Adapting Finance Courses

Suggestions for incremental change to finance courses, drawn from the ten building blocks of Economy Studies.

General approach

Change often happens incrementally and slowly. In the economics textbook market, for example, there is an unwritten rule that new textbooks cannot differ more than roughly 15% from the standard textbook in order to be ‘acceptable’ (Colander, 2003).

While our book clearly breaks this rule and proposes more far-reaching and fundamental changes in most chapters, in this chapter we focus instead on how existing courses could be adjusted incrementally. By doing so, we hope to assist educators in improving and adapting the courses they teach without needing to rip them up and start again, as well as helping students make suggestions for how this could be done.

First, we set out the typical contents of current courses. Second, we provide our suggested additions and changes. It is important to note that we pose all these suggestions as potential sources of inspiration, not a checklist of all the things that necessarily should be included. After all, there is a practical limit to what can be taught within a single course.


Typical contents of current courses

Over the last decades, financial markets have grown exponentially and their complexity has also increased drastically. Finance courses try to help students make sense of this imposing world by explaining different kinds of financial products and markets. Moreover, courses teach neoclassical theories of how the financial world can be understood as being in efficient equilibria brought about by rational optimising behaviour. Typically, courses start from a highly simplified world in which everything is certain, markets are ‘perfect’ and all available information is incorporated in prices. Then (calculable) risk and market imperfections are introduced to account for the complex reality of our world. Building on these ideas, a number of neoclassical models such as the capital asset pricing model (CAPM), arbitrage pricing theory, the Black-Scholes model, and intertemporal equilibrium models, are taught. And with the help of these models, financial products such as derivatives, fixed-income securities, and options, are discussed. Recently some courses are also integrating insights from behavioural and complexity economics, which focus on irrational and unpredictable behaviour.

Frequently used textbooks:

  • Asset Pricing by John H. Cochrane
  • Financial Economics by Frank Fabozzi, Ted Neave and Gaofu Zhou
  • Money and Banking by Robert E. Wright and Vincenzo Quadrini
  • Money, Banking and Financial Markets by Stephen Cecchetti and Kermit Schoenholtz
  • Money, Banking, and the Financial System by Glenn Hubbard and Anthony Patrick O’Brien
  • Principles of Financial Economics by Stephen F. LeRoy, Jan Werner and Stephen A. Ross
  • Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange by Keith Cuthbertson and Dirk Nitzsche
  • The Econometrics of Financial Markets by John Y. Campbell
  • The Economics of Financial Markets by Hendrik S. Houthakker and Peter J. Williamson
  • The Economics of Financial Markets by Roy Bailey
  • The Economics of Money, Banking & Financial Markets by Glenn Hubbard and Anthony P. O’Brien

Suggested additions and changes

Practical skills and real-world knowledge

It is important that students get to know the actual financial world, not only theoretical ones, for four reasons. First, it motivates students because it makes the often abstract material come alive. By visiting a financial institution, or market, it is no longer just numbers and equations, but also actual people of flesh and blood. Second, it can help students better understand the theory. This is often how the real world is currently incorporated in courses. With the help of examples, the theory is demonstrated to help students grasp what is meant by abstract statements. Third, exposing students to the real world helps them better understand it. This sounds almost tautological, but it is important to note as understanding the real world is too often underappreciated as a goal in itself. By giving students assignments, case studies and lectures that focus on explaining the complex and messy real world, rather than a theory about it, they will learn how theories can help them but also what their limitations are. Finally, making students familiar with the workings and details of actual financial institutions and markets is crucial as it helps them acquire practical skills and knowledge that they will need in their future work. Many of these skills and knowledge will be of little theoretical significance, but nevertheless vital for students’ later functioning in an organisation.

For more detail, see Building Block 2: Know Your Own Economy and Building Block 9: Problems & Proposals.

A range of analytical tools and approaches

Current finance courses could be enriched by incorporating post-Keynesian insights into fundamental, or Knightian, uncertainty, credit dynamics, and animal spirits. We applaud the recent incorporation of behavioural and complexity insights, often related to systematic irrationality and systemic risk, in some finance courses, and encourage teachers to do so even more. To broaden the scope further, cultural insights, among other things into how analytical constructs, such as economic models, can shape real world markets, can be incorporated.

For more detail, see Building Block 7: Research Methods & Philosophy of Science, Building Block 8: Economic Theories.

Teaching Materials

  • Economics After The Crisis by Irene van Staveren, from 2015, chapter 9. This useful and pluralist textbook discusses financial markets from the neoclassical, institutional, social and post-Keynesian perspectives.
  • Economics: The User’s Guide by Ha-Joon Chang, from 2014, chapter 8. This book provides a pluralist and accessible introduction, with one chapter specifically devoted to finance.
  • Introducing a New Economics by Jack Reardon, Maria A. Madi, and Molly S. Cato, from 2017, chapters 13, 14 and 17. This textbook introduces the topic of finance in a pluralist and real-world manner.
  • The Economy by The CORE Team, from 2017, chapters 10 and 17. This textbook introduces students to money, banks and financial crises by explaining recent mainstream insights and empirical findings.
  • Principles of Economics in Context by Jonathan Harris, Julie A. Nelson and Neva Goodwin, most recent edition from 2020, chapter 26. This textbook, which pays particular attention to social and environmental challenges, devotes one chapter specifically to money and finance.
  • Macroeconomics by William Mitchell, L. Randall Wray, Martin Watts, from 2019, chapter 10. This textbook written by three leaders of Modern Monetary Theory (MMT) has one chapter specifically devoted to money and banking.
  • The Handbook of Economic Sociology by Neil J. Smelser and Richard Swedberg, from 2005, chapters 22, 23 and 24. This extensive and yet accessible book for non-sociologists, provides an impressive and useful overview of the field of economic sociology, including a chapter on finance.
  • The anthropology of money by Bill Maurer, from 2006. An insightful review article discussing money and finance from a cultural, social and performative perspective.
  • “No one saw this coming”: Understanding Financial Crisis Through Accounting Models by Dirk Bezemer, from 2009. A useful article discussing how equilibrium models were not able to anticipate the credit crisis, while accounting models were.
  • An Engine, Not a Camera: How Financial Models Shape Markets by Donald MacKenzie, from 2006. A book on the performative perspective on finance, looking at how economists’ analytical tools can influence how financial markets work.
  • Behavioral Finance: Psychology, Decision-Making, and Markets by Lucy Ackert and Richard Deaves, from 2010. A book on the behavioural perspective on finance, looking at how cognitive limitations and irrationalities shape how financial markets work.
  • The Routledge International Handbook of Financialization by Philip Mader, Daniel Mertens, and Natascha van der Zwan, from 2020. A useful and extensive collection of essays on different aspects and perspectives on financialisation, a key development of the last decades.

Institutions and different ways of organising the economy

Financial systems are complex human constructions that know many varieties. To function well in this environment in their later careers, students need to become familiar with the various ways in which financial systems can be organised. This ranges from different micro-level practices and rules inside banks and specific markets, to macro-level structures that determine what characteristics and dynamics shape the system as a whole. Given the limited teaching time, it can be useful to focus on giving a brief overview of the wide variety of possibilities that have existed around the world throughout history, or have been proposed, and then going in more detail into the current domestic institutional framework.

For more detail, see Building Block 5: Economic Organisations & Mechanisms and Building Block 6: Political-Economic Systems.

Teaching Materials

  • Modern Financial Systems: Theory and Applications by Edwin H. Neave, from 2011. This textbook explores how financial systems can be structured, with market and non-market governance forms, different kinds of market activities and relations, intermediation by banks and regulation.
  • Comparing Financial Systems by Franklin Allen, Douglas Gale, and Julius Silver, from 2001. This textbook compares the financial systems of different countries and discusses the different options in terms of corporate governance and banking structure.
  • The Financial System, Financial Regulation and Central Bank Policy by Thomas F. Cargill, from 2017. A book on how the financial system is structured and has emerged, discussing historical and current ideas and real-world developments.
  • Principles of Sustainable Finance by Dirk Schoenmaker and Willem Schramade, from 2018. An accessible and well-structured textbook explaining to students how finance can become sustainable, paying attention to integrated reporting, long-term value creation, internalizing externalities, and approaching equity, bonds, banking and insurance differently.
  • Between Debt and the Devil: Money, Credit, and Fixing Global Finance by Adair Turner, from 2015. A book on the current financial problems and innovative ideas to solve them coming from an influential ‘insider’.
  • The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King, from 2016. Another book by an ‘insider’ which connects personal insights with an accessible description of how our thinking has developed over time, and how the financial system does and should work.

Societal relevance and normative aspects

A finance course without attention to ethics is incomplete. However, we should not stick to a narrow conception of ethics in finance, discussing illegal trading practices or other obvious forms of deceit. Ethical questions concern the core of finance itself and how financial systems are organised. What is the goal of finance, or what should it be? This is a key normative question for students to discuss. Why does finance exist, in the first place? And how is the financial system connected to the rest of the economy and our broader society?

Current courses are often (implicitly) based on the idea that the main goal in finance is to make the highest financial returns possible, and therefore focus mainly on teaching how to put an ‘optimal’ portfolio together. This normative premise should be discussed and this is a good opportunity to let students themselves debate, in written or oral form. What are the implications of this focus on maximising profits for other societal concerns?

What would need to change if these other normative goals were given more priority? Environmental, Social, and (corporate) Governance (ESG) is increasingly important in actual financial markets, so to provide future-proof education it is important that students become familiar with these and how to deal with them. Rather than only asking how one can earn the highest returns, one can ask how financial professionals can best serve society and provide students with the tools to do so.

For more detail, see Building Block 1: Introducing the Economy and Building Block 10: Economics for a Better World.

Teaching Materials

  • Ethics and Finance by John Hendry, from 2013. A useful introduction into the many (a)moral aspects of finance, such as the ethics of lending and borrowing, trading, speculation, financial products, and regulation.
  • The Oxford Handbook of Ethics and Economics by Mark D. White, from 2019, chapter 17. This highly useful and extensive collection of essays explores the many moral dimensions of economics, with one chapter devoted to the ethics of finance and money.
  • The Oxford Handbook of Professional Economic Ethics by George F. DeMartino and Deirdre McCloskey, from 2016, chapters 14 & 15. This insightful collection of essays explores the different aspects of ethics in economics, with two chapters devoted to economists’ (non)ethical behaviour in the build-up to the global financial crisis of 2007-2008 and the lessons we can learn from it.


Good history lessons are a uniquely strong tool to present the complex reality through captivating stories. Historical knowledge of finance also allows students to place current events in context and better grasp their significance and origins. This does not have to be the deep past: the history of recent financial developments can be just as informative and useful.

Besides the history of financial markets themselves, the history of ideas about finance is also fascinating. The intellectual history of finance is largely characterised by two main long-standing strands of thinking. The first strand, deductive in nature, is often referred to as equilibrium models. It originates from the physiocrats in the 18th century and is a central part of modern-day neoclassical economics. The second, more inductive approach, is known as accounting or stock-flow consistent models. This strand of thought was born in the ideas of Jean-Baptiste Say and can today be found in modern-day post-Keynesian economists. This history can help students better understand the different theoretical ideas and models about how finance works.

For more detail, see Building Block 3: Economic History and Building Block 4: History of Economic Thought & Methods.

Teaching Materials

  • A Concise History of International Finance: From Babylon to Bernanke by Larry Neal, from 2015. A detailed history of how finance has evolved over time, with particular attention to financial innovations, crises, government regulation, and international dynamics.
  • Money and Government: The Past and Future of Economics by Robert Skidelsky, from 2018. This well-written and insightful book introduces readers to historical and current debates about money, with particular attention to neoclassical and Keynesian ideas.
  • The Oxford Handbook of Banking and Financial History by Youssef Cassis, Catherine R. Schenk, and Richard S. Grossman, from 2016. An impressive collection of essays on the history of finance, with its many different aspects, from banking types and varieties of financial markets, to financial crises and the role of the state.
  • The Ascent of Money: A Financial History of the World by Niall Ferguson, from 2008. A well-written and accessible book on the fascinating history of money and finance. There is also an accompanying documentary by the same name, as there are many other informative documentaries and movies on finance and the global financial crisis of 2007-2008 in specific, such as Inside Job, The Warning, Boom Bust Boom, Margin Call, The Big Short, and Money, Power and Wall Street.
  • Crashed: How a decade of financial crises changed the world by Adam Tooze, from 2018. A detailed and well-written account of the global financial crisis of 2007-2008 and the decade that followed it, with accessible explanations of the technical workings of finance and theories about it as well as sharp descriptions of the role of politics and close up personal accounts of individuals making decisions.
  • Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger, most recent edition from 2015. A classic in the genre, describing in a highly accessible and even entertaining way the complex history of financial crises.
  • Boom and Bust: A Global History of Financial Bubbles, by William Quinn and John D. Turner. A more recent book devoted to the fascinating history of financial crises, with specific chapters devoted to questions related to predicting bubbles and more recent developments in China and Japan.

What to take out

To create space for the above suggested additions, we advise focussing more on the key ideas and intuitions behind the taught models and devote less teaching time to their technicalities and mathematics. As teaching students to reproduce and work through mathematical models often takes up a large part of the teaching time, this would give the teachers the opportunity to devote more time to practical knowledge, the relevance, institutions, and history. Furthermore, a more even balance between neoclassical economics and other economic approaches could be achieved by decreasing the number of neoclassical ideas and models that are taught.