1. I know this is a riduculous question, vague and on its face, full of false dichotomies. Nevertheless, there is something straightforward that I have in mind which (1) illustrates the use of category theory as a mode for understanding general concepts in law and finance and (2) to comment and critique what appears to be the morally vacuous and easily reprehensible space of financial derivatives contracts. I will skip (1) for an another day and delve into (2).
2. In brief, my argument, borrowing from James Gorley's (1991) The Philosophical Origins of Modern Contract Doctrine, is that the moral tethers to the Aristotelian-cum-Aquinaian philosophical conceptions that contract law had built from the 13th (Aquinas proper) to the 16th and 17th centuries (the Spanish school) were loosened by the Enlightenment and finally, severed by 18th and 19th century northern European theorists, leaving the corpus of what we know as common law rules of contract (the doctrinal black letter laws)-- offer and acceptance, duress, consent and so on--de-linked from any fundamental moral conception of the Good (as per Aristotle-Aquinas)--and consequently, throughout the second half of the 20th century this 'moral vacuum' in the justification of contracts has been filled by quack-economic theories which demonstrably do not work in the real world and moreover, the morally-de-linked financial contracts per se have contributed significantly to the abuses of chrematistics that Aristotle warned us of in his Politics 2,400 years ago.
3. It would take me a couple thousand words to unpack the paragraph above, but for this blog, let's just assume I could persuade you that this argument is plausible. How does the title to the blog fit now? Well, one way is to say that in contrast to the morally-empty chrematistic financial contracts of Wall St bankers, Islamic finance contracts have not lost their "soul", that is, their philosophical-moral foundations. I can hear a chorus of objections: (1) that financial contracts must be decided on a flexible commercial basis to meet the needs of a dynamic gobal industry and (2) who cares about ancient philosophers anyway--aren't they all dead and Greek, and as we see today, completely untrustworthy? In quick reposte: the argument in (1) is circular and the argument in (2) is ad hominem.
4. The serious point I want to make is that just maybe what Aristotle warned us about chrematistics is reaching a global limit of Tom-foolery. Are rating agencies responsible to tell us the "truth" about the wherewithal of a legal entity to make good its financial obligations? And what does it mean to "rate" a sovereign? Just because we can make leveraged financial instruments, are we to believe we are no longer responsible for their being and becoming in the real world? Ask an investment banker what is the most moral and least moral financial instruments in his arsenal. Absolutely no conception. But ask an Islamic financier the same question, and off he goes, giving you a very nuanced argument based on general moral principles. They may not all come to the same conclusion, but there is a process by which these conclusions are reached. In the secular finance world, where no justification is given except an incremental return, the entire enterprise becomes an empty ritual. In this secular world, where "hedge arbitrage" and "regulatory arbitrage" are accepted as goods-in-themselves, virtues are segregated from action. And like Humpty-Dumpty, we can't put him back together.
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