Welfare

Suggested Citation

Kashyap, Ravi, Financial Services, Economic Growth and Well-Being (October 2, 2013). Indian Journal of Finance, Vol. 9, No. 1 (January 2015), pp. 9-22, Available at SSRN: https://ssrn.com/abstract=2338372 or http://dx.doi.org/10.2139/ssrn.2338372

Ravi Kashyap (Contact Author)

Gain Knowledge Group ( email )

1 Austin Road West
Kowloon
Hong Kong

HOME PAGE: http://www.gainknowledgegroup.com

Estonian Business School ( email )

City University of Hong Kong (CityU) - Department of Economics & Finance

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
261
Abstract Views
1,799
Rank
180,386
PlumX Metrics