Would More Women Bankers Have Prevented the Crisis?

Last Updated May 21, 2009 8:57 AM EDT

  • The Find: The economic crisis is a complex phenomenon with several contributing causes, one of which may have been an excess of testosterone in the banking profession.
  • The Source: A post by Anne Sibert, head of the School of Economics, Mathematics and Statistics at Birkbeck College, London, on Vox, a policy analysis site set up by the Centre for Economic Policy Research.
The Takeaway: There's no shortage of people to blame for the current crisis: regulators, politicians, imprudent consumers on a debt binge and, of course, bankers. But Sibert notes that there may be another culprit: excess testosterone.
As we've previously noted, elevated testosterone has been shown to encourage greater risk-taking, and with the financial industry dominated by men and with excessive risk-taking certainly at the heart of the current mess, this science is enough to suggest, as UK cabinet minister Hazel Blears did that, "maybe if we had some more women in the boardrooms, we [might] not have seen as much risk-taking behavior." It's a position Sibert agrees with and extends:
There is a substantial economics literature on the effect of gender on attitudes toward risk and most of it appears to support the idea that men are less risk averse than women in their financial decision making. There is also a sizable literature documenting that men tend to be more overconfident than women.

If men are especially prone to being insufficiently risk averse and overly confident, then this male dominance may have contributed to the financial crisis.

Of course, a male-dominated financial industry was not the only cause, or even necessarily the primary cause, of the financial meltdown, but as we rebuild and reform the financial sector it may pay to consider just how gender balance could effect risk-taking and what could be done to encourage more women into the industry.

(Image of man on a trading floor by artemuestra, CC 2.0)

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    Jessica lives in London where she works as a freelance writer with interests in green business and tech, management, and marketing.